9 Mar 2009 07:00
Monday, 9 March 2009
STATPRO GROUP PLC
("StatPro", "the Company" or the "Group")
Preliminary Results for the Year ended 31 December 2008
StatPro Group plc (AIM:SOG), the AIM listed provider of portfolio analytics and data solutions for the global asset management industry, today announces its unaudited preliminary results for the year ended 31 December 2008.
| Year ended 31 December 2008 Unaudited | Year ended 31 December 2007 Audited | Change | |
| Turnover | £27.87 million | £24.07 million | +16% |
| Profit before tax | £1.29 million | £4.57 million | -72% |
| Adjusted profit before tax * | £4.67 million | £5.16 million | -9% |
| Adjusted EBITDA * | £6.75 million | £6.57 million | +3% |
| Basic earnings per share | 1.8p | 7.0p | -74% |
| Adjusted earnings per share * | 7.0p | 8.1p | -14% |
| Dividend per share - final proposed for year | 1.25p | 1.05p | +19% |
| Dividend per share - total proposed for year | 1.75p | 1.5p | +17% |
Financial Highlights:
Annualised contracted recurring revenue increased to £28.39 million as at 31 December 2008 (2007: £20.27 million)
Adjusted EBITDA* increased to £6.75 million (2007: £6.57 million)
Adjusted profit before tax* decreased to £4.67 million (2007: £5.16 million)
Adjusted earnings per share* of 7.0p (2007: 8.1p)
Free cash flow** increased by 32% to £5.81 million (2007: £4.39 million)
Total dividend increased by 17% to 1.75p (2007: 1.5p)
Operational Highlights:
A successful conclusion to 2008 and a solid start to 2009
Strategic success of new Software as a Service ("SaaS") platform now with 28 customers
Performa acquisition integrated with annualised adjusted EBITDA of £1.1 million achieved
Cost cutting initiatives completed reducing annualised costs by more than £2.0 million
New 5 year senior debt facility signed with The Royal Bank of Scotland reducing net debt position from £14.6 million to £13.4 million ***
* Adjusted profit before tax, adjusted earnings per share, adjusted operating profit and adjusted EBITDA are profit before tax, earnings per share, operating profit and EBITDA after adjustment for amortisation of acquired intangibles, share based payments and exceptional items (notes 3 and 10) and the results for 2007 have been restated for share based payments for comparability purposes.
** Free cash flow is defined as cash generated from operations less investment in internally generated intangible assets (note 6)
*** Proforma net debt position as at 31 December 2008
Justin Wheatley, Chief Executive, commented: "These results demonstrate the robust nature of StatPro's business model which has continued to deliver significant growth in revenues and adjusted EBITDA. The growth in recurring revenue continues to provide for excellent forward visibility whilst the recent refinancing has underpinned the Company's financial position. With the current economic climate compelling companies to seek products that deliver the same benefits at a lower cost, significant demand remains for StatPro's products. Whilst no one can predict the future, given our current visibility and an encouraging start to the year, we look forward to a successful outcome for 2009."
For further information, please contact:
| StatPro Group plc | www.statpro.com | |
| Justin Wheatley, Chief Executive | 020 8410 9876 | |
| Andrew Fabian, Finance Director | ||
| Cenkos Securities (NOMAD) | ||
| Jon Fitzpatrick / Ken Fleming | 0131 220 6939 | |
| ICIS | ||
| Tom Moriarty / Caroline Evans-Jones | 020 7651 8688 |
A briefing for analysts will be held at 9.30am today at the offices of
ICIS, 3rd Floor, Aldemary House, 10-15 Queen Street, London, EC4N 1TX
About StatPro
StatPro is a leading provider of portfolio analytics and data solutions for the global asset management industry. The Company sells its suite of products on a rental basis to investment management companies to analyse portfolio performance, attribution, risk and GIPS© compliance. StatPro also provides the market data and valuation feeds including a new Complex Asset Pricing service.
StatPro has grown its recurring revenue from less than GBP1 million in 1999 to GBP28.4 million at end December 2008 and currently enjoys a 94% renewal rate. StatPro floated on the London Stock Exchange in May 2000 and transferred its listing in June 2003 to AIM. The Company has operations in Europe, North America, South Africa and Australia, with around 80% of revenues being generated outside the UK.
CHIEF EXECUTIVE'S REVIEW
Highlights
The Board is pleased to report a successful close to 2008 with full year results in line with market expectations. The Company recorded a strong performance in a difficult year with revenue growing to £27.87 million (2007: £24.07 million) a rise of 16%. Additionally, annualised recurring revenues grew to £28.39 million as at 31 December 2008 compared to £20.27 million at 31 December 2007 which demonstrates the predictability of the business model and underpins our revenues for 2009.
StatPro's development of its Software as a Service ("SaaS") offering has been very much aligned to current industry requirements given that it can deliver significant cost savings to our customers. Our clients want more for less and our new services will enable them to reduce their total cost of ownership significantly. Based on this performance and an encouraging start to the year the Board remains confident of delivering a solid result for 2009.
Market
Fund managers, pension funds, private banks and custodian banks, irrespective of the performance of their funds under management, will all require performance management tools. The market for our products is therefore stable and growing. We anticipate that there will be considerable M&A activity in the fund management sector and this will provide opportunities as well as threats to our business. Above all our clients want to rationalise systems, IT infrastructure, data sources and processes whilst maintaining or improving the quality of information they get. StatPro is well placed to provide such a service.
Operations
The key development within the period was the launch and subsequent uptake of our Software as a Service ("SaaS") offering which was launched in August 2008. It has been extremely well received by the industry. StatPro has a total of 28 customers for its SaaS offering representing 10% of our recurring revenue. It is our core focus to move our existing clients onto the new platform. We anticipate that we will make significant inroads on this objective in the course of 2009. All new clients will also be put on to the SaaS platform.
