SSY.L Regulatory News (SSY)

16 Mar 2006 07:02

CODASciSys PLC16 March 2006 Embargoed until 7.00am 16 March 2006 CODASciSys plc RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 CODASciSys plc ("CODASciSys") announces its preliminary results for the yearended 31 December 2005. Quoted on AIM (stock code: CSY), CODASciSys has itsheadquarters in Chippenham and is a supplier of specialist software, consultancyand IT services. Key points: • Financial results for 2005: o Operating profit, turnover and operating profit margin all at record levels; o Operating profit, turnover and dividend ahead of market expectations; o Revenue 7.4% ahead at £72.8m (2004: £67.8m); o Profit before tax, interest, goodwill amortisation and exceptional items improved by 33.8% to £10.3m (2004: £7.7m); o Profit before tax: £7.7m (2004: £3.9m), an increase of 97.4%; o The CODA Division increased operating profits (before goodwill amortisation of £2.5m (2004; £2.3m)) by 30.1% to £9.5m (2004: £7.3m); o The SciSys Division increased operating profits by 11.1% to £2.0m (2004: £1.8m); o Adjusted basic earnings per share (excluding goodwill amortisation) up 42.2% to 36.7p (2004: 25.8p). o Basic earnings per share 24.7p (2004: 9.9p) • Proposed final dividend increased 35% to 5.0p (2004: 3.7p), making 7.0p in respect of this financial year (2004: 5.0p) - an increase of 40%. • Year-end net cash of £10.1m (2004: £7.5m), despite outflows of £4.7m on acquisitions. • Deferred income: £19.3m (2004: £18.6m). On outlook, Chairman, Mike Love stated: "The early indications are that the factors underpinning the increasing strengthof each Division and the Group as a whole are continuing, and our expectationsfor the business in 2006 remain positive." FOR FURTHER INFORMATION, PLEASE CONTACT: Jane Curry, Investor Relations, CODASciSys 01249 466466Graham Steinsberg, Chief Executive, CODASciSys 01249 466466 EXTRACTS FROM CHAIRMAN'S STATEMENT - MIKE LOVE I am delighted to report that 2005 has been a year of profitable, controlledexpansion across the Group. The CODA Division recorded a healthy growth in bothrevenue and profits, supported by a number of acquisitions across Europe.Meanwhile, SciSys made a significant number of investments into each of its mainsectors, which saw returns becoming apparent late in the year. BusinessCollaborator also saw a pleasing return to profitability. Profitability. Profits, turnover and margin all reached record levels in 2005.Operating profit (before goodwill amortisation) exceeded £10m for the firsttime, improving by 33.8% to £10.3m (£7.7m). Operating profit increased to £7.4m(£3.6m). Turnover improved 7.4% to £72.8m (£67.8m); and overall operating profitmargin (excluding amortisation) rose to 14.1% (11.4%). Operating profit marginrose to 10.2% (5.2%). Each Division contributed to these improvements. CODA'soperating profits (before goodwill amortisation) rose 30.1% to £9.5m (£7.3m) onturnover 9.9% higher at £47.6m (£43.3m), with operating profit margins (beforegoodwill amortisation) rising to 20.0% (16.9%). Operating profit rose 33.3% to£8.0m (£6.0m) and the operating profit margin rose to 16.8% (13.9%). A healthybalance of new and traditional offerings distributed across a wider number ofoutlets underpinned this result. Within SciSys, turnover improved to £22.3m(£22.0m), and although much of this improvement arose late in the period, therise in operating profit margin to 9.0% (8.2%) shows that the strategy oftargeted investment into profitable business has begun to yield improvingreturns. Cash. Operating cash flows during the year remained positive and the year endnet cash position was £10.1m (2004: £7.5m), despite outflows of £4.7m onacquisitions during the period. The Board has consistently stated its strategyof using cash reserves to improve overall shareholder returns. The prime focuswill remain targeted acquisitions and cash will be retained within the businessto facilitate this. However, dividends also represent an important mechanismfor returning value to shareholders, and therefore (in keeping with ourprogressive dividend policy and to reflect the strong growth in bothprofitability and cash reserves) we have decided to recommend a final dividendof 5.0p per share (prior year: 3.7p), making a total of 7.0p for the year (prioryear: 5.0p) - an increase of 40% for the full year. The Board. During the year, John Haynes stepped down from the Board. Johnprovided excellent service to the CODASciSys Group throughout his 22 yearsservice and we would like to extend our sincere thanks to him. I am alsodelighted that John has agreed to continue to provide his expertise when theneed arises. John was succeeded as the SciSys CEO by Mark Hampson. Mark hashad an excellent track record throughout his 7 years with the Group. As ChiefOperating Officer of SciSys, Mark was responsible for engineering many of thechanges that have been at the heart of the increasing strength of this Divisionand I was delighted to welcome him to the Group Board at the start of 2006. 