StatPro Regulatory News (SOG)

20 Mar 2006 07:01

Statpro Group PLC20 March 2006 Monday, 20 March 2006 STATPRO GROUP PLC ("StatPro" or the "Group") Preliminary Results for the Year ended 31 December 2005 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 2005. Year ended Year ended Change 31 December 31 December 2005 2004Turnover £10.79 million £9.07 million +19%Profit before tax £1.64 million £0.90 million +83%Basic earnings per share * 4.6p 7.5p -39%Adjusted earnings per share (note 7) 4.6p 3.4p +35%Dividend per share - final and totalproposed for year 0.5p - n/a * includes exceptional deferred tax credit in 2004 of 4.4p per share (note 7) Highlights • Recurring annualised software revenue up by 20% to £10.10 million (2004: £8.41 million) • Recurring software revenue in the year of £9.13 million (2004: £7.49 million) represents 85% of total revenue (2004: 83%) • Successful acquisition of Delve Limited, a supplier of enterprise reporting solutions in July 2005 • Strong free cash flow (cash generated from operations less internally generated intangible assets) of £1.42 million (2004: £1.46 million) • Year end 2005 net cash position doubled to £1.82 million (2004: £0.90 million) • Maiden dividend as a public company of 0.5p per share (final and total for year) proposed (2004: nil) The AIM rules require AIM listed companies to adopt International FinancialReporting Standards ("IFRS") commencing on or after 1 January 2007 at thelatest. The Board has decided to adopt IFRS early in 2005 in order to followbest practice. Therefore, these preliminary results are being reported, and thecomparative results for 2004 have been restated, under IFRS. Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: "We believe that 2006 will be another year of solid progress for StatPro. Wehave our largest ever pipeline of prospects, and a large and growing number ofclients to service with our broadest ever range of existing and new products.Market conditions are the best for a number of years, and although volatile, arecurrently supported by new regulations, which are a major market driver for us.The fixed income market also presents an excellent opportunity and productdemand plays to our strengths." - Ends - For further information, please contact: StatPro Group plcJustin Wheatley, Chief Executive On 20 March:(020) 7360 4900Andrew Fabian, Finance Director Thereafter:(020) 8410 9876 SmithfieldReg Hoare 020 7360 4900/07831 406117 Corporate Synergy PlcJustin Lewis/Rhod Cruwys 020 7448 4400 A briefing for analysts will be held at 9.15 for 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 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 £10.8 million in 2005. CHIEF EXECUTIVE'S REVIEW Highlights In 2005 StatPro delivered its best financial performance ever. Revenues havegrown by 19% to £10.79 million (2004: £9.07 million) and more importantlyoperating profit has risen by 64% to £1.66 million (2004: £1.02 million). Asstated in our interim report, we are aiming to achieve 20% net operating marginover the next few years as we benefit from the operational gearing of thebusiness; the net operating margin has already improved markedly in 2005 with anincrease to 15.4% from 11.2% in 2004. The rate of software sales has increasedand 2006 has started with a strong new business pipeline. This is undoubtedlydue to the fact that we are now able to offer our existing and potential clientsa broader range of analytical products. We continue to seek to build long term relationships with our clients and, atthe end of 2005, 53% of our contracts now extend for more than one year,representing an increase from 44% in 2004. 85% of revenues are recurring and theannualised value of software contracts has risen to £10.10 million at the end of2005 from £8.41 million at the end of 2004. Acquisition of Delve On 1 July 2005 we acquired Delve Ltd., a business that provides an enterprisereporting solution (SER) for asset managers. The annualised recurring revenueacquired with Delve was £0.17 million from 7 clients; at the end of December2005 this had increased to £0.27 million from 9 clients. In the first quarter of2006, we have signed new contracts for SER with several more clients. We believethat we will increase sales of SER during 2006 as we market the product to ourclient base and prospects. It is clear that being able to offer a high qualityreporting solution for our clients is seen as a very beneficial offering bythem. New business Existing clients accounted for around half of new sales of software products byvalue thus underlining the importance of our cross-selling strategy. Once againsales were strongest in continental Europe, with Germany and Italy