SSY.L Regulatory News (SSY)

27 Mar 2007 07:02

SciSys PLC27 March 2007 SCISYS PLC (SSY: AIM) Preliminary results for the year ended 31 December 2006 SciSys Plc ("SciSys" or "the Company"), supplier of bespoke software systems, ITbased solutions and support services to the space and defence industries andpublic sector markets, today announces preliminary results for the year ended 31December 2006. Key points: • Financial highlights for continuing operations: • Revenue up by 14.4% to £25.4m (2005: £22.2m); • Adjusted operating profit up 1.8% to £1.5m (2005: £1.4m)(before FRS20 share based payment charges and non-recurring costs in respect of payments from the Employee Share Trust); • Operating profit £0.9m (2005: £1.4m); • Adjusted basic earnings per share improved by 12.9% to 7.0p (2005:6.2p); • Basic earnings per share 2.7p (2005: 6.0p); • Proposed final dividend of 1p per share. • Successful demerger of the business from CODA completed in September 2006. • Operational Highlights for continuing operations: • Continued high levels of repeat business with existing client base; • Investment in business development to deliver top line growth, strong pipeline and order book; • Secured new customers within existing niche markets; • Successful delivery of UK Ministry of Defence FRES EA TDP programme with Lockheed Martin; • Good progress on other major programmes. Mike Love, Chairman, commented: "I am pleased to report another successful year for SciSys. These resultsdemonstrate that SciSys has established itself as a successful standalonebusiness with a sound strategy for long term and sustainable growth. SciSys isin very good shape with excellent prospects, evidenced by a strong pipeline andorder book, and is heading into the future with confidence." For further information please contact: SciSys Plc Mark Hampson, CEO T: +44 (0)1249 466 466 Pelham Public Relations Archie Berens T: +44 (0)20 7743 6679 E : archie.berens@pelhampr.com Pelham Public Relations Alex Walters T : +44 (0) 20 3170 7435 E: alex.walters@pelhampr.com EXTRACTS FROM CHAIRMAN'S STATEMENT - Mike Love I am delighted to report that 2006 has been a year of further good progressagainst our strategic plans and we are entering 2007 with a strong order bookand excellent prospects. In particular I am pleased to report the growth inrevenue and number of customers, which is the direct result of a strategicdecision to invest in business development, cross sector capability anddiversification of the customer base, whilst continuing to take good care of ourexisting clients. These decisions helped to offset delays to programme awards inour Defence business, programmes which we now expect to secure in 2007. The business is primarily focused on 3 markets: Space, Defence and the PublicSector. It also supplies services into a number of other areas includingTransport, Utilities and Communications. These markets are the ones where wehave domain experts who speak the clients' language, understand their problemsand are able to deliver solutions including business transformation, support andtraining. Financial results for continuing operations Turnover increased by 14.4% to £25.4m (2005: £22.2m) with adjusted operatingprofit (operating profit before FRS20 share based payment charges and non-recurring costs in respect of payments from the Employee Share Trust) rising1.8% to £1.5m (2005: £1.4m). Operating profit was £0.9m (2005: £1.4m). Pre-tax profits were £0.5m (2005: £1.5m) after charging £0.5m (2005: £nil) inrespect of exceptional demerger costs. A reduction in the effective tax ratefrom 5.5% in 2005 to a credit of 18.5% in 2006 resulted in an improvement ofadjusted earnings per share by 12.9% to 7.0p (2005: 6.2p). Earnings per sharewere 2.7p (2005: 6.0p). At the year end the group had a total of £5.9m in cash, with no borrowings. Inaddition, the Group expects to receive by early 2008 up to £3m in relation to arepayment of funds loaned to the Employee Share Trust following the exercise ofshare options in the Executive Share Ownership Plan. These results provide a solid financial platform for future growth. Demerger 2006 has been a landmark year, with the successful demerger of the CODA andSciSys parts of the group into their constituent parts, both of them listed onAIM and trading successfully in their own right. Historically, SciSys has alwaysoperated independently within the group and therefore the impact of thisinternally, and upon customers, has been minimal. Dividend The Board remains committed to a progressive