The Company reduced annualised costs by a total of more than £2.0 million during 2008 as a result of two restructuring programs. Headcount reduced from 272 staff following the Performa acquisition in February 2008 to 235 staff at the end of December 2008. The exceptional items amounting to £2.60 million (2007: nil) associated with these cost reductions have been fully recognised in 2008. The main restructuring effort centred on transferring a significant portion of our development teams from offices in Canada and London to our office in Cape Town which now consists of around 50 staff. By centering our core development in South Africa we are able to take advantage of both the lower costs of development and the high level of skills to be found there. This strategy also reduces currency risk as there is a natural hedge between our rand-denominated revenue generated in South Africa and the rand costs.
Acquisition
The Company is also pleased to report that Performa, which provides GIPS compliance software and was acquired in February 2008, has been successfully integrated into the business having consolidated support and development functions. The sales from Performa's products and data services have contributed £1.8 million of additional revenue in 2008. We are pleased to report that the acquisition has been earnings enhancing for the business.
Refinancing
StatPro announced a new five year, £19.25 million debt facility with The Royal Bank of Scotland on 19 February 2009 replacing the previous facility with Kaupthing Singer & Friedlander Limited (KSF), which was placed into administration in October 2008. The agreement comprises a £7.0 million term loan with bullet repayment in 2014, a multi-currency fully revolving five-year amortising loan amounting to an initial value of £10.25 million, and a multi-currency revolving working capital loan of £2.0 million. The refinancing agreement brings increased flexibility and immediate benefits to the balance sheet, reducing the net debt position from £14.6 million to £13.4 million (on a proforma basis at the end of December 2008). The agreement is a significant development for StatPro as this improved debt facility and repayment profile positions the Company well to invest in organic business generation initiatives as well as further underpinning the Company's forecasts of expected stable growth in 2009.
Research and Development
Our strategy going forward will see further product development of our SaaS offering. Stage One is underway with the successful launch of version 5.5 and of the Company's new Index Data Service in late 2008, with version 5.6 planned for April 2009. Stage Two of the Company's next generation SaaS release is planned for 2010 and will be a lower price entry product designed to broaden StatPro's addressable market by capturing the SME segment of the industry. Additionally, the Company's new Complex Asset Pricing (CAP) service is beginning to gain momentum. Our first version, operating at T+1, was launched in October 2008 and has been used to run a number of trials. The full T+0 Version is launched this week and we believe this new service to be a significant driver for growth for StatPro.
Sales and Marketing
We invested in our sales infrastructure this year through the expansion of our North American sales team based in our new Boston office. This investment had a positive effect on sales in North America in the second half of 2008 and we expect that it will boost our North American business in 2009. We hope to expand our European sales team during the course of 2009. Sales to existing clients accounted for 65% of new software and data sales which remains consistent with previous years and under-scores our cross-selling strategy. We expect that in difficult markets it will be far easier to increase sales to existing clients than to secure wholly new clients. Fortunately our existing client base offers significant opportunities for profitable growth.
Within Group revenues, 19 per cent are indirect sales through custodian banks and administrators. We are currently undertaking specific activities designed to increase the level of revenues arising from this channel. We believe that our SaaS products will also help our custodian clients provide even better services.
Strategy
Our development focus in 2009 will be on our SaaS platform, focusing on operational efficiency and geographic expansion. With a purely web-based approach, we expect to be able to accelerate our penetration into additional geographies without the need to establish a physical presence in the region. At the same time we will grow our sales teams in the locations where we currently operate. The Company will continue with its programme of harmonisation of all products into a single interface and combining this with our expanding data services. This will enhance the total offering and facilitate greater cross-selling opportunities. Equally the single interface approach will enable the Company to manage its clients more easily and efficiently, with streamlined support functions.
People
As always, it is due to the excellent teamwork of our people that StatPro owes its success. I would like to thank everyone at StatPro for all their hard work in 2008.
Dividend
The Board is pleased to recommend that the final dividend for 2008 be 1.25p per share, which, together with the interim dividend of 0.5p, makes a total of 1.75p for 2008, a 17% increase on the 2007 dividend of 1.5p per share. We intend to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and growth in underlying cash and earnings per share.
Outlook
These results demonstrate the robust nature of StatPro's business model which has continued to deliver significant growth in revenues and adjusted EBITDA. The growth in recurring revenue continues to provide for excellent forward visibility whilst the recent refinancing has underpinned the Company's financial position. With the current economic climate compelling companies to seek products that deliver the same benefits at a lower cost, significant demand remains for StatPro's products. Whilst no one can predict the future, given our current visibility and an encouraging start to the year, we look forward to a successful outcome for 2009.
Justin Wheatley
Chief Executive
FINANCIAL REVIEW
Overview
During 2008 a number of key projects were successfully concluded:
Acquisition and successful integration of Performa Consultants UK Limited ("Performa")
Restructuring of business in H1 2008 following the Performa acquisition and migration of the Johannesburg Stock Exchange ("JSE") project team
Cost cutting initiative in H2 2008 and restructuring of development team with focus on SaaS strategy
Arranging the refinancing of bank facilities (completed in early 2009)
Following a good first half sales performance in 2008, the second half of 2008 proved to be more challenging, as envisaged in our interim statement on 1 August 2008. As a result of certain investment decisions made in early 2008, combined with lower non-core professional services revenue compared to 2007, our operating margin was lower in 2008. Nevertheless, we achieved a growth in underlying revenue and an adjusted operating margin of 22.1% (2007: 25.6%). We continue to generate strong operating cash flow with free cash increasing by 32% to £5.81 million (2007: £4.39 million), and repaid £2.92 million of our term loans in the year.
Acquisition
In line with our strategy of acquiring complementary businesses and consolidating the sector, we acquired Performa, a supplier of software solutions to asset managers for complying with Global Investment Performance Standards (GIPS®), in February 2008. The acquisition brought with it new largely blue chip clients, a highly professional team and significant cross-selling opportunities. The recurring revenue on acquisition was £2.08 million per annum.