achieving aparticularly strong growth. The UK had a positive year with sales performingstrongly in the second half. Performance in the US was weak in 2005 although anumber of key deals were achieved. However, sales in the US in the first quarterof 2006 have improved and we expect this to continue for the rest of the year. New business in 2005 was led by our Risk product, SRM, which is performingstrongly as a result of increased regulation in Europe. Recurring revenuerelating to SRM amounted to £1.60 million at the end of December 2005, up from£0.93 million in 2004. We have also made good progress with SRM in the firstquarter of 2006 and the pipeline continues to grow. We launched our new product,StatPro Fixed Income (SFI), in January 2006, but prior to the formal launch, weundertook stringent test trials for six months with various clients. The resultis that at the start of 2006 we already have a number of clients contracted forSFI with annualised revenues amounting to £0.28 million. We believe that thereis significant demand for a fixed income attribution system that can assist bondmanagers model their portfolios and analyse performance according to theirchosen investment strategy. We believe that based on market feedback from the UK, continental Europe and the US, SFI meets that demand and we are thereforeconfident that we will see good SFI revenue growth in 2006. Revenues from StatPro's original core products, StatPro Performance &Attribution (SPA) and StatPro Composites (SC), are also growing, but at moremodest levels. It is becoming clear that many potential clients are interestedin buying products from just one provider and the combination of supplying SFIor SRM, with SPA and SC is very compelling. Our new product range will also helpus win clients with legacy performance systems who need a catalyst to make thechange from one system to another. Sales of professional services also improved in 2005 increasing to £1.40 million(2004: £1.21 million). We anticipate that professional services will continue togrow in 2006, especially related to SER projects, where there is demand fromclients for consulting services to configure reports and websites. Strategy Our strategy continues to be to build strong client relationships with assetmanagers and increase the number of products used by each client. We havepreferred to acquire new products and invest in them, rather than develop fromscratch as we have felt that this reduces our risk and also brings us criticalexpertise in the domain of each product. It is also clear that StatPro now has a very strong team of professionals at alllevels within the business. Our expertise in analytics is now widely recognisedand a number of our team have written and published books and articles on a widerange of industry topics. We continually seek to improve our offering onanalytics and try to solve challenging problems faced by the industry in anefficient way. We believe that by demonstrating our expertise to our clients,coupled with excellent products and service, we will be able to build a verystrong and profitable business. We intend to continue our strategy of making small tactical acquisitions but weare also considering larger opportunities, that might enable us to extend ourproduct portfolio or to increase our critical mass in certain markets, such asNorth America. Our criteria for acquisitions is that they should enhanceshareholder value. Dividend We are very pleased to be able to propose our maiden dividend as a publiccompany of 0.5p per share to be paid on 31 May 2006. Our strong cash generationover the last few years has made this possible so that our balance sheet is nowmarkedly stronger than it was a few years ago. Going forward we intend to maintain a progressive dividend policy reflecting thebalance between the investment needs of the business and the growth inunderlying cash and earnings per share. Outlook We expect that 2006 will be another year of solid progress for StatPro. We haveour largest ever pipeline of prospects, and a large and growing number ofclients to service. Market conditions are the best for a number of years, andalthough volatile, are currently supported by new regulations (such asSarbanes-Oxley and UCITS III), which are a major market driver for us. The fixedincome market also presents an excellent opportunity and product demand plays toour strengths. None of this is possible without the dedication and excellence of our employeesand I would like to thank them once again for another year of hard work and Ilook forward to even better results in 2006. Justin WheatleyChief Executive FINANCIAL REVIEW IFRS The rules of the Alternative Investment Market