dividend policy. During 2006SciSys paid • a special one off dividend in August of 25 pence per share; and • An interim dividend of 2.8p per share paid in October (comprising 0.75p per share held in the new CODA plc and 0.55p per share held in SciSys. This represents an increase of 40% on the previous year. The proposed final dividend for the year ended 31 December 2006, of 1p pershare, will be paid on 21st June 2007 to shareholders on the register at 13thApril 2007. The shares will go ex dividend on 11th April 2007. The Board During the year, and as a result of the demerger, there have been severalchanges to the Board. Cliff Preddy, Graham Steinsberg and Jeremy Roche,stepped down from the Board moving to the newly AIM listed CODA plc. They allprovided excellent service to the CODASciSys Group for many years and we wouldlike to extend our sincere thanks to them. Mark Wells and Mike Greig wereappointed as non executive directors in the middle of 2006 with an eye to thefuture demerger and they have now moved onto the CODA plc board. We thank themfor their assistance prior to the demerger. At the same time we welcome SteveBrignall and Chris Cheetham to the Board. Steve joined the Board as TechnicalDirector following the demerger in September but has been with the Company since1986. He brings a wealth of technical expertise. Chris joined as FinancialDirector in January 2007 and has a long association with growing IT companies. Finally I would like to express my personal thanks to Bryan Hucker who intendsto resign from the Board after the AGM in May. Bryan has been with SciSys inall its forms since 1986 and was largely responsible for the successfulflotation of the company in 1997. He has provided an invaluable contributionover the years and we wish him well for the future. Staff participation The results for the year reflect the dedication, commitment and professionalismof all members of staff. I would like to take this opportunity to thank them for their invaluablecontribution to these results, and the Board for maintaining focus during thepotentially distracting demerger activity. Outlook Our prospects for 2007 are very positive and our expectation is for a period ofsustained growth both organically and potentially through acquisition. Webelieve that the innovative solutions SciSys is creating for its currentcustomers have viability in other market sectors and SciSys will pursue theseopportunities where the Board considers they will be both profitable andsustainable over the longer term. In addition, there is clearly room for SciSysto grow within its core market sectors and our clarity of purpose and offeringshas allowed us to increase the sales team during 2006, who have successfullybuilt a strong pipeline. We look forward to announcing exciting new wins during2007. SciSys retains a strong balance sheet following the demerger which enables it toconsider acquisitions that meet its long term strategy both in its currentmarket sectors and potential new ones where synergy exists. If a suitableopportunity presents itself then SciSys is we believe well placed to exploit it. In conclusion, SciSys is in very good shape with excellent prospects and isheading into the future with confidence. EXTRACTS FROM BUSINESS REVIEW - Mark Hampson, Chief Executive Officer Introduction As a result of the demerger of CODA, SciSys has been able to re-establish itsown identity, and in so doing, to re-focus on what has made it successful andresilient over the past two decades. We are one of the few companies in the U.K. able to offer the full range of ITrelated services, from Business Process re-engineering, analysis, design,development and system integration to through life maintenance and support in arange of different sectors. This combination of size and capability gives ussignificant advantages in that we are agile, able to respond to new marketopportunities quickly, yet dependable. Our size also makes us an excellentchoice to partner larger organisations bringing our innovative thinking andfocus on delivery to the large programmes which they lead. We have a growingreputation amongst such companies, which sees us at the heart of some new andexciting programmes, especially in the space and defence arenas where we nowwork alongside the majority of the prime contractors. In the public sector we are working closely with the Environment Agency on corebusiness change, to introduce risk based regulation across their monitoringactivities whilst developing innovative new software methods. This willingnessto "partner" allows us to develop, and extend our specialist niches which wethen seek to expand or take into new areas. For example, we developed a giltsmodelling capability for the UK Debt Management Office using technologydeveloped for spacecraft simulation. It is this combination of capability, agility and dependability that lies at theheart of our success to date and allows us to grow on a stable baseline ofrepeat and long term business derived from satisfied customers. Business Objectives and Strategy SciSys' primary business objective is to increase shareholder value in acontrolled and sustainable manner. Specific objectives for 2006 which I am pleased to report were achievedincluded: • Investment in business development; • Broadening of cross sector capabilities; • Diversification of the customer base; • Retention of existing clients; and • Growth in revenue. Our strategy for delivering sustainable growth remains broadly the same as ithas been for the past two decades, the key elements being:- • Delivering a high quality service to customers to sustain high levels of repeat business; • Focusing on specific market/technology niches where we have, or can develop, expertise; • Bringing innovation to customers by transferring knowledge across sectors; • Attracting and retaining highly capable staff by offering them challenging problems to solve, career development and a pleasant working environment; • Using technology and modern methods to remain competitive, as well as to deliver innovative solutions; • Developing re-usable capability to enhance margins; • Seeking growth opportunities in "adjacent" markets and new customers in our existing markets. We have actively sought to clarify our areas of expertise to allow us to growthe business more aggressively. This has led to the creation of 3 market focusedsectors, each of which: • was based around a particular set of offerings to the market; • has a substantial programme (or programmes) of work with sufficient duration to form a baseline for growth; and • is managed by a team with accountability and authority to deliver on growth objectives. There has been a considerable increase in sales activity which has delivered astrong order book at the year end, and a growing prospect list which includesseveral new name customers. Review of Operations SciSys operates as 4 business units, 3 of which are market focused divisions:Space, Defence and Transport, Public Sector. The fourth is the ApplicationsMaintenance and Support team, who offer 24/7 service management to a variety ofcustomers. Each of these divisions takes responsibility for business developmentwithin its respective market and for the delivery of the projects which itsecures. Staff typically stay in one division but can re-deploy whenevercircumstances or opportunities arise. During 2006 a number of staff moved fromthe Defence division into the growing Public Sector, partly as a result ofdelays to defence programmes, and partly to provide career developmentopportunities to staff. Space SciSys has been working in the Space sector since 1981. The bulk of the businessderives from the European Space Agency (ESA), although there is a growingresurgence in the commercial satellite broadcast industry. SciSys delivers arange of different types of consultancy and systems covering: • Spacecraft Ground Systems; • Autonomous On Board Systems; • Spacecraft Modelling and Simulation; • Mission Operations, Analysis and Flight Dynamics. In addition, SciSys provides consultancy and funded R&D in the areas of OpenSystems Standardisation, Autonomy and Robotics and, in particular, is heavilyinvolved in the Aurora programme covering European missions to Mars. Outside of ESA, SciSys customers include Eumetsat, Eutelsat, BNSC and theSpacecraft manufacturers Astrium (UK, Germany and France) and Alcatel-AleniaSpace. In addition we work with a number of software/systems integratorsincluding LogicaCMG, Vega and GMV. The single biggest area of activity during 2006 was on the Galileo programme,work which was secured in 2005. This contributed £1.8m of revenue during theyear and the programme will continue into 2007. Good progress was made acrossthe various projects in the programme, achieving Preliminary Design Reviewsignoff and proceeding to Critical Design Review early in 2007. SciSys is the European leader in the development of Spacecraft On Boardsoftware, and activity in this area generated £0.9m of revenue. We worked duringthe year on the Aeolus and Lisa Pathfinder