StatPro acquired 100 per cent of Performa for a consideration (before expenses) of £7.74 million. The total consideration was satisfied by a combination of £6.55 million in cash and the issue to the vendors of 1,372,020 ordinary shares of 1p each at an effective price of 86.6p, based on the average closing mid-price of StatPro's ordinary shares for the ten day trading period prior to the date of completion. The cash element of the consideration was financed by an additional loan of £7.0 million. The acquisition was successfully integrated and has achieved an annualised adjusted EBITDA on track of approximately £1.1m.
Turnover
Group turnover increased by 16% (2007: 65%) to £27.87 million (2007: £24.07 million), of which £1.81 million (7%) related to the acquisition in the year. At constant exchange rates the revenue would have increased by approximately 10% to £26.44 million. Adjusting for the revenue impact of acquisitions and disposals in 2007 and 2008 and other one-off items the underlying growth rate was approximately 24% as shown in the table below.
| Year to 31 December 2008 £ million | Year to 31 December 2007 £ million | Growth year on year % | |||
| Group revenue | |||||
| Total revenue as reported | 27.87 | 24.07 | 16 | ||
| Acquisition in 2008 | (1.81) | - | |||
| Acquisition in 2007 | (0.35) | (0.17) | |||
| Real time data including one-off fees (discontinued in 2007) | - | (1.08) | |||
| JSE integration project | (0.15) | (2.16) | |||
| Underlying revenue | 25.56 | 20.66 | 24 |
The split of revenue for the year by type was as follows:
| Year to 31 December 2008 £ million | Year to 31 December 2007 £ million | Growth year on year % | |
| Turnover | |||
| Software licences | 20.64 | 15.23 | 36 |
| Data fees - core valuation data | 4.12 | 3.27 | 26 |
| Data fees - real time data (discontinued in 2007) | - | 0.78 | |
| Total data fees | 4.12 | 4.05 | |
| Total recurring revenue | 24.76 | 19.28 | 28 |
| Professional services and other revenue | 3.11 | 4.79 | -35 |
| Total revenue | 27.87 | 24.07 | 16 |
Software licence revenue grew by 36% to £20.64 million (2007: £15.23 million). The core valuation data revenue increased by 26% to £4.12 million (2007: £3.27 million). The level of professional services revenues reduced by 35% to £3.11 million (2007: £4.79 million); the results for 2007 were boosted by a number of one-off integration projects as shown in the table below and the underlying professional services revenue increased by 27%.
| Year to 31 December 2008 £ million | Year to 31 December 2007 £ million | Growth year on year % | |
| Professional services and other revenue | |||
| Underlying professional services revenue | 2.96 | 2.33 | 27 |
| Real time data (discontinued in 2007) - one off fee | - | 0.30 | |
| JSE integration project | 0.15 | 2.16 | |
| Total professional services and other revenue | 3.11 | 4.79 | -35 |
Recurring revenue
The Group continues to have excellent visibility of revenue with a high percentage of recurring revenue at 89% (2007: 80%) of total revenue. The annualised recurring revenue from software licences and data fees at the end of December 2008 was £28.39 million (2007: £20.27 million). New contracts, net of cancellations, amounted to £1.89 million (2007: £2.04 million). The net impact of the revaluation of contracts to the year end exchange rates amounted to an increase of £4.15 million. Therefore, before the impact of the acquisition, there was an increase in annualised recurring revenue of 9% year on year at constant exchange rates. Contracts acquired with the Performa acquisition amounted to £2.08 million.
| Software licences and data fees |
| Annualised recurring contract value £ million | % of starting year value |
| Unaudited | |||
| At 31 December 2007 | 20.27 | 100.0% | |
| Net impact of exchange rates | 4.15 | 20.5% | |
| At 1 January 2008 (at 31 Dec 2008 exchange rates) | 24.42 | 120.5% | |
| Contracts acquired with acquisition | 2.08 | 10.3% | |
| New contracted revenue (net of cancellations) | 1.89 | 9.3% | |
| At 31 December 2008 | 28.39 | 140.1% | |
Approximately 65% of new recurring contracted revenue arose from existing clients (2007: 63%).
The proportion by value of recurring software licences and data clients at the end of 2008 secured to the end of 2009 or beyond increased to 80% (2007: 71%). We now have 50 (2007: 38) client groups each subscribing more than £150,000 per annum and 23 (2007: 13) at over £300,000 per annum. StatPro's top thirty client groups have on average 4.5 products per client (2007: 4.5) with an average recurring value of contracts of £474,000 per annum (2007: £341,000). The weighted average length of contracts committed is over 16 months, resulting in approximately £37.6 million of revenue being contracted as at 31 December 2008 (2007: £28.0 million) at year end exchange rates, and our renewal rate remains at 94% (2007: 94%).
Operating expenses and exceptional items
Operating expenses (before amortisation of intangibles and exceptional items) increased by 23% to £19.97 million (2007: £16.19 million). Exceptional items amounted to £2.60 million (2007: nil) as a result of the restructuring in the year. The increase was partly attributable to the acquisition (5%) and foreign exchange movements (3%). There was also a higher average employee number which increased by around 3% during the year from 239 to 247. We ended 2008 with 235 employees (2007: 253) which is lower than the average following the restructuring in October 2008.
Other expenditure for the business which has increased in the year relates to data acquired from third parties, exchange fees and other costs such as telecommunications required to deliver an integrated data and software service.
Adjusted operating profit margin
Operating profit reduced by 50% to £2.77 million (2007: £5.57 million). Adjusted operating profit was flat year on year at £6.15 million (2007: £6.15 million) as shown in note 3 and the adjusted operating profit margin reduced to 22.1% (2007: 25.6%). The adjusted EBITDA grew by 3% to £6.75 million (2007: £6.57 million) although the annualised adjusted EBITDA in H2 2008 was even higher at £7.54 million.