of the London Stock Exchange("AIM") require AIM listed companies to adopt International Financial ReportingStandards ("IFRS") for accounting periods beginning on or after 1 January 2007at the latest. The Board decided to adopt IFRS early during 2005 in order tofollow best practice. Therefore, these results for 2005 are being reported, andthe comparative results for 2004 have been restated, under IFRS. The primarystandards that impact the results are as follows: •IFRS 3, Business combinations and IAS 36, Impairment of assets (resulting in goodwill being "frozen" with effect from 1 January 2004 and no longer being amortised but subject to annual impairment reviews) •IAS 38, Intangible assets (resulting in certain software development costs being capitalised and amortised over the expected useful life of the development) •IFRS 2, Share-based payment (resulting in costs being attributed to the value of share options issued to employees) The impact of these changes compared with the accounting treatment under UK GAAPis summarised in note 1. Further information on the effects of IFRS is includedwithin the relevant commentary within this financial review. Overview The improved level of new business achieved in the first half of 2005 andreported on at the time of the interim results, continued into the second halfof 2005. The combination of higher new licence revenues over the past twelvemonths, a higher customer retention rate, and an increase in professionalservices, resulted in revenue increasing by 19% (18% before the impact of theacquisition) over 2004. The Group increased its operating profit by 64% to £1.66million (2004: £1.02 million) and by 73% before the impact of the acquisition.The net cash position doubled to £1.82 million at the end of 2005 (2004: £0.90million). The Group repaid all its remaining bank debt amounting to £1.20million during the first two months of 2005 (whilst retaining its loan facilityof £1.50 million). The balance sheet was restructured during the year: the warrants issued as partof the original flotation of the Company in 2000 were restructured raising £0.52million (net of costs) and reducing the potential future dilution of earningsper share. Following a capital restructuring, the share premium account has beenused to offset the deficit on the profit and loss account in the Company balancesheet, thus allowing dividends to be paid out of future profits. As a result theGroup is in a very robust financial position and the directors have proposedStatPro's maiden dividend as a public company. Turnover StatPro has maintained its record of growing revenue each year since itsflotation in 2000 and the growth rate has picked up in 2005 to 19% (2004: 8%)including the contribution from the acquisition of Delve of 1%. The impact ofexchange rates on turnover and profit was immaterial in the year. Group turnoverincreased to £10.79 million (2004: £9.07 million). Software licence revenue grewby 22% to £9.13 million (2004: £7.49 million) and represents 85% (2004: 83%) ofannual turnover. The level of professional services revenues of £1.40 millionwas up by 16% compared to the prior year (2004: £1.21 million). Whilst aroundhalf of new licence revenue was from new clients, the proportion of consultingfor new clients was higher at around 70% (2004: 30%) as a result of an increasein professional fees related to new projects. As anticipated, there was afurther reduction in other recurring revenues from TAP royalties (StatPro'soriginal product, which has no associated costs of delivery) by 30% to £0.26million (2004: £0.37 million). The split of revenue by type was as follows: Year to Year to Growth 31 December 31 December year on 2005 2004 year £ million £ million %TurnoverSoftware licences 9.13 7.49 +22Professional services 1.40 1.21 +16TAP royalties 0.26 0.37 -30 10.79 9.07 +19----------------- -------- ------- ------ Recurring revenue The annualised recurring revenue from software licences at the end of December2005 grew to £10.10 million (2004: £8.41 million), an increase of 20% year onyear (16% before impact of acquisition and at constant exchange rates). Newcontracts, net of cancellations, amounted to £1.54 million (2004: £1.08 million)of which £0.17 million relates to contracts that were acquired with Delve.Overall, foreign exchange movements resulted in an increase of £0.15 million(2%) in the revaluation of the net value of contracts to the 2005 year-end ratescompared with the 2004 year-end rates, mainly due to a strengthening US dollarat the end of 2005. Annualised Growth ratevalue (excluding contracts acquired New contracted Contracts Net and at At 31 revenue (net acquired with impact of At 31 