missions, as well as being selectedto redevelop the software for a revised Cryosat mission to analyse the effectsof global warming on the polar ice caps and the SWARM mission to investigate theEarth's geomagnetic field. Defence and Transport The Defence and Transport sectors were merged in 2005 and the management teamtasked with developing capability and growing the business. SciSys has a longtrack record in the transport sector in particular and currently countsTransport for London and Westinghouse amongst its customers. Similarly, we havebeen working in Defence since the late 1980s and, as a result of our knowledgeof the Bowman combat radio and willingness to partner with prime contractors, wecount Fujitsu, Raytheon, Lockheed Martin and Thales amongst our customers. Inaddition to general system integration and IT services, SciSys offers expertisein a range of areas including: • Real-time monitoring and control; • Modelling (especially CBRN); • Bowman communications and interoperability; • Intelligent Autonomous vehicles. Increasingly we have been seeking to exploit synergies between the Space andDefence sectors and this has led to a number of studies and projects includingwork on a swarm of unmanned underwater vehicles, a demonstrator to assistpassengers navigate around crowded airports and the Future Rapid Effects Systemprogramme for the UK Ministry of Defence. The latter was an enormouslysuccessful programme of work delivered to Lockheed Martin during 2006 to developsoftware and electronic technologies which will lie at the heart of the BritishArmy's armoured vehicle fleet in the near future. A recent win in Transport for 2007 is the securing of the Transport for LondonFramework which positions us well for the potential work needed in the run-up tothe 2012 Olympics. Public Sector SciSys' involvement in the Public Sector started through a diversification ofthe work in Spacecraft monitoring and control systems into the SCADA systems forthe Utilities sector, leading in time to environmental work including theFishing Rod Licencing system (recently singled out by the National Audit Officeas one of only a handful of successful government IT projects) and theEnvironment Agency's Permit Administration System. As a result, SciSys hasbecome expert in the fields of Government regulation and permitting, andcontinues to work closely with the EA on the protection of the environment. The delivery of such programmes has required SciSys to utilise a wide range ofcapabilities including: • Business Process Re-engineering; • Project and Business consultancy; • Business Analysis. The Public Sector team today employs a significant number of such specialists aswell as the IT developers. The bulk of our work during 2006 was on the Integrated Regulation programme forthe Environment Agency which required the recruitment of an additional 30 staffinto the sector. This is a 3 year programme to provide the tools necessary forthe EA to respond to the Gershon and the Hampton reports requiring them to adopta modern, risk based approached to regulation in order to reduce the burden onbusinesses and become more effective regulator. The work is undertaken inpartnership and close co-operation with the EA and creates a number ofopportunities for spin-off work into other regulators, supported by the EA. Todate we have undertaken assessment work for the Scottish EnvironmentalProtection Agency (SEPA) and the Countryside Council for Wales and look forwardto developing this potential market. In addition, the Public Sector team are seeking to widen their customer base andhave recruited new business developers to assist in this. An early success inthe year was our appointment as partner to Cable&Wireless in supporting theCabinet Office Knowledge Network. This makes SciSys an application serviceprovider on the Government Secure Intranet (GSI) Framework bringing us intodirect contact with some 20 Government Departments and the possibility ofdevelopment work in addition to regular maintenance revenue. One of the important routes to market in the Public Sector remains the Office ofGovernment Commerce (OGC) approved supplier catalogue CATALIST. SciSys wassuccessful during 2006 in securing approval on 5 different categories and thishas led to increased opportunity to identify and work for new customers. Duringthe year we undertook work for a number of new customers including OFSTED,Hampshire County Council and the Countryside Council for Wales. This trend iscontinuing into 2007 with early wins including OFWAT, The National Archives andthe National Audit Office. As part of our continued development and application of our knowledge base, wehave jointly developed a unique service called iGather, which gives users aspecialist search and retrieval solution to gather information from a number ofsources including Environment Agency publications, the Office of NationalStatistics and Government publications. The service was originally developed inresponse to the implementation of the Strategic Environmental Assessmentinitiative but has much wider applications in the joining up of Local andCentral Government organisations. Application maintenance and Support Application maintenance and support services have been a cornerstone of SciSys'business for over a decade. We continue to provide such services for businesscritical systems operated by a number of long standing customers including theEnvironment Agency, Thames Water, EDF, House of Commons, the Cabinet Office(Knowledge Network), Transport for London, Metropolitan Police Service andArqiva. The service covers a combination of systems developed by SciSys,packaged software and also customers' bespoke systems, originally developed bythemselves or other parties. We promote support services as a natural follow-on to our development activitieswhere relevant and also seek opportunities where organisations lack in-houseresources to properly support key systems or are seeking more cost effectivesupport models. The scope and availability of our support services is tailoredto the customers' individual requirements and service level expectations. We enjoy long term relationships with our support services customers, whichallows us to build up a better understanding of the customer's business andhelps us deliver a more focused and effective service. Where legacyapplications are replaced by or required to integrate with newer solutions, ourknowledge is often invaluable in transition or data migration services. We alsowork closely with infrastructure service providers where our application supportservices neatly complement their communications and hosting services to delivera total support service to the end customer. Outlook Trading across all divisions continues to be healthy. We enjoy an excellentreputation for quality of service in the various market sectors in which weoperate. This is a reputation of which we are proud and which we are focused onmaintaining. On the back of the successful programme of transferability of skill andknowledge across the group, we have now established an "Incubator" division. Thepurpose of this division will be to act as a mechanism through which our entirebase of knowledge and skills can be applied into markets and industries whereSciSys is not currently active but where our expertise and experience can bedirectly applied. An obvious example is in the area of Media andCommunications, where we believe our track record and capabilities are highlyrelevant and we are working on several initiatives in this area. We also intend to explore the possibility of acquiring companies whosetechnologies and market focus are complementary to our own. With our strongbalance sheet, we believe we are well placed to do so. We are currentlyexamining several opportunities but will only conclude any transaction if we arefirmly convinced that the fit is a good one for both organisations and agreedterms are in shareholders' best interests. Finally, we will maintain our focus on our core markets, with a view toincreasing the number of customers. Significant progress has been made in thisregard and I anticipate further success in the current year and beyond. Therefore, we are well placed to deliver steady growth and meet our overalloperational and financial objectives for the year. EXTRACT FROM GROUP FINANCIAL DIRECTOR'S REVIEW - Bryan Hucker Introduction The Group underwent considerable change during the last year with the completionof the demerger of the CODA and Business Collaborator divisions on 26 September2006. I am delighted to report that this was achieved with minimal disruption tothe business whilst at the same time achieving the objective of increasingshareholder returns, and the benefits of greater transparency and focus. It hadbecome apparent that the previous structure was not conducive to a clearunderstanding of the business by its various stakeholders. Furthermore, once theCODA-related business of SciSys had been fully integrated into the CODA division(following the acquisition of CODA in 2000), the two underlying parts of theresulting CODASciSys plc benefited little by remaining within the same group. The results of the demerged businesses are disclosed under the headingDiscontinued Operations in the consolidated financial statements. A detailedfinancial review of the demerged operations for the full year is presented inthe annual report and accounts for CODA plc. The demerger was effected by the declaration of a £42.8m dividend in specieequal to the net asset value of the subsidiaries on the demerger date.Sufficient distributable reserves for the dividend were created by thecancellation of the share premium account with court approval. Revenues For the continuing SciSys operations, I am pleased to report that turnover grew14.4% to £25.4m (2005: £22.2m). Overall Group turnover shows a reduction from 2005 as the demerged businesseswere only included for the 9 month period prior to demerger, whereas 2005results reflected a full year's trading. The former divisions contributed£37.6m (2005: £50.6m) to Group turnover. Adoption of FRS20 Share Based Payments The Group has been obliged to adopt the accounting standard FRS20 Share BasedPayments for the first time during 2006 which results in a charge to operatingprofit for the year of £0.3m (2005: £0.6m). For the purposes of FRS20, theGroup's Executive Share Ownership Plans are equity-settled schemes. As aresult, there is no reduction in shareholder assets and there is a correspondingcredit to reserves. In the following financial statements, the 2005 figures have been restated,where appropriate to reflect the retrospective adoption of FRS20. Employee Share Trust payments During the year, as part of the demerger arrangements, the Employee Share Trustwas wound up, surplus funds being distributed to its beneficiaries, theemployees of the company. Since the payments were made to the beneficiaries as aresult of their employment, the company is required to include such payments asa charge to operating profit of £1.2m (2005: £0.3m). There is no reduction inshareholder assets in respect of the actual payment, except that the company isobliged to pay associated social security payments, and therefore there is acorresponding adjustment to reserves. Operating profit Adjusted operating profit, which reverses the impact of goodwill amortisation,the FRS20 Share Based Payment charges and Employee Share Trust payments notedabove, was up 1.8% to £1.5m (2005: £1.4m) for the continuing business and £7.1m(2005: £10.6m) including the discontinued operations. Charges relating to continuing operations in respect of FRS20 Share BasedPayments were £0.1m (2005: £nil) and were £0.5m (2005: £nil) for the EmployeeShare Trust distribution. This resulted in an operating profit for the SciSysbusiness of £0.9m (2005: £1.4m). Exceptional items These comprise non-recurring costs of £0.5m in the continuing operations forprofessional fees relating to the demerger. Earnings per share Adjusted basic earnings per share, for which the impact of exceptional items andcharges for FRS20 and Employee Share Trust payments are added back to profitafter tax increased 12.9% to 7.0p (2005: 6.2p) for the continuing business. Statutory basic earnings per share for the continuing business were 2.3p (2005:6.0p) Cash and financing The continuing SciSys business remains ungeared and closed the year with netcash of £5.9m. In addition, following the demerger SciSys has an outstandingloan of £3.0m to an employee share trust to fund the purchase of own shares forthe benefit of SciSys' employees. The majority of this loan is expected to berepaid by early 2008 following the exercise of share options relating to theExecutive Share Ownership Plan. Currency During the year, the euro weakened against sterling resulting in net exchangelosses for the continuing business during the year of £0.2m (2005: loss £0.1m).To mitigate currency risk SciSys will continue to maintain foreign exchangecylinder option cover. Tax The effective tax rate for continuing business was a credit of 18.5% (2005:charge of 5.5%). This remained below the standard rate of corporation tax inthe UK due principally to the effect of tax credits available on research anddevelopment expenditure made by the Group. Group Profit and Loss Accountfor the year ended 31 December 2006 2006 2005 Restated Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total £000 £000 £000 £000 £000 £000TurnoverExisting operations 25,402 37,564 62,966 22,207 48,243 70,450Acquisitions - - - - 2,321 2,321 Total turnover 25,402 37,564 62,966 22,207 50,564 72,771 Staff costs (16,093) (21,819) (37,912) (14,938) (28,298) (43,236)Depreciation (294) (951) (1,245) (299) (1,306) (1,605)Amortisation of goodwill - (2,287) (2,287) - (2,820) (2,820)Other operating charges (8,109) (10,229) (18,338) (5,599) (12,650) (18,249) (24,496) (35,286) (59,782) (20,836) (45,074) (65,910) Operating profitExisting operations 906 2,278 3,184 1,371 5,426 6,797Acquisitions - - - - 64 64 Total operating profit 906 2,278 3,184 1,371 5,490 6,861 "Adjusted operating profit"being operating profit beforegoodwill amortisation, FRS20share based payments andcharges arising from paymentsfrom the Employee Share Trust 1,454 5,603 7,057 1,428 9,161 10,589 FRS20 share based charges (80) (219) (299) (37) (548) (585)Payments from the EmployeeShare Trust (424) (726) (1,150) (18) (269) (287)Social security chargesrelating to the trustpayments (44) (93) (137) (2) (34) (36)Goodwill amortisation - (2,287) (2,287) - (2,820) (2,820) Operating profit 906 2,278 3,184 1,371 5,490 6,861 Profit on sale of fixed assets - - - - - -Other interest receivable 121 304 425 129 100 229Interest payable and similar charges (1) (3) (4) (3) (6) (9) Exceptional items (485) (495) (980) - - - Profit on ordinary activitiesbefore taxation 541 2,084 2,625 1,497 5,584 7,081 Tax on profit on ordinaryactivities 100 (618) (518) (83) (1,757) (1,840) Profit on ordinary activitiesafter taxation 641 1,466 2,107 1,414 3,827 5,241 Earnings per shareBasic 2.7p 6.2p 8.9p 6.0p 16.2p 22.2pDiluted 2.5p 5.7p 8.2p 5.5p 14.8p 20.3p Group Balance Sheetat 31 December 2006 2006 2005 £000 £000 £000 £000Fixed assetsIntangible assets - 39,858Tangible assets 1,435 13,202Investments 279 - 1,714 53,060Current assetsDebtors 9,213 24,450Cash at bank and in hand 5,934 10,097 15,147 34,547Creditors: amountsfalling due within one year (3,408) (10,527) Net current assets 11,739 24,020 Total assets less current liabilities 13,453 77,080 Creditors: amountsfalling due after more than one year - (1,206) Deferred income (304) (19,323) Net assets 13,149 56,551 £000Capital and reservesCalled-up share capital 6,414 6,352Share premium account - 43,008Capital redemption reserve 84 83Profit and loss account 6,651 7,108 Equity shareholders' funds 13,149 56,551 Group Cash Flow Statementfor the year ended 31 December 2006 2006 2005 £000 £000 £000 £000 Net cash inflow from operatingactivities 3,184 11,552 Returns on investments andservicing of financeInterest received 425 229Interest paid (4) (9) Net cash inflow from returns oninvestments and servicing offinance 421 220 TaxationUK and overseas corporation taxpaid (495) (1,687) Capital expenditure and financialinvestmentPayment to acquire tangible fixed assets (1,667) (1,499)Receipts from sale of investments 4,720 43Receipts from sales of tangible fixed assets 1 15 Net cash inflow/(outflow) fromcapital expenditure and financialinvestment 3,054 (1,441) Acquisitions & disposalsPurchase of CODA France - (1,723)Purchase of CODA Nordic - (2,110)Settlement of Nordic royalty - (365) Purchase of other CODA subsidiaries - (549)Cash disposed of with demergedbusiness (1,320) - Demerger costs (980)Cash paid to CODA employees byEmployee Share Trust after demerger (551) - Net cash outflow from acquisitions& disposals (2,851) (4,747) Equity dividends paid (8,180) (1,178) Net cash (outflow) / inflow beforefinancing (4,867) 2,719 FinancingIssue of ordinary share capital 691 30 Net cash inflow from financing 691 30 (Decrease)/increase in cash in the year (4,176) 2,749 Reconciliation of operating profit to net cash inflow from operating activities 2006 2005 £000 £000 Operating profit 3,184 6,861Depreciation charge 1,245 1,605Amortisation of goodwill 2,287 2,820FRS20 share based payment charges 299 585Exchange gains - 133Profit on sale of fixed assets (23) (13)(Increase) / decrease in debtors 3,068 (594)Increase / (decrease) in creditors and deferred income (6,876) 155 Net cash inflow from operating activities 3,184 11,552 Reconciliation of net cash flow to movement in net debt 2006 2005 £000 £000 (Decrease) / Increase in cash in the year (4,176) 2,749 Exchange adjustments 13 (164) (4,163) 2,585 Net cash at beginning of year 10,097 7,512 Net cash at end of year 5,934 10,097 Analysis of net debt At 1 January Cash flow Other At 31 December 2006 movements 2006 £000 £000 £000 £000 Cash at bank and in hand 10,097 (4,176) 13 5,934 Reconciliations of Movements in Shareholders' Funds for the year ended 31 December 2006 2006 2005GROUP Restated £000 £000 Profit for the financial year 2,107 5,241Net ordinary dividends (8,180) (1,178)Dividend in specie (42,770) - Retained (loss)/profit for the financial year (48,843) 4,063 FRS20 share based payments - charge recycled in equity 299 585Exchange adjustments 3 (1)Issue of new shares 63 2Premium on issue of new shares 628 28Amount charged to profit paid by Employee Share Trust 1,150 287Disposal of own shares in year 4,720 44Reclassification of CODA shares held by EST as an investmentpost-demerger 279 -Distribution of surplus within Employee Share Trust (1,701) (287) Net (deduction from)/addition to shareholders' funds (43,402) 4,721 Opening shareholders' funds 56,551 51,830 Closing shareholders' funds 13,149 56,551 Basic & diluted earnings per share The calculation of the Group basic and diluted earnings per ordinary share is based on the following data: Number of shares 2006 2005 Weighted Excluding own Net number of Weighted Excluding own Net number of average number shares held shares average shares held shares of shares number of shares '000 '000 '000 '000 '000 '000 Basic earnings per ordinaryshare 25,546 (1,795) 23,751 25,400 (1,816) 23,584 Diluted earnings per share 27,418 (1,795) 25,623 26,941 (1,158) 25,783 Earnings 2006 2005 Restated Continuing Discontinued Continuing Discontinued operations operations operations operations Total Total £000 £000 £000 £000 £000 £000 Profit on ordinary activitiesafter taxation 641 1,466 2,107 1,414 3,827 5,241 Basic earnings per ordinaryshare 2.7p 6.2p 8.9p 6.0p 16.2p 22.2p Diluted earnings per share 2.5p 5.7p 8.2p 5.5p 14.8p 20.3p Own shares held "Own shares held" represent the number of shares in the SciSys No. 1 Employees' Share Trust held specifically for SciSys employees. Diluted earnings per share The calculation of the diluted earnings per share does not take into account thenumber of shares in the SciSys No. 1 Employees' Share Trust since these shareshave been awarded under the Executive Share Ownership Plan. The calculation doestake into account the number of share options outstanding during the year,however there were nil in 2006 (2005: nil). Adjusted earnings per share The calculation of the Group basic adjusted earnings and diluted adjusted earnings per ordinary share is based on the following data: Number of shares 2006 2005 Weighted Excluding own Net number of Weighted Excluding own Net number of average number shares held shares average number shares held shares of shares of shares £000 £000 £000 £000 £000 £000Basic earnings perordinary share 25,546 (1,795) 23,751 25,400 (1,816) 23,584 Diluted earnings per share 27,418 (1,795) 25,623 26,941 (1,158) 25,783 Adjusted earnings 2006 2005 Restated Continuing Discontinued Continuing Discontinued operations operations operations operations Total Total £000 £000 £000 £000 £000 £000Profit on ordinaryactivities aftertaxation 641 1,466 2,107 1,414 3,827 5,241 Adjusted for:Exceptional item -demerger costs 485 495 980 - - - FRS20 Share basedpayment charges 80 219 299 37 548 585 Distributions from theEmployee Benefit Trust 424 726 1,150 18 269 287 Social Security Chargesrelating to the trustdistributions 44 93 137 2 34 36 Goodwill amortisation - 2,287 2,287 - 2,820 2,820 Adjusted profit aftertaxation 1,674 5,286 6,960 1,471 7,498 8,969 Basic adjusted earningsper share 7.0p 22.3p 29.3p 6.2p 31.8p 38.0p Diluted adjustedearnings per share 6.5p 20.6p 27.1p 5.7p 29.1p 34.8p Own shares held "Own shares held" represent the number of shares in the SciSys No. 1 Employees'Share Trust held specifically for SciSys employees. Diluted earnings per share The calculation of the diluted earnings per share does not take into account thenumber of shares in the SciSys No. 1 Employees' Share Trust since these shareshave been awarded under the Executive Share Ownership Plan. The calculation doestake into account the number of share options outstanding during the year,however there were nil in 2006 (2005: nil). Annual report The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 or 2005. The financialinformation for 2005 is derived from the statutory accounts for 2005 in respectof the Group's companies which have been delivered to the Registrar ofcompanies. The auditors have reported on the 2005 accounts; their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. The statutory accounts for 2006 will be finalised on thebasis of the financial information presented by the Directors in the preliminaryannouncement and will be delivered to the Registrar of Companies following theCompany's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange