SSY.L Regulatory News (SSY)

17 Mar 2005 07:00

CODASciSys PLC17 March 2005 CODASciSys plc RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 CODASciSys plc ("CODASciSys") announces its preliminary results for the yearended 31 December 2004. 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 2004: o Results and dividend ahead of market expectations; o Profit before tax, interest, goodwill amortisation and exceptional items improved by 18.5% to £7.7m (2003: £6.5m); o Profit before tax: £3.9m (2003: £3.9m), after charging a goodwill impairment adjustment of £0.87m; o The CODA Division increased operating profits (before goodwill amortisation of £2.3m) by 2.8% to £7.3m (2003: £7.1m); o The SciSys Division turned an operating loss of £0.4m in 2003 into an operating profit of £1.8m; o Group Revenue: £67.8m (2003: £68.0m); o Adjusted basic earnings per share (excluding goodwill amortisation) up 16.2% to 25.8p (2003: 22.2p). • Proposed final dividend increased 37% to 3.7p (2003: 2.7p), making 5.0p for the year (2003: 3.8p) - an increase of 32% • Year-end net cash of £7.5m (2003: £6.8m) after net expenditure of £3.9m on freehold offices. • Deferred income: £18.6m (2003: £19.2m) On outlook, Chairman, Mike Love stated: "Going forward, the Board's attention will be focused on expanding both theCODA and SciSys Divisions. The early indications are that the upturn in businessexperienced in the last quarter of 2004 is continuing and we remain positive inour expectations for 2005." FOR FURTHER INFORMATION, PLEASE CONTACT: CODASciSys 01249-466466 Today Jane Curry, Investor Relations, CODASciSys 07775 720355 Otherwise:Jane Curry, Investor Relations, CODASciSys 01249-466421 Graham Steinsberg, Chief Executive, CODASciSys 01249-466421Barrie Newton, Rowan Dartington 0117-933-0011 EXTRACTS FROM CHAIRMAN'S STATEMENT - MIKE LOVE It is pleasing to report that 2004 saw a return to growth in both the profitsand profitability of the Group. The CODA Division, despite increased competitionand pricing pressure, delivered continued improvements in profitability in theperiod, while the SciSys Division emphasised its continued return to health witha year on year improvement in pre-tax profits of more than £2m. Profit before tax, interest, goodwill amortisation and exceptional itemsimproved by 18.5% to £7.7m (2003: £6.5m) on turnover of £67.8m (2003: £68.0m).The CODA Division achieved a 2.8% increase in operating profits (before goodwillamortisation of £2.3m) to £7.3m (2003: £7.1m). Although this division's turnoverfell back slightly (approximately 2%) for the period as a whole, the lastquarter of the year showed a marked upturn in business, a trend which hascontinued into the first part of 2005. The changing product mix within thisdivision (many products now require shorter implementation timescales) resultedin a release of deferred revenue in relation to licences of £0.6m across theperiod. The SciSys Division (after adjusting for SciSys Commercial, which is nowshown separately) produced an overall operating profit of £1.8m (2003: operatingloss £0.4m). This profit was spread evenly across the period, marking a returnto stability in the division's operations. Group operating margins improved overall to 11.4% (2003: 9.6%). Profit beforetax was £3.9m (2003: £3.9m) after charging £3.7m (2003: £2.7m) for amortisationof goodwill, goodwill impairment and abortive disposal costs, and creditingprofit on the sale of fixed assets of £0.25m. Operating cash flows during the year remained strong and the year end net cashposition was £7.5m (2003: £6.8m), despite net outflows of £3.9m on freeholdproperty in relation to our Harrogate operations. The Board is mindful to focusthe use of its cash reserves on improving overall shareholder returns. TheGroup's growth strategy will continue to involve targeted acquisitions (such asthe recent acquisition in France). Cash will be retained within the business tofacilitate this. However shareholders have indicated the desire for acontinuation of the progressive dividend policy we have adopted previously. Inview of this we have decided to recommend a final dividend of 3.7p per share(2003: 2.7p), making a total of 5.0p for the year (2003: 3.8p). This representsan increase of 31.6%. During the year a review of the composition of the Board was undertaken. As aresult Bryan Hucker, Financial Director during the Group's flotation, resumedthat role, with Ruth McRitchie departing. We would wish to take this opportunityto acknowledge and thank Ruth for her contribution during a critical period inthe Group's growth. Jeremy Roche, head of the CODA Division, was appointed tothe Board. These changes have brought increased focus and a more representativebalance to the Board. The results for the year reflect the dedication, commitment and professionalismof the whole team at CODASciSys. We would like to take this opportunity to thankall staff members for their contribution during the past year. Going forward, the Board's attention will be focused on expanding both the CODAand the SciSys Divisions, and stabilising and growing Business Collaborator. Thefirst steps in this direction have already been taken with the recentannouncement of the acquisition of our French CODA distributor and the openingof two offices in Germany, one to service each major division. The early indications are that the upturn in business experienced in the lastquarter of 2004 is continuing and we remain positive in our expectations for2005. The proposed final dividend for the year ended 31 December 2004 of 3.7p pershare will be paid on 4 July 2005 to shareholders on the register at 1 April2005. The shares will go ex-dividend on 30 March 2005. EXTRACTS FROM GROUP CHIEF EXECUTIVE OFFICER'S REVIEW - GRAHAM STEINSBERG The CODASciSys Group has over the years taken much pride in reporting anunbroken track record in profits growth. It is therefore gratifying to reportrecord profits of £7.7m for the year. Both major operating divisions, CODA and SciSys, have contributed to thisposition. CODA showed great resilience by countering pricing pressure andincreased competition with a rationalisation in both business structure andproduct mix. The result was improved profitability across the year and a growingrevenue stream across the second half of the period. SciSys's return to health,signalled last time, has shown itself to be sustainable with a turnaround inoperating profits of £2.2m year on year. The Group strategy which underpins this return to growth in profitability is asimple one. CODASciSys focuses on its core competencies, remains flexible tomarket conditions and responds to business demands by delivering solutions whichaddress real customer needs. By way of example in 2004, Finance Directors around the world becameincreasingly sensitive to the need to improve reporting in relation to theirCorporate Governance obligations. CODA responded by becoming the first globalprovider of financial systems to deliver software, which not only assisted thereporting in this arena, but which also automated the often complex proceduresto facilitate this task. Within the SciSys Division, it was clear that to remaina major supplier to the European Space Agency, we needed to establish a directpresence in Germany. In October 2004 we opened an office in Darmstadt. Withintwo months we were awarded a position as one of the five prime suppliers acrossEurope to be allowed to bid to ESA under a framework agreement and won aninitial contract worth approximately €0.9m over the next two years. By adopting this simple focused approach we believe that we will achievepositive organic growth. However it is clear that the software and IT servicesmarkets remain challenging and organic growth will need to be supplemented by awell defined acquisition strategy to provide shareholders with good levels ofreturn. CODASciSys's balance sheet has significant strength and the Group istherefore well placed to make suitable acquisitions to assist in the next phaseof its growth. The recent acquisition of its French distributor will allowdirect access to a key market for CODA and is a good example of how we intend touse the funds at our disposal. In 2005 CODA will continue to focus on delivering solutions to Finance Directorswhich assist them to control and reduce transactional costs and address the everincreasing compliance requirements within their businesses. The geographicalexpansion upon which CODA embarked by the acquisition of its French distributorwill be developed further. SciSys's focus remains on three key sectors, Space, Defence and Public Sector.In 2004 it continued to establish itself as a major force in the first two ofthese. It secured a position as one of only a small number of prime suppliers tothe European Space Agency, thereby making it a leader in the European Spacesoftware market. In Defence it added to its involvement in the BISA (BattlefieldInformation Systems Application) program. It had already established itscredibility through Bowman and the NBC BISA. In 2004, against strongcompetition, it won a place in the consortium for the JETTS initiative. In 2005it will seek to continue to enhance its reputation within these sectors and growa similar level of credibility within the Public Sector, by focusing on its corecompetencies within both the transportation and regulatory compliance markets. In 2004, Business Collaborator made a significant investment in "SEDEX" - theEthical Trading Initiative designed to report on labour practices. Thisinitiative is now supported by many household name retailers such as Tesco,Marks & Spencer, Sainsbury and Waitrose. The return from this investment willaccrue as more third parties subscribe to this initiative. This division willalso remain focused on its core competencies of providing extranet systems totwo key markets, Property Refurbishment and AEC (Architecture, Engineering &Construction). EXTRACTS FROM THE GROUP FINANCIAL DIRECTOR'S REVIEW - BRYAN HUCKER Despite challenging market conditions during the year the Group has seen animprovement in operating profits (before exceptional items) from £6.5m in 2003to £7.7m in 2004. These profits exclude a one off cost of £0.37m which resultedfrom an unsolicited offer for the purchase of the SciSys Division and a gain of£0.25m which arose from the disposal of Follifoot Hall, a property that wasacquired as a part of SquareSum plc. Revenues of the CODA Division fell by 2% to£43.3m (2003: £44.2m) which was largely the result of currency movements andsome pricing pressure in the services division. However, pleasingly, licencerevenues showed growth overall when compared with last year, with a significantimprovement in the latter part of 2004. Maintenance also continued to advance,reflecting continuing confidence from CODA's customers. Both the CODA-Financials and CODA-Dream product sets continue to make a strong contribution tothe CODA results. The SciSys Division (after adjusting for SciSys Commercial which is now shownseparately) has achieved the most significant improvement during the year withan operating profit of £1.8m (2003: loss of £0.4m). This follows a majorrestructuring and improvements to management reporting systems. Revenuesincreased slightly to £22.0m (2003: £21.9m). Of particular note is that allunits (Space, Defence and Public Sector) contributed to the division's success. Business Collaborator made a strategic decision to invest into the SEDEX(Ethical Trading) initiative during the year. The cost of this investment hasbeen fully expensed during the period and this accounted for a significant partof the reported operating loss of £0.4m (before amortisation). It is expectedthat this initial investment will provide appropriate returns as the SEDEXinitiative (which now has many "blue chip" members) begins to expand. However,new licence sales by Business Collaborator have not met our expectations duringthe year and as a result the Board has decided to make a goodwill impairmentadjustment of £0.87m to the goodwill in the company. During the year CODA spent £8.8m (2003: £8.9m) on product development costswhich continue to be written off in the year in which they occur. CODA alsopurchased, for £5.0m, the freehold of CODA's Harrogate office. Deferred income, at 31st December 2004, decreased from £19.2m to £18.6m. This ismade up of £15.8m (2003: £16.3m) for the CODA Division, £2.3m (2003: £2.6m) forthe SciSys Division and the balance of £0.5m (2003: £0.3m) for BusinessCollaborator. An analysis of the total figure shows £12.1m (2003: £12.1m) ofmaintenance income, deferred licence fee revenues of £3.5m (2003: £4.1m) andadvance payments for projects/consultancy of £3.0m (2003: £3.0m). The reductionin deferred licence fees reflects the faster implementation times associatedwith the more recent product releases. The Group continues to place considerable emphasis on cash management. Duringthe year the Group generated cash from operating activities of £7.6m (2003:£11.3m). The figure for 2004 significantly exceeds profits after tax and appearseven stronger when due account is taken of the reduction in deferred income of£0.6m (2003: increase £4.4m). The year end net cash balance of £7.5m (2003:£6.8m) was after net expenditure of £3.9m in the year on the acquisition /disposal of freehold property. The Group translates all non sterling transactions at the year end exchangerates. There was very little movement in the Euro exchange rate at 31 December2004 compared to the equivalent rate for 2003. Comparative rates for the USDollar show a decrease in its value of 8.3% to 1.9258. The effect of this fallhas been that revenues transacted in US Dollars and subsequently expressed inSterling have reduced by £0.4m when compared with the same revenues converted atconstant exchange rates. The Group had net exchange losses for the year of £0.1m(2003 gain: £0.3m). The effective tax rate (excluding goodwill amortisation) for the Group of 20.6%(2003: 20.3%) remained below the standard rate of corporation tax in the UK, dueto the effect of tax credits available on Research and Development expendituremade by the Group. Constructive meetings with the Inland Revenue have led to amore informed estimate of the likely outcome of claims already submitted inrespect of years 2002 and 2003. As a result, the tax provision now reflects anincrease in the Board's estimate of amounts reclaimable for Research &Development tax credits. Group Profit and Loss Account for the year ended 31 December 2004 2004 2003 (unaudited) £000 £000 Turnover 67,830 68,026 Staff costs (40,641) (42,209)Depreciation (1,833) (1,885)Amortisation of goodwill (3,742) (2,680)Other operating charges (18,059) (17,398) (64,275) (64,172) Operating profit 3,555 3,854 Operating profit before goodwill amortisation and 7,670 6,534exceptional items Non Recurring items Abortive disposal costs (373) - Goodwill impairment (875) -Goodwill amortisation (2,867) (2,680)Operating profit 3,555 3,854 Profit on sale of fixed assets 254 - Other interest receivable 110 70Interest payable and similar charges (5) (63) Profit on ordinary activities before taxation 3,914 3,861Tax on profit on ordinary activities (1,580) (1,328) 2,334 2,533 Dividends paid and proposed (1,178) (895) Retained profit for the year 1,156 1,638 Earnings per shareBasic 9.9p 10.8pDiluted Basic 8.9p 9.9pAdjusted Basic (excluding goodwill amortisation) 25.8p 22.2pDiluted Adjusted Basic (excluding goodwill amortisation) 23.2p 20.5p All operations are continuing in both the current and previous year. Group Balance Sheet at 31 December 2004 2004 2003 restated £000 £000 £000 £000Fixed assetsIntangible assets 36,123 39,866Tangible assets 13,180 9,824 49,303 49,690Current assetsDebtors 21,385 23,147Cash at bank and in hand 7,512 6,754 28,897 29,901Creditors: amountsfalling due within one year (8,968) (10,921) Net current assets 19,929 18,980 Total assets less current liabilities 69,232 68,670 Deferred income (18,580) (19,224) Net assets 50,652 49,446 £000Capital and reservesCalled-up share capital 6,350 6,350Share premium account 42,980 42,980Capital redemption reserve 83 83Profit and loss account 1,239 33 Equity shareholders' funds 50,652 49,446 Adoption of UITF Abstract 38 (Accounting for ESOP Trusts) in 2003 caused fixedasset investments, relating to the Group's Employee Share Trust, to bereclassified as a deduction from shareholders' funds within other reserves. In2004 these assets have been deducted directly from the profit and loss accountto give a clearer representation of distributable profits. For comparability,the 2003 profit and loss account has been restated to reflect this newpresentation. Group Cash Flow Statement for the year ended 31 December 2004 2004 2003 £000 £000 £000 £000 Net cash inflow from operating activities 7,641 11,255 Returns on investments and servicing of financeInterest received 110 70Interest paid (5) (62)Interest element of finance lease rental - (1)payments Net cash inflow from returns on investments and 105 7servicing of finance TaxationUK and overseas corporation tax paid (1,281) (1,365) Capital expenditure and financial investmentPayment to acquire tangible fixed assets (6,057) (1,168)Receipts from sale of investments 30 25Receipts from sales of tangible fixed assets 1,125 24 Net cash outflow from capital expenditure andfinancial investment (4,902) (1,119) AcquisitionsPurchase of SquareSum - (7,942)Purchase of Business Collaborator - (2,814) Net cash outflow from acquisitions - (10,756) Equity dividends paid (895) (798) Net cash inflow / (outflow) before financing 668 (2,776) FinancingCapital element of finance lease rental payments - (37) Net cash outflow from financing - (37) Increase/(decrease) in cash in the year 668 (2,813) Reconciliations of Movements in Shareholders' Funds for the year ended 31 December 2004 GROUP 2004 2003 £000 £000 Profit for the financial year 2,334 2,533Dividends (1,178) (895) Retained profit for the financial year 1,156 1,638 Exchange adjustments 20 (63)Issue of new shares - 131Premium on issue of new shares - 1,153Net movement of shares owned in Employee Share Trust 30 24 Net addition to shareholders' funds 1,206 2,883 Opening shareholders' funds 49,446 46,563 Closing shareholders' funds 50,652 49,446 Statement of Total Recognised Gains and Losses for the year ended 31 December 2004 GROUP 2004 2003 £000 £000 Profit for the financial year 2,334 2,533Exchange adjustments 20 (63) Total recognised gains and losses 2,354 2,470 Earnings per share Basic earnings per ordinary share are calculated by dividing the profit after taxation attributable to the shareholders of £2,334,000 (2003: £2,533,000) by the weighted average number of shares in issue during the year (excluding own shares held) of 23,559,775 (2003: 23,521,538). Diluted basic earnings per ordinary share are calculated by dividing the profit after taxation attributable to the shareholders of £2,334,000 (2003: £2,533,000) by the weighted average number of shares in issue during the year (excluding own shares held, but after taking into account options outstanding during the year) of 26,176,757 (2003: 25,460,354). Adjusted basic 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 £6,076,000 (2003: £5,213,000) by the weighted average number of shares in issue during the year (excluding own shares held) of 23,559,775 (2003: 23,521,538). Diluted adjusted basic 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 £6,076,000 (2003: £5,213,000) by the weighted average number of shares in issue during the year (excluding own shares held, but after taking into account options outstanding during the year) of 26,176,757 (2003: 25,460,354). 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 - focused on the delivery of professional software services and the design and build of systems incorporating third party packaged software. 2004 2003 Turnover £000 £000 CODA (including SquareSum) 43,341 44,202 SciSys 22,000 21,880 Other (Business Collaborator and SciSys Commercial) 2,489 1,944 67,830 68,026 2004 2003 Profit / (loss) before interest and taxation £000 £000 CODA (including SquareSum) 5,008 4,827 SciSys 1,839 (380) Other (Business Collaborator and SciSys Commercial) (1,617) (177) Group (1,302) (416) Abortive disposal costs re the SciSys Division (373) - 3,555 3,854 Note: In the above segmental analysis, the comparatives have been restated toaccount for the reclassification of Business Collaborator and the SciSysCommercial Division into "Other". Annual Report The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2004 or 2003. The financial information for 2003 is derived from the statutory accounts for 2003 which have been delivered to the Registrar of companies. The auditors have reported on the 2003 accounts; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2004 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and 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