constant December of Delve exchange December exchange 2004 cancellations) acquisition rates 2005 rates) £ million £ million £ million £ million £ million % RecurringrevenuesSoftwarelicences 8.41 1.37 0.17 0.15 10.10 +16------------- ------- ------- ------- ------- -------- ---------- The proportion by value of recurring software licences on multi-year contracts(licence agreements with more than one year remaining contractually committed)increased to 53% at the end of 2005 from 44% at the end of 2004. We now have 33(2004: 28) client groups each subscribing more than £100,000 per annum, of which21 (2004: 18) subscribe more than £150,000 per annum. The vast majority of our contracts are on a distributed software basis. However,we have concluded a number of strategic contracts in 2004 and 2005 with, forexample, custodian banks for hosted solutions or performance measurement bureauservices, which generate revenue depending on the number of portfoliosprocessed. Whilst the recurring revenue from these contracts is currentlymodest, we expect this segment of our business to grow over the coming years. The range of products in our current offering has been greatly enhanced in thelast two years with the addition of StatPro Risk Management ("SRM"), StatProFixed Income ("SFI") and StatPro Enterprise Reporting ("SER"). The directorsbelieve that these products have an even larger market potential than theproducts that have hitherto been the core revenue for the Group, namely StatProPerformance and Attribution ("SPA") and StatPro Composites ("SC"). Employees There was an increase in the average number of employees during the year as aresult of both organic growth and acquisitions from 85 to 98. We have recruitedpeople in all the regions in which we operate in order to strengthen our clientservices team in line with increased sales. During the year we opened an officein San Francisco to service our growing client base on the west coast of the US.The increased average number also reflects the full year effect of theacquisition of SiSoft (four people), and the impact of the employees joiningwith Delve (six people). We ended 2005 with 105 employees situated in nineoffices (London, Paris, Milan, New York, San Francisco, Frankfurt, Luxembourg,Cape Town and Brisbane). Operating expenses Operating expenses (before amortisation of intangibles and exceptional item)increased by 12% to £7.97 million (2004: £7.09 million). Around two thirds ofour cost base relates to headcount and the average number of staff outlinedabove is the main driver of the cost increase compared to 2004. The operatingexpenses relating to Delve, for the six-month period following its acquisitionin July 2005 amounted to £0.21 million. Additional costs associated with theprovision of the risk data service to our increased client base, together withthe costs of the opening of our San Francisco office, also had an impact.Nevertheless, the average cost per person (before the effect of capitalisationand amortisation of intangible development costs) was virtually unchanged yearon year. Share based payments In common with many high-growth technology enterprises, StatPro has issued anumber of share options to executives and employees. Under IFRS, the optionsmust be valued based on a market or estimated market value at inception and thiscost is spread over the option vesting period (generally three years). As thereis no readily available market price for the options the Board has used anindependent model to evaluate the fair value of the options. There are a numberof assumptions which affect the value and the Board has considered carefullythese assumptions in order to derive an appropriate charge for the cost ofoptions. As a result there is a charge of £0.06 million (2004: £0.03 million)relating to share based payments. There is no cash impact to the Group as aresult of this new accounting standard. Investment in research and development The Group continues to increase its investment in research and development,partly as a natural consequence of our increased product offering; our strategyis to ensure we provide high value portfolio analytics solutions. In the lastsix years we have invested around 21% of our revenue on research anddevelopment. Development costs, which were previously written off under UK GAAP,are now capitalised under IFRS, where the recognition criteria are met. As aresult there is now an intangible asset (including acquired software) amountingto £2.31 million (2004: £1.62 million) recognised on the Group's balance sheetrelating to the carrying value of previous developments where the Board expectsthe benefits to be recovered through incremental revenue from future sales. TheBoard has decided to amortise its development expenditure over a three yearperiod as this is the period that the directors expect the benefits to arisefrom the investments in intangibles. The amortisation of intangibles amounted to£1.15 million in 2005 (2004: £0.88 million). The carrying values, which areanalysed by product, are considered carefully by the Board and if there has beenany impairment in any development costs then the carrying value is written downaccordingly. Goodwill amortisation Under IFRS, goodwill on acquisitions has been "frozen" with effect from 1January 2004 and is no longer amortised but subject to annual impairmentreviews. Goodwill on acquisitions since 1 January 2004 is reviewed and allocatedto its underlying intangible components. As a result £0.16 million of goodwillfor our investment in SiSoft and Delve has been categorised as software productcosts and amortised over a three year period. Goodwill arising on acquisitionsprior to 1 January 2004 has been reviewed and to the extent that some of thegoodwill would now be deemed to be development costs under IFRS then a reductionto the previously reported goodwill has been made and an equivalent increase inthe value of intangible assets (development costs) applied. These adjustmentsresult in corresponding adjustments to the goodwill carrying value at 1 January2004 and the amortisation of intangibles since that date. As a result there isno amortisation of goodwill in the restated accounts for 2004 or 2005. Under UKGAAP, the goodwill amortisation would have amounted to £0.41 million (2004:£0.38 million). 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, reduced to £0.02 million (2004: £0.12 million) as a result ofthe cash generation and repayment of debt. Profit before tax The profit before taxation grew by 83% to £1.64 million (2004: £0.90 million).The adjusted earnings before interest, tax, depreciation, amortisation ofintangibles and exceptional items, ("EBITDA"), a performance measure previouslyreported under UK GAAP, amounted to £1.34 million (as shown in note 4) in 2005(2004: £0.98 million). Taxation There was a £0.05 million movement on deferred taxation which offset the currenttax charge for the year, resulting in a nil tax charge overall for 2005 (2004:£1.44 million credit). An exceptional credit of £1.47 million for deferred taxwas recognised in 2004 relating to group tax losses. The Group level of deferredtax recognised increased by £0.05 million in 2005 resulting in a carryingbalance of £1.52 million at 31 December 2005 (2004: £1.47 million). In theopinion of the directors this deferred tax asset will be recoverable withreasonable certainty against tax on trading profits in future years and thelevel of the deferred tax balance is considered reasonable in the light offuture probability of recovery of the whole amount of deferred tax. Therecognised deferred tax asset amounts to 61% (2004: 53%) of the potentialdeferred tax asset for the Group. £0.32 million of deferred tax in 2004 has beenreclassified as current deferred tax for comparability purposes. Equity minority interests The equity minority interests amounting to £0.07 million (2004: net loss of£0.16 million) relate to the minorities' share of profits less losses for theyear. £0.11 million has been transferred from minority interest to goodwill onthe acquisition of the minority interest in StatPro Australia. Earnings per share Basic earnings per share amounted to 4.6p (2004: 7.5p). Earnings per share in2004 benefited considerably from the deferred tax credit referred to above.Adjusted earnings per share before exceptional items were 4.6p (2004: 3.4p).Fully diluted earnings per share in 2005 were 4.5p (2004: 7.5p) based onpotentially dilutive shares outstanding amounting to 426,591 (2004: 371,770). Balance Sheet The Group's net assets increased to £3.03 million at 31 December 2005 from £0.74million at 31 December 2004. The main drivers for the increased net assets werethe profits attributable to equity shareholders of £1.57 million for the yearand the net proceeds from shares issued of £0.55 million. The balance sheetincludes deferred income of £6.56 million (2004: £5.37 million), which is anon-cash liability and has a significant adverse impact on the reported netasset position of the Group balance sheet. Non-current and current assets Goodwill arising during the year amounted to £2.35 million, the bulk of whichrelated to the acquisition of Delve. Total capital expenditure amounted to £0.19million in 2005 (2004: £0.17 million). Included within non-current assets isdeferred tax of £1.03 million (2004: £1.16 million). The level of current assets(including current deferred tax) increased to £6.10 million (2004: £4.82million). Increased new business resulted in an increase in trade debtors, thelargest component of debtors, amounting to £3.09 million at the end of 2005(2004: £1.99 million). Deferred tax included within current assets amounted to£0.49 million (2004: £0.32 million). The level of cash and cash equivalentsreduced to £1.85 million (2004: £2.15 million). Current and non-current liabilities The main movements in creditors has arisen following the repayment of £1.20million of bank debt in early 2005 and the recognition of an estimated £1.50million deferred consideration arising on the acquisition of Delve, which is thedirectors' current projection of the amount that will ultimately be due underthe transaction. However, this amount is uncertain and the eventual payment maybe higher or lower than this amount, subject to a maximum of around £3.45million. The directors will review this estimate from time to time andadjustments, if any, will be made to the goodwill carrying value and thedeferred consideration. The level of trade and other payables (excluding financeleases, corporation tax and deferred income) increased by 15% to £1.99 million(2004: £1.72 million). Cash flow and financing There was an improved cash generated from operations before investment indevelopment activities during 2005 amounting to £3.16 million (2004: £2.72million). The free cash flow (cash generated from operations less internallygenerated intangible assets) of £1.42 million (2004: £1.46 million), wasmarginally lower year on year (see note 5). The investment in acquisitionsamounted to £0.86 million during the year, the bulk of which related to theinitial cash consideration and associated costs for Delve. The restructuring of the warrants resulted in a reduction of potential dilutionto shareholders and the net proceeds amounted to £0.52 million. In combinationwith other exercises of employee options and shares issued under the Share Plana total of £0.55 million of cash was received on issue of shares in 2005. Thenet cash position at 31 December 2005 was £1.82 million (2004: £0.90 million). Share capital and reserves The issued share capital amounted to £0.35 million (2004: £0.33 million)representing 35,049,744 shares of 1p nominal value (2004: 33,199,244) as aresult of the issue of 1,850,500 shares during the year. Following the balancesheet restructuring the share premium account has been reduced to £0.89 million(2004: £8.56 million) and the warrant reserve virtually eliminated (2004: £0.42million). The equity minority interests of £0.05 million (2004: £0.23 million)have been deducted in computing the total capital employed. Dividend Following three years of cash generation and the balance sheet restructuringcarried out in 2005, the directors now consider that the Company is in a soundposition to pay its maiden dividend. As a result, the directors are proposing afinal (and total) dividend for 2005 of 0.5p per share (2004: nil). Under IFRS,this dividend is not accrued in these financial statements. If approved by aresolution at the Annual General Meeting, it is intended to pay the dividend on31 May 2006 to all shareholders on the register at the close of business on 28April 2006. Going forward we intend to maintain a progressive dividend policyreflecting the balance between the investment needs of the business and thegrowth in underlying cash and earnings per share. Andrew FabianFinance Director Group income statementfor the year ended 31 December 2005 Notes Year to Year to 31 31 December December 2005 2004 £'000 £'000 Group TurnoverContinuing operations 10,666 9,072Acquisition 120 -Total continuing operations 10,786 9,072------------------------- ------- ---------- ----------Operating expenses before amortisation ofintangibles and exceptional item (7,969) (7,087)Amortisation of intangibles (1,154) (877)Exceptional item 3 - (93)------------------------- ------- ---------- ---------- Operating expenses (9,123) (8,057)------------------------- ------- ---------- ----------Continuing operations 1,752 1,015Acquisition (89) -------------------------- ------- ---------- ---------- Operating profit 1,663 1,015 Interest receivable 18 22Interest payable (42) (139) Profit before taxation 1,639 898 Taxation (including exceptional deferred taxcredit of nil (2004: £1,472,000)) 3 - 1,435 Profit for the year 1,639 2,333 Profit/(loss) attributable to minorityinterests 69 (163)Profit attributable to equity shareholders 1,570 2,496 1,639 2,333 Earnings per share from continuing operations- basic 7 4.6p 7.5p- diluted 7 4.5p 7.5p Statement of recognised income and expense Year to Year to 31 December 31 December 2005 2004 £'000 £'000Profit after tax 1,639 2,333Net exchange differences offset in reserves net oftax (81) (11) ------ ------Total recognised income for the year 1,558 2,322 ------ ------Attributable to:Minority interests 78 (163)Equity shareholders 1,480 2,485 Consolidated balance sheetat 31 December 2005 Notes As at As at 31 December 31 December 2005 2004 £'000 £'000AssetsNon-current assetsGoodwill 3,053 708Intangible assets 2,308 1,624Property, plant and equipment 466 509Other receivables 174 286Deferred tax assets 1,032 1,155 ------ ------ 7,033 4,282 Current assetsTrade and other receivables 3,759 2,350Deferred tax assets 490 317Cash and cash equivalents 1,853 2,149 ------ ------ 6,102 4,816 LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (35) (40)Trade and other payables (1,987) (1,723)Current tax liabilities (26) (7)Deferred income (6,487) (5,289) ------ ------ (8,535) (7,059) Net current liabilities (2,433) (2,243) Non-current liabilitiesFinancial liabilities - borrowings - (1,211)Deferred income (75) (85)Provisions - contingent consideration (1,500) - ------ ------ (1,575) (1,296) Net assets 3,025 743 ------ ------Shareholders' equityOrdinary shares 350 332Share premium 891 8,562Warrant reserve 2 424Retained earnings 1,832 (8,342) ------ ------Total shareholders' equity 3,075 976Minority interest in equity 6 (50) (233) ------ ------Total equity 3,025 743 ------ ------ Group cash flow statementfor the year ended 31 December 2005 Year to Year to 31 December 31 December 2005 2004 £'000 £'000Cash flows from operating activitiesCash generated from operations 3,155 2,717Interest received 18 16Interest paid (13) (99)Issue costs in respect of bank loan (5) (5)Tax paid (31) (44) ------ ------Net cash from operating activities 3,124 2,585 ------ ------ Cash flows from investing activitiesAcquisition of/increased investment insubsidiaries (net of cash acquired) (858) 14Investment in intangible assets - developmentcosts (1,738) (1,261)Proceeds from sale of property, plant andequipment 22 -Purchase of property, plant and equipment (188) (175) ------ ------Net cash used in investing activities (2,762) (1,422) ------ ------ Cash flows from financing activitiesRepayment of bank loan (1,200) (300)Repayment of convertible loan - (1,000)Proceeds from issue of ordinary shares 551 4Capital element of finance lease payments (2) (7) ------ ------Net cash used in financing activities (651) (1,303) ------ ------Effects of exchange rate changes (7) (3) Net decrease in cash and cash equivalents (296) (143) Cash and cash equivalents at start of year 2,149 2,292 ------ ------Cash and cash equivalents at end of year 1,853 2,149 ------ ------ Reconciliation of net cash flow to movement in net cash/(debt) 2005 2004 £'000 £'000Decrease in cash and cash equivalents in the year (296) (143)Repayment on finance leases 2 7Convertible loan repayment - 1,000Bank loan repayment 1,200 300Loan assumed on acquisition - (30)Other non-cash movements 14 (39) ------ ------Movement in net cash 920 1,095Net cash/(debt) at beginning of year 898 (197) ------ ------Net cash at end of year 1,818 898 ------ ------ The difference between the net decrease in cash and cash equivalents reportedabove under IFRS and the amount reported under UK GAAP relates to the widerdefinition of cash and cash equivalents which under IFRS includes money marketdeposits. Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000Operating profit 1,663 1,015Depreciation of tangible fixed assets 202 221Amortisation of intangibles 1,154 877(Increase)/decrease in debtors (1,254) 389Increase in creditors (excluding deferred income) 193 38Movement in deferred income 1,130 146Share based payments 59 31Net loss on disposal of fixed assets 8 - ------ ------Net cash inflow from operating activities 3,155 2,717 ------ ------ Notes to the preliminary financial statements 1. Reconciliation between UK GAAP and IFRS Reconciliation of profit before tax for the year under UK GAAP and IFRS 2005 2004 £000 £000Profit before tax - UK GAAP 708 162Investment in intangible assets - development 1,738 1,261costsAmortisation of intangibles (1,154) (877)Amortisation of goodwill 406 383Share based payments (59) (31) ------ ----- 931 736 ------ -----Profit before tax - IFRS 1,639 898 ------ ----- Reconciliation of capital employed under UK GAAP and total equity under IFRS 2005 2004 £000 £000Capital employed - UK GAAP 173 (1,119)Investment in intangible assets - development costs 2,171 1,521Intangibles acquired - software acquired 137 103Goodwill adjustment 544 238 ------ ------Total equity - IFRS 3,025 743 ------ ------ Reconciliation of retained earnings under UK GAAP and IFRS 2005 2004 £000 £000Retained earnings - UK GAAPOpening position - UK GAAP (10,204) (11,953)Development costs - opening position 1,521 1,098Goodwill - opening restatement 383 -Goodwill - fair value adjustment - -Intangibles - opening restatement (42) (3) ------- -------Opening position - IFRS (8,342) (10,858)Total recognised income for the year 1,558 2,322Credit in respect of share based payments 59 31Gain from warrant conversion 66 -Transfer from share premium account/other reserve 8,560 - ------- ------- 1,901 (8,505)Minority interests (69) 163 ------- -------Retained earnings - IFRS 1,832 (8,342) ------- ------- 2. Turnover by destination 2005 2005 2005 2004 £'000 £'000 £'000 £'000 Continuing operations Acquisition Total Total United Kingdom 2,358 120 2,478 2,136Continental Europe 5,559 - 5,559 4,557North America 1,778 - 1,778 1,552Rest of World 971 971 827 -------- ------ ------- -------Total 10,666 120 10,786 9,072 -------- ------ ------- ------- 3. Exceptional item. There were no exceptional items in 2005. The exceptionalitem of £0.09 million in 2004 relates to compensation for loss of office andrelated expenses. In 2004 there was an exceptional deferred tax credit of £1.47million. 4. Adjusted earnings before interest, tax, depreciation, amortisation ofgoodwill ("EBITDA") 2005 2004 £'000 £'000 Profit before tax - UK GAAP 708 162Add back: Interest 24 117 -------- ------Operating profit - UK GAAP 732 279Add back: Depreciation of tangible fixed assets 202 221Amortisation of goodwill 406 383Exceptional operating item - 93 -------- ------EBITDA - UK GAAP 1,340 976 -------- ------ This additional information is being presented in order to assist the reader tounderstand the underlying performance of the Group. 5. Free cash flow - reconciliation from statutory heading to businessperformance measure 2005 2004 £'000 £'000Cash generated from operations 3,155 2,717Investment in intangible assets - development costs (1,738) (1,261) -------- ------Cash generated from operations less internally generatedintangible assets 1,417 1,456 -------- ------ 6. Equity minority interests Equity minority interests at the year end relating to minority interests inStatPro Italia and SiSoft were as follows: 2005 £'000At 1 January 2005 233Acquisition of remaining 49% of StatPro Australia Pty Ltd (105)Profit and loss account (69)Exchange differences (9) -------At 31 December 2005 50 ------- 7. 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 Earnings average Earnings number of per number of per Earnings shares share Earnings shares share 2005 2005 2005 2004 2004 2004 £'000 '000 Pence £'000 '000 Pence Earnings per share - basic 1,570 34,211 4.6 2,496 33,115 7.5 Potentially dilutive shares - 427 (0.1) - 372 - Earnings per share - diluted 1,570 34,638 4.5 2,496 33,487 7.5 Adjusted earnings per share Weighted Weighted average Earnings average Earnings number of per number of per Earnings shares share Earnings shares share 2005 2005 2005 2004 2004 2004 £'000 '000 Pence £'000 '000 Pence Earnings pershare - basic 1,570 34,211 4.6 2,496 33,115 7.5Effect ofoperatingexceptionalitem - - - 93 - 0.3Effect ofdeferred taxexceptionalitem - - - (1,472) - (4.4)Adjustedearnings pershareexcludinggoodwillamortisationandexceptionalitems 1,570 34,211 4.6 1,117 33,115 3.4Potentiallydilutiveshares - 427 (0.1) - 372 (0.1)Dilutedearnings pershareexcludinggoodwillamortisationandexceptionalitems 1,570 34,638 4.5 1,117 33,487 3.3--------------- ------ -------- ------- ------- -------- ------ 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. 7. Dividend The directors are proposing a final (and total) dividend for 2005 of 0.5p pershare (2004: nil). Under IFRS, this dividend is not accrued in these financialstatements. If approved by a resolution at the Annual General Meeting, it isintended to pay the dividend on 31 May 2006 to all shareholders on the registerat the close of business on 28 April 2006. This announcement was approved by the Directors on 17 March 2006. Thepreliminary results for the year ended 31 December 2005 are unaudited. Thefinancial information set out in the announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2005 or 31 December2004. 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 2004 except that adjustmentshave been made to reflect changes in accounting standards from UK GAAP as aresult of the introduction of IFRS. The financial information for the year ended31 December 2004 is derived from the statutory accounts for that year, whichhave been delivered to the Registrar of Companies. The auditors reported onthose accounts and their report was unqualified. This information is provided by RNS The company news service from the London Stock Exchange