Investment in research and development
The Group continues to invest in research and development. The carrying value of development costs, including acquired technology and customer contracts, amounted to £5.91 million (2007: £5.07 million). Development expenditure is amortised over a three year period as this is the period that the directors expect the benefits to arise from the expenditure incurred. Customer contracts are amortised over a period of between three and seven years as this is the period that the directors expect the benefits to arise from the contracts. The amortisation of intangibles amounted to £2.53 million in 2008 (2007: £2.32 million), of which £0.66 million related to acquired intangibles (2007: £0.46 million). The carrying values, which are analysed by product, are considered carefully by the Board and if there has been any impairment in any development costs then the carrying value is written down accordingly. During the year the development teams were restructured with a refocus on developing our products for a SaaS platform with a core team based in South Africa. As a result we have written off £0.71 million relating to previously capitalised projects within the exceptional restructuring costs for the year.
Interest
There was a significant increase in the net interest expense in 2008 amounting to £1.48 million (2007: £1.00 million) as a result of the interest arising on the additional £7.0 million loan drawn down in February 2008 to finance the acquisition of Performa. Part of this interest charge relates to the unwinding of discount on deferred consideration amounting to £0.07 million (2007: £0.16 million).
Profit before tax
The profit before taxation reduced by 72% to £1.29 million (2007: £4.57 million). At constant exchange rates the profit before taxation would have reduced by 73% to £1.23 million. The adjusted profit before taxation fell by 9% to £4.67 million (2007: £5.16 million).
Taxation
The tax charge amounted to £0.19 million (2007: £0.82 million) giving an effective tax rate of 15% (2007: 18%). The Group level of deferred tax asset was £2.37 million (2007: £1.74 million) and amounts to 53% (2007: 46%) of the potential deferred tax asset for the Group. In the opinion of the directors it is more likely than not that this deferred tax asset will be recoverable against tax on trading profits in future years.
Earnings per share
Basic earnings per share amounted to 1.8p (2007: 7.0p). Diluted earnings per share in 2008 were 1.8p (2007: 6.8p) based on potentially dilutive shares outstanding amounting to 593,365 (2007: 1,757,282). Adjusted earnings per share, which is earnings per share adjusted for amortisation of acquired intangibles, share based payments and exceptional items was 7.0p (2007: 8.1p).
Balance Sheet
The Group's net assets increased to £30.17 million at 31 December 2008 (2007: £25.01 million). This increase was mainly as a result of the net profits attributable to equity shareholders of £1.02 million, an increase in equity during the year of £3.19 million and net exchange gains through reserves amounting to £1.61 million.
Non-current and current assets
Goodwill arising on acquisitions during the year amounted to £6.24 million of which the main movement related to Performa. Other net adjustments to goodwill relate to adjustments to the estimated deferred consideration. The carrying value for goodwill arising on all acquisitions has been reviewed and there have been no impairments to any goodwill. The revaluation of goodwill to year end exchange rates resulted in a net increase of £4.11 million.
Total capital expenditure amounted to £1.19 million in 2008 (2007: £1.22 million). The expenditure relates predominantly to office moves and investments in data centres and related equipment. Included within non-current assets is deferred tax of £2.37 million (2007: £1.74 million). The level of current assets increased to £12.82 million (2007: £8.16 million). Increased new business and acquisitions resulted in an increase in trade debtors, the largest component of debtors, amounting to £6.99 million at the end of 2008 (2007: £4.98 million). The level of cash and cash equivalents increased to £4.26 million (2007: £0.95 million).
Current and non-current liabilities
The main movements in creditors were an increase in deferred income and accruals and movements relating to the term loan and deferred consideration. At 31 December 2008, there is an estimated £1.33 million deferred consideration remaining (2007: £3.05 million) arising on acquisitions, which is the directors' current projection of the fair value that will ultimately be due under the various transactions. However, this amount is uncertain and the eventual payments may be higher or lower than this amount. The directors will review this estimate at each balance sheet date and adjustments, if any, will be made to the goodwill carrying value and the deferred consideration. The level of trade and other payables (excluding corporation tax and deferred income) increased to £5.28 million (2007: £4.70 million). Deferred income, which is a non-cash liability, increased significantly to £13.06 million (2007: £9.11 million) due to increased business and the contracts acquired as well as exchange movements.
Cash flow and financing
There was another year of solid cash generation; cash generated from operations before investment in internally generated intangible assets during 2008 amounted to £8.35 million (2007: £7.03 million). The free cash flow (cash generated from operations less investment in internally generated intangible assets) of £5.81 million (2007: £4.39 million), was 32% higher year on year (see note 6). The net cash investment in acquisitions amounted to £6.73 million during the year, including payments of deferred consideration on prior year acquisitions. The net proceeds of share issues during the year amounted to £2.00 million.
The acquisition in 2008 was financed through an additional £7.00 million loan. The deferred consideration payments in 2008 on past acquisitions were financed through existing resources. Higher financing costs of interest and dividends and an adverse exchange movement on translation of the currency debt have resulted in an increase in the net debt at 31 December 2008 to £14.62 million (2007: £10.13 million). Following the successful refinancing in 2009, the Group's proforma net debt at 31 December (see below) was approximately £13.4 million.
Share capital and reserves
The issued share capital amounted to £0.59 million (2007: £0.53 million) representing 59,469,452 shares of 1p nominal value (2007: 53,114,334) and the share premium account has increased to £16.28 million (2007: £14.27 million) as a result of the issue of 6,355,118 shares during the year.
The equity minority interests amounting to a net profit of £0.08 million (2007: £0.03 million) relate to the minorities' share of profits less losses for the year. The equity minority interests of £0.04 million have been added (2007: £0.04 million deducted) in computing the total equity.
Post balance sheet event
As announced on 19 February 2009, the Company signed a 5 year senior debt credit facility agreement with The Royal Bank of Scotland plc. This new facility replaces banking arrangements with Kaupthing Singer & Friedlander Limited ("KSF") which was placed into administration in October 2008. Following an in-depth review of alternative financing arrangements the Board concluded that this new senior debt facility was the most optimal financing structure for the business. The new five year facility with its reduced repayment profile and increased flexibility will not only strengthen the balance sheet but will ensure we are well positioned to invest in organic business generation initiatives where it is in the best interests of StatPro and its shareholders. The key features are:
Secured committed facility to February 2014
Reduction in net debt position from £14.6 million to £13.4 million *
Exceptional overall gain in 2009 on redemption amounting to approximately £1.2 million pre-tax
Balance sheet strengthened
Total available funds amount to £19.25 million
*Proforma net debt position as at 31 December 2008
New facilities
The new facilities comprise:
Term loan of £7.0 million with bullet repayment in February 2014
Multi-currency fully revolving five-year amortising loan amounting to an initial value of £10.25 million with six monthly repayments
Flexibility to repay early with no penalty and to redraw within the amortising limits
Multi-currency revolving working capital loan amounting to £2.0 million
Average margin is 345 bps over LIBOR which decreases by 25 bps once gross debt to EBITDA is less than 1.75
Margin reduces by a further 50 bps on the revolving facility once gross debt to EBITDA is less than 1.0
The arrangement fees and associated professional charges amounted to approximately 5% of the nominal value of the facility and in accordance with FRS4 these fees will be capitalised and released as a financing charge over the life of the facility.
Exceptional overall gain on redemption
The agreed value of debt (excluding accrued interest of approximately £0.2 million) redeemed with KSF amounted to a total of £17.6 million. The carrying value of the debt at 31 December 2008 was approximately £19.1 million and therefore this redemption will result in an overall exceptional pre-tax gain of approximately £1.5 million in 2009. (£1.2 million after writing off previously capitalised financing costs of approximately £0.3 million).
Financial risk management
The current and projected financial risks of the Group are managed by the Group Finance team. The primary risk relates to financing facilities and this is mitigated by ensuring very tight control of cash and detailed forecasting of the business cash flows.
The directors believe that the financial risk profile has reduced significantly following the refinancing and the cost cutting completed in 2008. Whilst the balance sheet is still geared the directors believe that this financial structure is in the best interests of the shareholders given the strong recurring revenue and the projected operating cash inflow.
During the re-financing process the Board agreed to cancel the existing foreign exchange hedging and interest rate hedging instruments and the Board decided that it would reduce the refinancing risk if all debt was re-denominated into sterling. As a result, all debt is currently denominated in sterling but the Board is evaluating re-denominating some of the debt into other currencies (e.g. US$, C$, and €) in order to provide a currency hedge for profits generated by investments in overseas subsidiaries.
The Company has also purchased a 3 year interest rate cap on a notional £10 million of debt at a strike price of 3% (based on 3 month GBP LIBOR). The Board believes this is a cost effective way of benefiting from falling interest rates whilst protecting the company from potential adverse interest rate movements over the next three years.
Dividend
The directors are recommending a final dividend for 2008 of 1.25p per share (2007: 1.05p) making a total dividend for 2008 of 1.75p per share (2007: 1.5p). It is intended to pay the dividend on 27 May 2009 to all shareholders on the register at the close of business on 24 April 2009. In accordance with IFRS, this dividend is not accrued in these financial statements. Dividends paid in 2008 amounted to £0.86 million (2007: £0.62 million). The Board intends to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and the growth in underlying cash and earnings per share.
Andrew Fabian
Finance Director
Group income statement
for the year ended 31 December 2008
| Notes | Year to 31 December 2008 Unaudited | Year to 31 December 2008 Unaudited | Year to 31 December 2008 Unaudited | Year to 31 December 2007 Audited | ||||
| £'000 | £'000 | £'000 | £'000 | |||||
| Continuing operations | Acquisitions | Total | ||||||
| Group Revenue | 2 | 26,056 | 1,815 | 27,871 | 24,074 | |||
| Operating expenses before amortisation of intangibles and exceptional items | (19,108) | (860) | (19,968) | (16,190) | ||||
| Amortisation of internally generated intangibles | (1,874) | - | (1,874) | (1,857) | ||||
| Amortisation of acquired intangibles | 3 | (473) | (186) | (659) | (459) | |||
| Exceptional items | 4 | (2,332) | (268) | (2,600) | - | |||
| Operating expenses | (23,787) | (1,314) | (25,101) | (18,506) | ||||
| Operating profit | 3 | 2,269 | 501 | 2,770 | 5,568 | |||
| Interest receivable | 67 | 66 | ||||||
| Interest payable | (1,545) | (1,062) | ||||||
| Profit before taxation | 3 | 1,292 | 4,572 | |||||
| Taxation | 8 | (190) | (821) | |||||
| Profit for the year | 1,102 | 3,751 | ||||||
| Profit attributable to minority interests | 78 | 33 | ||||||
| Profit attributable to equity shareholders | 1,024 | 3,718 | ||||||
| 1,102 | 3,751 | |||||||
| Earnings per share from continuing operations - basic | 10 | 1.8p | 7.0p | |||||
| - diluted | 10 | 1.8p | 6.8p | |||||
Statement of recognised income and expense
| Year to 31 December 2008 £'000 | Year to 31 December 2007 £'000 | ||
| Profit after tax | 1,102 | 3,751 | |
| Net exchange differences offset in reserves | 1,609 | 2,990 | |
| Total recognised income for the year | 2,711 | 6,741 | |
| Attributable to: | |||
| Minority interests | 81 | 5 | |
| Equity shareholders | 2,630 | 6,736 |
Consolidated balance sheet
at 31 December 2008
| Notes | As at 31 December 2008 £'000 Unaudited | As at 31 December 2007 £'000 Audited | |||
| Assets | |||||
| Non-current assets | |||||
| Goodwill | 45,760 | 36,163 | |||
| Intangible assets | 5,909 | 5,072 | |||
| Property, plant and equipment | 2,446 | 1,742 | |||
| Other receivables | 321 | 274 | |||
| Deferred tax assets | 2,374 | 1,737 | |||
| 56,810 | 44,988 | ||||
| Current assets | |||||
| Trade and other receivables | 8,561 | 7,205 | |||
| Cash and cash equivalents | 4,263 | 950 | |||
| 12,824 | 8,155 | ||||
| Liabilities | |||||
| Current liabilities | |||||
| Financial liabilities - borrowings | (5,859) | (2,744) | |||
| Trade and other payables | (5,280) | (4,700) | |||
| Current tax liabilities | (225) | (44) | |||
| Deferred income | (12,821) | (8,984) | |||
| Provisions - contingent consideration | (1,168) | (1,682) | |||
| Provisions - onerous contracts | (373) | - | |||
| (25,726) | (18,154) | ||||
| Net current liabilities | (12,902) | (9,999) | |||
| Non-current liabilities | |||||
| Financial liabilities - borrowings | (13,023) | (8,339) | |||
| Other creditors and accruals | (51) | (149) | |||
| Deferred income | (243) | (125) | |||
| Provisions - contingent consideration | (157) | (1,367) | |||
| Provisions - onerous contracts | (266) | - | |||
| (13,740) | (9,980) | ||||
| Net assets | 30,168 | 25,009 | |||
| Shareholders' equity | |||||
| Ordinary shares | 595 | 531 | |||
| Share premium | 16,276 | 14,273 | |||
| Shares to be issued | 827 | 874 | |||
| Other reserves | 5,912 | 3,132 | |||
| Retained earnings | 6,515 | 6,237 | |||
| Total shareholders' equity | 30,125 | 25,047 | |||
| Minority interest in equity | 43 | (38) | |||
| Total equity | 12 | 30,168 | 25,009 |
Group cash flow statement
for the year ended 31 December 2008
| Notes | Year to 31 December 2008 £'000 Unaudited | Year to 31 December 2007 £'000 Audited | |||
| Cash flows from operating activities | |||||
| Cash generated from operations | 5, 6 | 8,345 | 7,026 | ||
| Interest received | 67 | 66 | |||
| Interest paid | (1,545) | (1,008) | |||
| Tax paid | (324) | (86) | |||
| Tax received | - | 286 | |||
| Net cash from operating activities | 6,543 | 6,284 | |||
| Cash flows from investing activities | |||||
| Acquisition of/increased investment in subsidiaries (net of cash acquired) | (6,731) | (3,382) | |||
| Investment in intangible assets - development costs | 6 | (2,535) | (2,640) | ||
| Purchase of property, plant and equipment | (1,189) | (1,218) | |||
| Net cash used in investing activities | (10,455) | (7,240) | |||
| Cash flows from financing activities | |||||
| Repayment of bank loan | (2,918) | (2,009) | |||
| Net proceeds from bank loan/overdraft | 8,812 | 562 | |||
| Proceeds from issue of ordinary shares | 2,001 | 690 | |||
| Dividends paid to equity shareholders | (860) | (618) | |||
| Net cash from/(used in) financing activities | 7,035 | (1,375) | |||
| Effects of exchange rate changes | 190 | (46) | |||
| Net increase/(decrease) in cash and cash equivalents | 3,313 | (2,377) | |||
| Cash and cash equivalents at start of year | 950 | 3,327 | |||
| Cash and cash equivalents at end of year | 4,263 | 950 |
Notes to the preliminary financial statements
1. Announcement
This announcement was approved by the Board of directors on 6 March 2009. The preliminary results for the year ended 31 December 2008 are unaudited. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2008 or 31 December 2007. The financial information set out in the announcement has been prepared on the basis of the accounting policies set out in the statutory accounts of StatPro Group plc for the year ended 31 December 2007. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified.
2. Revenue analysis
| Turnover by destination | 2008 Unaudited £'000 Continuing operations | 2008 Unaudited £'000 Acquisition | 2008 Unaudited £'000 Total | 2007 Audited £'000 Total | |||
| United Kingdom | 3,097 | 1,251 | 4,348 | 3,294 | |||
| Continental Europe | 8,566 | 381 | 8,947 | 7,073 | |||
| North America | 10,994 | 159 | 11,153 | 11,519 | |||
| Rest of the World | 3,399 | 24 | 3,423 | 2,188 | |||
| Total | 26,056 | 1,815 | 27,871 | 24,074 |
Analysis of recurring revenue by type
| Type | Sterling value at 31 December 2008 Unaudited £ millions | Percentage | Sterling value at 31 December 2007 Audited £ millions | Percentage |
| Software licences | 23.38 | 82.4% | 16.51 | 81.5% |
| Data fees | 5.01 | 17.6% | 3.76 | 18.5% |
| 28.39 | 100.0% | 20.27 | 100.0% |
Analysis of recurring revenue by region
| Region | Sterling value at 31 December 2008 Unaudited £ millions | Percentage | Sterling value at 31 December 2007 Audited £ millions | Percentage | |
| United Kingdom | 6.03 | 21.2% | 3.20 | 15.8% | |
| Continental Europe | 7.95 | 28.0% | 6.52 | 32.2% | |
| North America | 11.09 | 39.1% | 8.50 | 41.9% | |
| Rest of World | 3.32 | 11.7% | 2.05 | 10.1% | |
|
| 28.39 | 100.0% | 20.27 | 100.0% |
Analysis of recurring revenue by currency
| Currency | Currency value Millions | Year end exchange rate 31 December 2008 | Sterling value at 31 December 2008 Unaudited £ millions | Percentage |
| Pounds sterling | £5.78 | 1.000 | 5.78 | 20.4% |
| Euro | €8.69 | 1.034 | 8.40 | 29.6% |
| US Dollar | US$7.75 | 1.438 | 5.39 | 19.0% |
| Canadian Dollar | C$10.12 | 1.775 | 5.70 | 20.1% |
| Other currencies | 3.12 | 10.9% | ||
| 28.39 | 100.0% |
| Currency | Currency value Millions | Year end exchange rate 31 December 2007 | Sterling value at 31 December 2007 Unaudited £ millions | Percentage |
| Pounds sterling | £3.49 | 1.000 | 3.49 | 17.2% |
| Euro | €8.87 | 1.361 | 6.52 | 32.2% |
| US Dollar | US$7.61 | 1.991 | 3.82 | 18.8% |
| Canadian Dollar | C$9.56 | 1.965 | 4.87 | 24.0% |
| Other currencies | 1.57 | 7.8% | ||
| 20.27 | 100.0% |
3. Adjusted profit before taxation, and adjusted operating margin and adjusted EBITDA
Adjusted profit before taxation
| 2008 Unaudited | 2007 Audited | ||
| £'000 | £'000 | ||
| Profit before taxation | 1,292 | 4,572 | |
| Add back: Amortisation of acquired intangibles | 659 | 459 | |
| Add back: Share based payments | 118 | 127 | |
| Add back: Exceptional items (note 4) | 2,600 | - | |
| Adjusted profit before tax | 4,669 | 5,158 |
Adjusted operating profit
| 2008 Unaudited | 2007 Audited | ||
| £'000 | £'000 | ||
| Operating profit | 2,770 | 5,568 | |
| Add back: Amortisation of acquired intangibles | 659 | 459 | |
| Add back: Share based payments | 118 | 127 | |
| Add back: Exceptional items (note 4) | 2,600 | - | |
| Adjusted operating profit | 6,147 | 6,154 |
| Adjusted operating profit margin | 22.1% | 25.6% |
Adjusted EBITDA
| 2008 Unaudited | 2007 Audited | ||
| £'000 | £'000 | ||
| Operating profit | 2,770 | 5,568 | |
| Add back: Depreciation of fixed assets | 605 | 418 | |
| Add back: Amortisation of acquired intangibles | 659 | 459 | |
| Add back: Share based payments | 118 | 127 | |
| Add back: Exceptional items (note 4) | 2,600 | - | |
| Adjusted EBITDA | 6,752 | 6,572 |
The adjusted profit before tax, adjusted operating profit and adjusted EBITDA for 2007 have been restated for share based payments for comparability purposes.
4. Exceptional items. The exceptional items of £2.60 million in 2008 relates to severance payments, onerous leases and other contracts, writing off previously capitalised internal developments and other costs relating to restructuring the operations of the Group following the acquisition of Performa in February 2008 and the cost cutting initiative in October 2008. There were no exceptional items in 2007.
| 2008 Unaudited | 2007 Audited | ||
| £'000 | £'000 | ||
| Severance payments and related costs | 1,237 | - | |
| Onerous leases and other contracts | 657 | - | |
| Internal developments write down following restructuring | 706 | - | |
| Total exceptional items | 2,600 | - |
The approximate cash element of the exceptional costs amounts to £1.89 million of which £0.97 million has been paid in 2008. Approximately £0.70 million will be paid in 2009 and the remainder (£0.22 million) will be paid after 2009.
5. Reconciliation of operating profit to net cash inflow from operating activities
| 2008 Unaudited | 2007 Audited | |||
| £'000 | £'000 | |||
| Operating profit | 2,770 | 5,568 | ||
| Depreciation of tangible fixed assets | 605 | 418 | ||
| Amortisation of intangibles | 2,533 | 2,316 | ||
| Internal developments write down following restructuring | 706 | - | ||
| Increase in debtors | (1,163) | (1,640) | ||
| Increase/(decrease) in creditors (excluding deferred income) | 329 | (169) | ||
| Movement in deferred income | 2,427 | 406 | ||
| Loss on disposal of fixed assets | 20 | - | ||
| Share based payments | 118 | 127 | ||
| Net cash inflow from operating activities | 8,345 | 7,026 |
6. Free cash flow - reconciliation from statutory heading to business performance measure
| 2008 Unaudited £'000 | 2007 Audited £'000 | |||
| Cash generated from operations | 8,345 | 7,026 | ||
| Investment in intangible assets - development costs | (2,535) | (2,640) | ||
| Cash generated from operations less investment in internally generated intangible assets | 5,810 | 4,386 |
7. Reconciliation of net cash flow to movement in net debt
| 2008 Unaudited | 2007 Audited | |||
| £'000 | £'000 | |||
| Increase/(decrease) in cash and cash equivalents in the year | 3,313 | (2,377) | ||
| Movement on overdraft and other loans | (2,002) | (562) | ||
| Movement on bank loans | (3,892) | 2,009 | ||
| Exchange movement on bank loans | (2,008) | (1,600) | ||
| Other non-cash movements | 103 | 72 | ||
| Movement in net debt | (4,486) | (2,458) | ||
| Net debt at beginning of year | (10,133) | (7,675) | ||
| Net debt at end of year | (14,619) | (10,133) |
8. Taxation
The taxation reconciliation for the year is as follows:
| Tax reconciliation | 2008 | 2007 |
|
| Unaudited | Audited |
|
|
| |
|
| £'000 | £'000 |
| Profit before taxation | 1,292 | 4,572 |
|
|
| |
| Current tax |
| |
| Tax charge on profit before tax at standard rate of corporation tax in the UK of 28.5% (2007: 30%) | (368) | (1,372) |
| Effects of: |
| |
| Items allowable for tax purposes | 361 | 360 |
| Accelerated capital allowances | (80) | 228 |
| Differences in tax rates | 31 | (93) |
| Tax losses arising in year | (308) | (455) |
| Adjustment for previous periods | (195) | - |
| Tax losses utilised | 106 | 1,145 |
| Total current tax charge on ordinary activities | (453) | (187) |
|
|
| |
| Deferred tax |
| |
| Origination and reversal of temporary differences | 199 | (968) |
| (Release)/recognition of deferred tax asset | (131) | 327 |
| Differences in tax rates | 0 | (57) |
| Adjustment in respect of previous periods | 195 | 64 |
| Total deferred tax | 263 | (634) |
|
|
| |
| Total taxation charge | (190) | (821) |
The tax impact of the exceptional items is as follows:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Tax charge on profit before tax and exceptional items | (729) | (821) |
| Tax credit on exceptional items | 539 | - |
| Net tax charge on profit before tax and after exceptional items | (190) | (821) |
9. Acquisition
On 20 February 2008 the Company acquired 100% of the ordinary shares (100% of the voting shares) of Performa Consultants UK Limited, a UK business based in London that develops composites software. The acquisition has helped reinforce StatPro's existing strong position in the composites software market. The total consideration (including consideration for net asset adjustment on completion) amounting to £7.74 million (before costs) was satisfied by a combination of £6.55 million in cash and the issue to the vendors of 1,372,020 ordinary shares of 1p each at an effective price of 86.6p based on the average closing mid-price of StatPro's ordinary shares for the ten day trading period prior to the date of completion.
The provisional fair values of assets and liabilities of Performa acquired were as follows:
| Performa book value | Fair value adjustments (provisional) | Total fair value (provisional) | |||||||||||
| £'000 | £'000 | £'000 | |||||||||||
| Intangible fixed assets - technology | - | 105 | 105 | ||||||||||
| Intangible fixed assets - client contracts | - | 1,317 | 1,317 | ||||||||||
| Fixed assets | 93 | (54) | 39 | ||||||||||
| Debtors | 753 | - | 753 | ||||||||||
| Other receivables | 81 | - | 81 | ||||||||||
| Cash | 1,270 | - | 1,270 | ||||||||||
| Creditors | (1,050) | (609) | (1,659) | ||||||||||
| Net assets | 1,147 | 759 | 1,906 | ||||||||||
| Net assets acquired | 1,906 | ||||||||||||
| Goodwill | 6,168 | ||||||||||||
| 8,074 | |||||||||||||
| Satisfied by: | |||||||||||||
| Initial cash consideration including costs and adjustments for net assets | 6,886 | ||||||||||||
| Shares issued | 1,188 | ||||||||||||
| Total consideration (including costs) | 8,074 |
The provisional fair value adjustments relate to the valuation of intangible assets, value of fixed assets acquired and the adjustment of deferred revenue on client contracts to align the accounting policies. The goodwill is attributable to the client contract cross-selling potential, the skills of the team of the business and the significant synergies arising from the combined composites software business.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year as set out below.
Earnings per share - basic and diluted
| Earnings Unaudited 2008 £'000 | Weighted average number of shares Unaudited 2008 '000 | Earnings per share Unaudited 2008 pence | Earnings Audited 2007 £'000 | Weighted average number of shares Audited 2007 '000 | Earnings per share Audited 2007 pence | |||||||
| Earnings per share - basic | 1,024 | 55,368 | 1.8 | 3,718 | 52,771 | 7.0 | ||||||
| Potentially dilutive shares | - | 593 | - | - | 1,757 | (0.2) | ||||||
| Earnings per share - diluted | 1,024 | 55,961 | 1.8 | 3,718 | 54,528 | 6.8 |
Adjusted earnings per share
| Earnings Unaudited 2008 £'000 | Weighted average number of shares Unaudited 2008 '000 | Earnings per share Unaudited 2008 pence | Earnings Audited 2007 £'000 | Weighted average number of shares Audited 2007 '000 | Earnings per share Audited 2007 pence | ||||||
| Earnings per share - basic | 1,024 | 55,368 | 1.8 | 3,718 | 52,771 | 7.0 | |||||
| Effect of amortisation of acquired intangibles | 659 | - | 1.2 | 459 | - | 0.9 | |||||
| Effect of share based payments | 118 | - | 0.2 | 127 | - | 0.2 | |||||
| Effect of operating exceptional items | 2,600 | - | 4.7 | - | - | - | |||||
| Effect of tax on exceptional items | (539) | - | (0.9) | - | - | - | |||||
| Adjusted earnings per share | 3,862 | 55,368 | 7.0 | 4,304 | 52,771 | 8.1 | |||||
| Potentially dilutive shares | - | 593 | (0.1) | - | 1,757 | (0.2) | |||||
| Diluted adjusted earnings per share | 3,862 | 55,961 | 6.9 | 4,304 | 54,528 | 7.9 |
The adjusted earnings per share information has been provided in order to assist the reader to understand the underlying performance of the business on a comparable basis. The adjusted profit after tax for 2007 has been restated for of share based payments for comparability purposes.
11. Dividend
The directors are recommending a final dividend for 2008 of 1.25p per share (2007: 1.05p). This dividend is not accrued in these financial statements. If approved by a resolution at the 2009 Annual General Meeting, it is intended to pay the dividend on 27 May 2009 to all shareholders on the register at the close of business on 24 April 2009.
12. Statement of changes in shareholders' equity
| Share Capital | Share premium account | Shares to be issued | Retained earnings | Other reserves | Minority Interests | Total Unaudited | |||||||
| Group | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| At 1 January 2008 | 531 | 14,273 | 874 | 6,237 | 3,132 | (38) | 25,009 | ||||||
| Shares issued | 64 | 2,003 | (47) | (4) | 1,174 | - | 3,190 | ||||||
| Profit for the year | - | - | - | 1,024 | - | 78 | 1,102 | ||||||
| Dividends paid | - | - | - | (860) | - | - | (860) | ||||||
| Share based payments | - | - | - | 118 | - | - | 118 | ||||||
| Exchange differences offset in reserves | - | - | - | - | 1,606 | 3 | 1,609 | ||||||
| At 31 December 2008 | 595 | 16,276 | 827 | 6,515 | 5,912 | 43 | 30,168 |
Other reserves includes merger reserve and translation reserve