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 onbehalf of the Board for their invaluable contribution to these results. The future. The Board's attention remains focused on the continued growth ofall Divisions. Within CODA, we shall initially be looking to take maximumadvantage from the investments made during 2005. Within SciSys, we shall look toaccelerate the momentum gained through the major successes in each of thesectors in which we operate, whilst evaluating expansion opportunities for theDivision. For Business Collaborator, we shall be looking to maintain theexcellent turnaround during 2005. The early indications are that the factorsunderpinning the increasing strength of each Division and the Group as a wholeare continuing, and our expectations for the business in 2006 remain positive. EXTRACTS FROM GROUP CHIEF EXECUTIVE OFFICER'S REVIEW - GRAHAM STEINSBERG The CODASciSys Group made significant strides forward in 2005. Turnover,pre-tax profits and margins all moved ahead within each Operating Division;underpinning our goal of making each Division independently strong, andproviding a healthy environment for the next phase in the Group's evolution. Contributions from all Operating Divisions. CODA, SciSys and BusinessCollaborator ("BC") all made positive contributions to the Group in 2005. CODAcontinued to sell a balanced portfolio of traditional higher value accountingsolutions and the more recently developed and higher volume analytics offerings.This balanced approach saw operating profit margins (before goodwillamortisation) reach 20% (operating profit margin reached 16.8%). SciSysachieved its results whilst investing in opportunities to secure several majorlong-term contracts. Success in each of these brought improving returns as theyear progressed and has created the platform for future growth. BC capitalisedon the investments made in 2004, by recording a year-on-year improvement inoperating profit of approximately £0.7m (excluding the effects of a goodwillimpairment write-down in 2004), and delivering operating profit margins (beforegoodwill amortisation) of 15.2% (operating profit margin of nil). Focused group strategy - driving independent growth. Throughout 2005, our focushas been to make sure the Operating Divisions continue to grow independentlystronger. As well as financial improvements, this strength is also measuredboth against external factors - such as how well the offerings are defined,clarifying the markets to which they relate, the uniqueness of our position -and on internal issues - such as succession management, systems and operationalcontrols. All Divisions can demonstrate examples of this in action. Within CODA, therewas the acquisition of a product set from the United States to help address thegrowing compliance software market; and Steve Dashwood was appointed as the newUK Managing Director. Within SciSys, Mark Hampson took over as CEO. Attentionwas directed away from generalist consultancy and development and focused intoareas such as Environmental Regulation where the uniqueness of our knowledge ismore likely to create sustainable longer term revenues and protect margin. BCchanged its pricing policy in order to reduce its dependency on large "one-off"licence sales, and this helped to generate a higher proportion of long-termrecurring revenues. The results of this focus have delivered a solid platform for the future. The growth of the business has come both organically and from targetedacquisitions. The strong cash flows and the overall health of the balance sheetposition us well to continue with this dual approach without the need forexternal finance. CODA focus. In 2005, CODA continued its "best-of-class" approach deliveringsolutions to address the ever-increasing challenges of the world's FinanceDirectors. It made several acquisitions in mainland Europe, bringing additionalproduct offerings and allowing it to distribute its message directly to a wideraudience. In 2006, the Division will look to ensure maximum return from theseacquisitions and will actively promote all three ranges within its offerings -traditional accounting, analytics and compliance. SciSys focus. In 2005, each of SciSys' target sectors (space, defence andpublic sector) brought significant opportunities. In space, the Galileoprogramme began to move ahead. Defence saw the continuation of our involvementin the BISA programmes (Battlefield Information System Application) through theFRES initiative which is designed to provide the British Army with a new familyof armoured vehicles. Whilst, in the public sector, the Environment Agency wasselecting SciSys as its partner of choice for the development of its modernisedregulatory programme. The Division secured significant work in all three,justifying the levels of investment during the period. During 2006, the focuswill be on profitable delivery in all these areas, and on developing itspresence in all of these markets, but particularly in the public sector, wherethe Division's reputation as a niche specialist is gaining momentum. Business Collaborator. In 2005, BC capitalised on its strengths to win contractsin its traditional extranet markets (architecture, engineering & construction ("AEC") and property refurbishment), at the same time extending into the utilitiessector, seeing successes in three of the country's major water utilities. 2006will see a continuation of its current focus in the AEC, property refurbishmentand utilities markets as well as on the SEDEX (Supplier Ethical Data Exchange)initiative where the membership - now standing at over 4,000 - grew fourfoldduring the year. EXTRACTS FROM THE GROUP FINANCIAL DIRECTOR'S REVIEW - BRYAN HUCKER The Group made considerable advances against its own financial objectives during2005. Profitability and margins continued to advance; and it is particularlypleasing to report a growth in turnover of 7.4%, taking the Group beyond £70mfor the first time. CODA - Growth in Revenue and Margin Overall revenue for the CODA Division advanced 9.9%, with all revenue streams(licences, services and maintenance) showing an increase in the year. £2m ofthis growth was organic, with the balance coming from the acquisitions made inFrance and in Sweden. The other two acquisitions, in Germany and Hungary, weremade at the very end of the period and there is therefore no contribution to beshown. All acquisitions in the period were made without recourse to externalfinance. Operating profit margins (before goodwill amortisation) within theDivision continued their upward trend moving ahead from 16.9% to 20% (operatingprofit margin 16.8% (13.9%)). The acquisitions in France and Sweden for a maximum consideration of £5.6m(subject to earn-out arrangements) together made a contribution of £2.3m torevenues and operating profits before goodwill amortisation of £0.3m (operatingprofits £0.1m). SciSys - increasingly strong as the period progresses Within SciSys, all sectors made positive contributions to the overall operatingprofit. Of particular note, is the impact of the success late in the secondhalf in all three major initiatives (Galileo, FRES and Environmental Regulation)in which the Division invested. These saw utilisation, and hence revenues,rising steadily to new levels during the latter part of the year; also bringingimproved operating profit margins, which rose to 9.9% (8.3%) in the second halfand 9.0% (8.2%) for the year as a whole. Early indications are that these newlevels are being maintained into 2006. Business Collaborator - turnaround We reported last time that Business Collaborator had made a strategic investmentin the SEDEX program (Supplier Ethical Data Exchange). It is pleasing that asmembership of that exchange grows (an increase of 3,000 in 2005 alone) so doesthe return made by BC. This helped to contribute to a considerable turnaroundin the fortunes of the Division, reporting profits (before goodwillamortisation) of £0.3m against a loss of £0.4m last year (operating profit £nil(2004: loss £1.8m)). Operating profit margins (before goodwill amortisation)reached 15.2% for the year. Product investment Within CODA, we continued our significant product investment programme. In theyear, we spent £8.8m (2004: £8.6m). All product development costs are writtenoff in the year in which they occur. Deferred income Deferred income, at the year end, rose from £18.6m to £19.3m. This is made upof £16.7m for the CODA Division, £2.0m for the SciSys Division and the balanceof £0.6m for Business Collaborator. An analysis of the total figure shows£13.1m (2004: £12.1m) of maintenance income, deferred licence fee revenues of£3.5m (2004: £3.5m) and advance payments for projects/consultancy of £2.7m(2004: £3.0m). Within the £13.1m of deferred maintenance is £12.8m in respectof CODA. Cash management Operating cash flows have risen significantly throughout the year with cashinflow from operating activities of £11.6m (2004: £7.6m). The Group hascontinued its sharp focus on cash management. The year end net cash balance of£10.1m (2004: £7.5m) was after spending £4.7m during the year on acquisitions. Currency During the year, the main currencies the Group deals in (the euro and US dollar)again moved in opposite directions relative to sterling, and the Group had netexchange losses for the year of £0.1m (2004 gains: £0.3m). Tax The effective tax rate (excluding goodwill amortisation) for the Group of 17.5%(2004: 23.3%) remained below the standard rate of corporation tax in the UK, dueprincipally to the effect of tax credits available on Research and Developmentexpenditure made by the Group. Dividend The proposed final dividend for the year ended 31 December 2005, of 5p pershare, will be paid on 5 July 2006 to shareholders on the register at 31 March2006. The shares will go ex-dividend on 29 March 2006. Group Profit and Loss Accountfor the year ended 31 December 2005 2005 2004 £000 £000 TurnoverExisting operations 70,450 67,830 Acquisitions 2,321 -Total turnover 72,771 67,830Staff costs (42,651) (40,641)Depreciation (1,605) (1,833)Amortisation of goodwill (2,820) (3,742)Other operating charges (18,249) (18,059) (65,325) (64,275)Operating profitExisting operations 7,382 3,555 Acquisitions 64 -Total operating profit 7,446 3,555 Operating profit before 10,266 7,670goodwill amortisation andexceptional itemsNon Recurring items Abortive disposal costs - (373) Goodwill impairment - (875)Goodwill amortisation (2,820) (2,867)Operating profit 7,446 3,555 Profit on sale of fixed assets - 254 Other interest receivable 229 110Interest payable and similar (9) (5)charges Profit on ordinary activities before 7,666 3,914taxation Tax on profit on ordinary (1,840) (1,580)activities Profit on ordinary activities after taxation 5,826 2,334 Earnings per share Basic 24.7p 9.9pDiluted 22.6p 8.9p All operations are continuing in both the current and previous year.Group Balance Sheet at 31 December 2005 2005 2004 (restated) £000 £000 £000 £000Fixed assetsIntangible assets 39,858 36,123Tangible assets 13,202 13,180 53,060 49,303Current assetsDebtors 24,450 21,385Cash at bank and in hand 10,097 7,512 34,547 28,897Creditors: amountsfalling due within one year (10,527) (7,790) Net current assets 24,020 21,107 Total assets less current liabilities 77,080 70,410 Creditors: amounts Falling due after more than one year (1,206) - Deferred income (19,323) (18,580) Net assets 56,551 51,830 Capital and reservesCalled-up share capital 6,352 6,350Share premium account 43,008 42,980Capital redemption reserve 83 83Profit and loss account 7,108 2,417 Equity shareholders' funds 56,551 51,830 Group Cash Flow Statementfor the year ended 31 December 2005 2005 2004 £000 £000 £000 £000 Net cash inflow from operating activities 11,552 7,641 Returns on investments and servicing offinanceInterest received 229 110Interest paid (9) (5) Net cash inflow from returns on investments 220 105and servicing of finance TaxationUK and overseas corporation tax paid (1,687) (1,281) Capital expenditure and financialinvestmentPayment to acquire tangible fixed assets (1,499) (6,057)Receipts from sale of investments 43 30Receipts from sales of tangible fixed 15 1,125assets Net cash outflow from capital expenditure (1,441) (4,902)and financial investment AcquisitionsPurchase of CODA France (1,723) -Purchase of CODA Nordic (2,110) -Settlement of Nordic royalty (365) -Purchase of other CODA subsidiaries (549) - Net cash outflow from acquisitions (4,747) - Equity dividends paid (1,178) (895) Net cash inflow before financing 2,719 668 FinancingIssue of ordinary share capital 30 - Net cash inflow from financing 30 - Increase in cash in the year 2,749 668 Reconciliations of Movements in Shareholders' Funds for the year ended 31 December 2005 GROUP 2005 2004 (restated) £000 £000Profit for the financial year 5,826 2,334Dividends (1,178) (895) Retained profit for the financial year 4,648 1,439 Exchange adjustments (1) 20Issue of new shares 2 -Premium on issue of new shares 28 -Net movement of shares owned in Employee Share Trust 44 30 Net addition to shareholders' funds 4,721 1,489 Opening shareholders' funds (as restated) 51,830 50,341 Closing shareholders' funds 56,551 51,830 Statement of Total Recognised Gains and Lossesfor the year ended 31 December 2005 GROUP 2005 2004 £000 £000 Profit for the financial year 5,826 2,334Exchange adjustments (1) 20 Total recognised gains and losses 5,825 2,354 Dividends 2005 2004 (restated) £000 £000 Interim dividend paid in year 1.3p per share (2004 - 1.1p) 330 279 Final dividend paid in year 3.7p per share (2004 - 2.7p) 940 686 1,270 965 Dividend income on own shares held by Employee Share Trust (92) (70) 1,178 895 The new Accounting Standard, FRS21, requires that dividends should not be recognised in the accounts of the Company until such time as they have been formally declared, or in the case of interim dividends, paid. The comparative Profit and Loss Account and the Balance Sheets for the year ended 31 December 2004 have been restated in accordance with FRS21. The effect of FRS21 on each Balance Sheet is to restate the amount of creditors and reserves. As a result, the creditors due within one year has reduced by £1,178,000 at 31 December 2004, with the profit and loss reserve being increased by the same amount. Basic earnings per share Basic earnings per ordinary share are calculated by dividing the profit after taxation attributable to the shareholders of £5,826,000 (2004 - £2,334,000) by the weighted average number of shares in issue during the year (excluding own shares held in the Science Systems Employee Share Trust ("EST") and the CODASciSys No. 1 Employees' Share Trust ("No. 1 Trust") which holds shares in respect of the Executive Share Ownership Plan) of 23,583,905 (2004 - 23,559,775). Diluted earnings per ordinary share are calculated by dividing the profit after taxation attributable to the shareholders of £5,826,000 (2004 - £2,334,000) by the weighted average number of shares in issue during the year (excluding own shares held in the EST, but after taking into account options outstanding during the year) of 25,788,245 (2004 - 26,176,757). No adjustment to the number of shares in issue has been made in respect of the No. 1 Trust since these shares have been awarded under the Executive Share Ownership Plan. Adjusted earnings per share 2005 2004 Basic adjusted 36.7p 25.8p Diluted adjusted 33.5p 23.2p Basic adjusted earnings per ordinary share excluding amortisation of goodwill are calculated by dividing the profit after taxation excluding amortisation of goodwill attributable to the shareholders of £8,646,000 (2004 - £6,076,000) by the weighted average number of shares in issue during the year (excluding own shares held in the EST and the No. 1 Trust) of 23,583,905 (2004 - 23,559,775). Diluted adjusted earnings per ordinary share excluding amortisation of goodwill are calculated by dividing the profit after taxation excluding amortisation of goodwill attributable to the shareholders of £8,646,000 (2004 - £6,076,000) by the weighted average number of shares in issue during the year (excluding own shares held in the EST, but after taking into account options outstanding during the year) of 25,783,245 (2004 - 26,176,757). No adjustment to the number of shares in issue has been made in respect of the No. 1 Trust since these shares have been awarded under the Executive Share Ownership Plan. Segmental information Segmental analysis of turnover, profit before interest and taxation, and net assets The Group provides services and business solutions based on IT technologies. It comprises two main divisions: • CODA - focused on the delivery of financial intelligence through solutions based around financial analytics and accounting; • SciSys - which provides IT services, bespoke software and applications management to large corporations and government organisations. Turnover 2005 2004 £000 £000 Existing Operations CODA 45,292 43,341 SciSys 22,258 22,000 Business Collaborator and SciSys Commercial 2,900 2,489 Total existing operations 70,450 67,830 Acquisitions CODA 2,321 - Total Turnover 72,771 67,830 Operating profit / (loss) before goodwill amortisation, exceptional items, interest and taxation 2005 2004 £000 £000 Existing operationsCODA 9,203 7,312SciSys 2,007 1,839Business Collaborator and SciSys Commercial 530 (179)Group (1,754) (1,302) Total existing operations 9,986 7,670 AcquisitionsCODA 280 - Total operating profit before goodwill amortisation, exceptional items, interest and taxation 10,266 7,670 Operating profit / (loss) before interest and taxation £000 £000 Existing operationsCODA 6,899 5,008SciSys 2,007 1,839Business Collaborator and SciSys Commercial 230 (1,617)Group (1,754) (1,302)Abortive disposal costs re the SciSys Division - (373) Total existing operations 7,382 3,555 AcquisitionsCODA 64 - Total operating profit before interest and taxation 7,446 3,555 Annual Report The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2005 or 2004. The financial information for 2004 is derived from the statutory accounts for 2004 which have been delivered to the Registrar of companies. The auditors have reported on both the 2005 and 2004 accounts; their report was unqualified in both years and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2005 will be delivered to the Registrar of companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange