SSY.L Regulatory News (SSY)

15 Sep 2005 07:00

CODASciSys PLC15 September 2005 CODASciSys plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 CODASciSys plc ("CODASciSys") announces its unaudited results for the six monthsended 30 June 2005. Quoted on AIM (stock code: CSY), CODASciSys has itsheadquarters in Chippenham and is a supplier of specialist software, consultancyand IT services. Key points: • Operating profit before tax, goodwill amortisation and exceptional items increased by 27% to £4.7m (June 2004: £3.7m) • Profit before tax increased by 79% to £3.4m (June 2004: £1.9m) • Revenues increased by 3.8% to £35.3m (June 2004: £34.0m) • Net cash £10.2m (31 December 2004: £7.5m; 30 June 2004: £4.3m) • Proposed interim dividend increased by 54% to 2.0p per share (June 2004: 1.3p per share) • Earnings per share o Basic earnings per share increased by 104% to 10.4p (June 2004: 5.1p) o Adjusted earnings per share, before goodwill amortisation and exceptional items, increased by 43% to 16.2p (June 2004: 11.3p) • All Divisions performing in line with, or ahead of, expectations On outlook, Chairman, Mike Love stated: "The markets in which we operate are beginning to show renewed signs of growth.The combination of this and our proactive M&A activity leads the Directors toexpect the Group to deliver further revenue growth through 2005 and beyond. Weshall increase the rate of planned investment to take full advantage of themarket opportunities presented by our recent acquisitions, ensuring a closecorrelation between such investments and their returns. As a result we expectboth profit and cash generation to be in line with expectations for theremainder of 2005 and beyond into 2006." FOR FURTHER INFORMATION, PLEASE CONTACT: Graham Steinsberg, Chief Executive Officer, CODASciSys 01249 466466Jane Curry, Investor Relations, CODASciSys 01249 466466Barrie Newton, Managing Director, Rowan Dartington 0117 933 0011 Directors Interim Report Introduction The Directors present their interim report for the six months ended 30 June2005. These results reflect growth within the CODA Division, sustainedprofitability within the SciSys Division and an improving position withinBusiness Collaborator. Group Strategy The CODASciSys Group strategy is to achieve critical mass for each operatingdivision in order to make them independently strong. It aims to achieve thisthrough a combination of organic growth and M&A activity. During the period, the Group continued to pursue its programme of expansionwithin Europe. The opening of offices in Germany in late 2004 has been followedby acquisitions in France and, since the period end, in Sweden. Expansion is also designed to increase the scope of our product and serviceofferings. The Swedish acquisition brought an industry acclaimed AccountingConsolidation suite "OCRA" to our portfolio. We also made our first productacquisition in the US shortly after the period end, when we added SOCET(TM) to our CODA product range to help us address the rapidly expanding CorporateCompliance market. During the second half of the year we shall increase the rate of plannedinvestment to ensure we take full advantage of the market opportunities theseacquisitions present. At the same time, we shall evaluate further ways ofstrengthening the underlying businesses. Financial Review Total revenue for the Group was £35.3m (June 2004: £34.0m). Within this, CODA'srevenue (including a contribution of £0.8m from CODA France) rose 6% to £22.9m(June 2004: £21.6m) and SciSys' revenue remained constant at £11.2m. Operating profit before tax, goodwill amortisation and exceptional itemsincreased by 27% to £4.7m (June 2004: £3.7m). We are particularly pleased thatthe improvement reflects positive contributions from all operating divisions. Other operating activities in the business (consisting of Business Collaboratorand the Commercial Unit) together made an operating profit before tax, goodwillamortisation and exceptional items of £0.2m (June 2004: loss of £0.1m) onrevenue of £1.3m (June 2004: £1.3m). The turnaround in the Business CollaboratorDivision has been swifter than originally anticipated and arises from thesecuring of a number of longer term new contracts and improving servicesrevenues. Profit before tax for the period was £3.4m (June 2004: £1.9m) and basic earningsper share were 10.4p (June 2004: 5.1p). Cash The Group continued to be strongly cash generative. Net cash at the end of theperiod reached £10.2m (31 December 2004: £7.5m; 30 June 2004: £4.3m). Thisfigure is after the purchase of CODA France in February which was fundedentirely out of internal resources. Taxation CODASciSys continues to benefit from the tax credit system for expenditure onResearch and Development. The effective tax rate for the Group, excludinggoodwill amortisation, was 20.5% for the half year (2004, full year: 20.6%). Deferred income At 30 June 2005, deferred income was £16.9m (31 December 2004: £18.6m; 30 June2004: £17.2m). This comprised deferred licence fees of £3.5m (31 December 2004:£3.5m; 30 June 2004: £3.2m), maintenance of £11.4m (31 December 2005: £12.1m; 30June 2004: £11.4m) and projects and consultancy payments on account of £2.0m (31December 2004: £3.0m; 30 June 2004: £2.6m). Interim dividend payment In keeping with the Group's progressive dividend policy, an interim dividend forthe year ending 31 December 2005 of 2.0p per share will be paid on 5 January2006 to shareholders on the register on 23 September 2005. This represents anincrease of 54% and aligns the payment more closely with last year's fulldividend of 5.0p per share. The shares are expected to go ex-dividend on 21September 2005. Operational Review CODA CODA has experienced steadily improving levels of business across the period.There has been some improvement in market demand; and our re-organisation inlate 2004, designed to bring a sharper focus on our core offerings, has enabledus to capitalise on this. We continue to follow our strategy of providingworld-class solutions for finance departments addressing current and emergingchallenges. Throughout the period, the CODA business has been developed throughgeographic expansion, extension and optimisation of the product range, togetherwith an increased focus on partnerships and distribution channels. Geographic Expansion Our strategy has been to continue our European expansion, with particular focuson territories where CODA already has an established client base. Germany: CODA established a direct presence in Germany in late 2004. This unitis now fully operational and has won business in the period from both new andexisting clients. France: in February, CODA acquired its distributor in France, bringing anadditional 33 staff and over 100 customers into the business. The unit is nowfully integrated and early performance is ahead of our original expectations. Nordic: since the period end we have acquired the Stockholm based company,Simple Concepts. This also brings a small development capability in Estonia, anarea with excellent technical skills and a low cost base. Product Extension and Optimisation CODA has continued to invest in a truly global solution for the financedepartment. During the first 6 months of 2005, a significant number of product launches andupgrades have been made, including modules to meet planning and budgetingrequirements; a browser based invoice matching solution, and a new version ofCODA-XL, to streamline the input process and improve reporting. Dream continues to provide a significant contribution to the CODA business. Are-launch early in the period has further boosted its profile in the market.Version 3.2 was launched and received excellent reviews. Since the period end we have strengthened the portfolio further. The acquisitionof Simple Concepts included a consolidation and treasury solution - OCRA. Wealso acquired SOCET(TM), which enables the finance directorate to document,evaluate and monitor compliance, a market which is showing strong growth. The second half of 2005 will see the release of CODA-Financials v10.1, plussignificant enhancements to our suites for Performance Management andCompliance. Partnerships and Distributors In March, Microsoft and CODA announced an alliance, giving CODA extensive accessto Microsoft's development teams and technologies and allowing joint marketinginitiatives. We also signed a "teaming agreement" with IBM providing for jointmarketing campaigns into users of IBM platforms and access to IBM skills inrespect of its Linux platforms. CODA's distributors continue to provide an increasing contribution to ourbusiness. The next release of CODA-Financials will support "web serviceintegration", making it simpler for third parties to attach their offerings,improving our ability to forge new relationships. Summary CODA has seen strong sales of licences and services in the period, with growthin the US particularly pleasing, driven by demand for compliance solutions. Inthe second half, we shall continue to implement our strategy of plannedgeographic expansion, the broadening of our product range and the strengtheningof our partnerships. SciSys SciSys continues to operate as one unit with three primary vertical routes tomarket: Space, Defence and Public Sector, and, during the period, has beentaking advantage of opportunities to sell its capabilities across the sectors. During the period the Division has managed to maintain a constant level ofrevenue and profitability despite investing considerable professional time inthe development of future business. This investment is designed to provide astrong platform for future growth. The consistency of the results are atestimony to the loyalty of our client base where we have continued toexperience high levels of repeat business. The announcement since the periodend of the award by the Environment Agency for us to be their preferreddevelopment partner for the modernisation of their Regulatory Programme isparticularly gratifying. The Space sector has been heavily involved in activity related to the EuropeanGalileo programme. This includes the delivery of systems to support the TestBed spacecraft due for launch around the end of the year. Tenders with acombined value of €15m have been issued to develop the systems to operate thenext phase of four in-orbit validation spacecraft. Our early involvement in therequirements definition means that we are well placed to secure a portion ofthis business. In addition, our work in on-board software solutions continues tobe especially successful. One example is Cryosat, a spacecraft designed toprovide information in relation to Global Warming, on which our work was singledout for praise by The European Space Agency. At the same time as securingbusiness on our long term frame contracts at ESOC, we have recently won ourfirst framework contract for manpower services at ESTEC, the European Space andTechnology Centre. This should allow us to develop a long term presence at asecond key Space Agency site. Despite some external delays to existing contracts, the Defence sector hassucceeded in securing new work on several key initiatives. It also won a newcustomer - Flag Officer Sea Training - in the face of some strong opposition.Much of our work in this sector is done through key partners including Thales,Raytheon, Lockheed-Martin, Fujitsu, General Dynamics and Westland Helicopters.Our relationships with these partners have all continued to advance in theperiod. In the Public Sector, we have been working to extend and secure our relationshipwith the Environment Agency. This has yielded significant results recently, withthe EA signing an overarching agreement to engage SciSys to further developtheir regulation based solutions, as well as extending existing activities. Thisis a very significant development which will satisfy the needs of the EA, and inaddition will form a platform for offering similar solutions to other governmentagencies. The unit has also been responsible for the successful delivery of anEngineering Extranet solution (based on the Business Collaborator software) toThames Water, another long standing customer. Other business secured in theperiod includes contracts from the Rural Payments Agency and Debt ManagementOffice where we are looking to enhance and diversify our offerings to providebetter support for our customers. Business Collaborator The Business Collaborator Division has delivered a swifter than anticipatedturnaround since the end of 2004. Full year losses of £0.4m before goodwillamortisation have been reversed to produce a first half profit. Investment inthe SEDEX initiative has begun to bear fruit with profitable revenues nowbeginning to flow. This has been amplified by the securing of a number ofextranet projects which have generated a growth in future long term licencerental streams and increased demand for consultancy services. New clients in theUtilities sector, such as Thames Water and Southern Water, as well as existingclients such as Primark and Edmund Nuttall have all been strong contributors tothis result. Board During the period, John Haynes retired as a member of the Board after 22 yearsof excellent service to the Group. John's strength and expertise, particularlyin the Space Sector, have proved invaluable to the Group over the years. Johnhas continued to offer the Group such support as necessary to help during thetransitional phase. Mark Hampson, who has been with the Group for seven years and whose experiencespans all three sectors in which SciSys operates, has been appointed CEO of theSciSys Division. Outlook The markets in which we operate are beginning to show renewed signs of growth.The combination of this and our proactive M&A activity leads the Directors toexpect the Group to deliver further revenue growth through 2005 and beyond. Weshall increase the rate of planned investment to take full advantage of themarket opportunities presented by our recent acquisitions, ensuring a closecorrelation between these investments and their returns. As a result we expectboth profit and cash generation to be in line with expectations for theremainder of 2005 and beyond into 2006. Group Profit and Loss Accountfor the six months to 30 June 2005 Restated Restated (see note 8) (see note 8) Unaudited unaudited audited Six months to Six months to Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000TurnoverExisting operations 34,469 34,039 67,830Acquisitions 837 - - Total Turnover 35,306 34,039 67,830 Staff costs (20,627) (20,294) (40,641) Depreciation (859) (903) (1,833) Amortisation of goodwill (1,374) (1,460) (3,742) Other operating charges (9,141) (9,535) (18,059) Operating profitExisting operations 3,287 1,847 3,555Acquisitions 18 - - Total operating profit 3,305 1,847 3,555 Total operating profit before tax, goodwill 4,679 3,680 7,670amortisation and exceptional itemsNon recurring items Abortive disposal costs - (373) (373) Goodwill impairment - - (875)Goodwill amortisation (1,374) (1,460) (2,867) Total operating profit 3,305 1,847 3,555 Profit on sale of fixed assets - - 254 128 57 105 Net interest Profit on ordinary activities before 3,433 1,904 3,914taxation Tax on profit on ordinary activities (985) (714) (1,580) Profit on ordinary activities after 2,448 1,190 2,334taxation Dividends paid and declared (872) (636) (942) Retained profit for the period 1,576 554 1,392 Earnings per share Basic 10.4p 5.1p 9.9p Diluted 9.4p 4.5p 8.9p Group Balance SheetAt 30 June 2005 Restated Restated (see note 8) (see note 8) Unaudited unaudited audited 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Fixed assetsIntangible assets 37,351 38,404 36,123Tangible assets 13,028 14,530 13,180 50,379 52,934 49,303 Current assetsDebtors 19,615 19,391 21,385Cash at bank and in hand 10,227 4,315 7,512 29,842 23,706 28,897 Creditors: amounts falling due (10,154) (8,742) (8,096)within one year Net current assets 19,688 14,964 20,801 Total assets less current liabilities 70,067 67,898 70,104 Deferred income (16,944) (17,200) (18,580) Net assets 53,123 50,698 51,524 £000 £000 £000Capital and reserves Called up share capital 6,350 6,350 6,350Share premium account 42,980 42,980 42,980Capital redemption reserve 83 83 83Profit and loss account 3,710 1,285 2,111 Total equity shareholders' funds 53,123 50,698 51,524 Group Cash Flow Statementfor the six months to 30 June 2005 Unaudited Unaudited Audited Six months to Six months to Year ended 30 June 2005 30 June 2004 31 December 2004Reconciliation of Operating Profit to net £000 £000 £000cash inflow from operating activities Operating profit 3,305 1,847 3,555Depreciation charge 859 903 1,833Amortisation of goodwill 1,374 1,462 3,742Exchange gains/(loss) 134 159 (54)Profit on sale of fixed assets (13) - (10)Decrease in debtors 3,736 3,572 1,041(Decrease) / increase in creditors and (3,493) (3,983) (2,466)deferred income Net cash inflow from operating activities 5,902 3,960 7,641 Returns on investments and servicing of 128 57 105financeTaxation (858) (521) (1,281) Capital expenditure and financial (623) (5,615) (4,902)investment Acquisitions and disposals (1,383) - - Equity dividends paid (306) (259) (895) Increase / (decrease) in cash 2,860 (2,378) 668 Reconciliation of Net Cash Flow to movement in Net Debtfor the six months to 30 June 2005 Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Increase / (Decrease) in cash 2,860 (2,378) 668 Exchange adjustment (145) (61) 90 Movement in net debt 2,715 (2,439) 758 Net cash 1 January 7,512 6,724 6,754 Net cash at 30 June / 31 December 10,227 4,315 7,512 Notes to the Unaudited Interim Report 1 Basis of Preparation of Interim Financial Information The interim financial information has been prepared on the basis of theaccounting policies set out in the Group's Annual Report and Accounts for theyear ended 31 December 2004, as adjusted for FRS21 (see note 8). The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefigures for the year ended 31 December 2004, as adjusted for FRS21 (see note 8),are extracted from the statutory accounts of CODASciSys plc for that year. Thestatutory accounts for that year, upon which the auditors issued an unqualifiedopinion, have been delivered to the Registrar of Companies. 2 Turnover Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Existing operationsCODA 22,065 21,591 43,341SciSys 11,154 11,190 22,000Business Collaborator and SciSysCommercial 1,250 1,258 2,489 Total existing operations 34,469 34,039 67,830 AcquisitionsCODA France 837 - - Total acquisitions 837 - - 3 Operating Profit (Excluding Goodwill Amortisation and Exceptional Items) Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Existing operationsCODA 4,372 3,519 7,312SciSys 858 859 1,839Business Collaborator and SciSysCommercial 155 (74) (180)Group (796) (624) (1,301) Total existing operations 4,589 3,680 7,670 AcquisitionsCODA France 90 - - Total acquisitions 90 - - 4 Operating Profit (After Goodwill Amortisation) Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Existing operationsCODA 3,220 2,340 5,008SciSys 858 859 1,839Business Collaborator and SciSysCommercial 5 (355) (1,618)Group (796) (624) (1,301) Total existing operations 3,287 2,220 3,928 AcquisitionsCODA France 18 - - Total acquisitions 18 - - 5 Taxation Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 UK and overseas corporation tax 1,053 561 1,418Adjustment relating to an earlier year - 2 (530)UK income tax 13 - -Deferred taxation (81) 151 692 985 714 1,580 The charge for taxation for the six months ended 30 June 2005 reflects theanticipated effective rate for the period. 6 Basic Earnings per Share Basic earning per share are calculated by dividing the profit after taxationattributable to the shareholders of £2,448,000 (30 June 2004 £1,190,000; 31December 2004 £2,334,000) by the weighted average number of shares in issueduring the period (excluding own shares held) of 23,574,569 ordinary shares (30June 2004 23,551,461; 31 December 2004 23,559,775). Diluted basic earnings per ordinary share are calculated by dividing the profitafter taxation attributable to the shareholders of £2,448,000 (30 June 2004£1,190,000; 31 December 2004 £2,334,000) by the weighted average number ofshares in issue during the period (excluding own shares held, but after takinginto account options outstanding during the period) of 26,001,876 ordinaryshares (30 June 2004 26,168,470; 31 December 2004 26,176,757). 7 Adjusted Earnings per Share Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 Basic 16.2p 11.3p 25.8p Diluted 14.7p 10.1p 23.2p Adjusted basic earnings per ordinary share excluding amortisation of goodwillare calculated by dividing the profit after taxation excluding amortisation ofgoodwill attributable to the shareholders of £3,822,000 (30 June 2004£2,650,000; 31 December 2004 £6,076,000) by the weighted average number ofshares in issue during the period (excluding own shares held) of 23,574,569ordinary shares (30 June 2004 23,551,461; 31 December 2004 23,559,775). Diluted adjusted basic earnings per share excluding amortisation of goodwill arecalculated by dividing the profit after taxation excluding amortisation ofgoodwill attributable to the shareholders of £3,822,000 (30 June 2004£2,650,000; 31 December 2004 £6,076,000) by the weighted average number ofshares in issue during the period (excluding own shares held, but after takinginto account options outstanding during the period) of 26,001,876 ordinaryshares (30 June 2004 26,168,470; 31 December 2004 26,176,757). 8 Prior Year Adjustments The new Accounting Standard, FRS21, requires that dividends should not becharged to the profit and loss account in the accounts of the company until suchtime as they have been formally declared. The comparative Profit and LossAccounts and the Balance Sheets for the periods ended 30 June 2004 and 31December 2004 have been restated in accordance with FRS21. The effect of FRS21 on each Profit and Loss Account has been to restate theamount of dividends paid and proposed during the period, with the result thatthe retained profit is reduced by £330,000 for the period to 30 June 2004 andincreased by £236,000 for the period to 31 December 2004. The effect of FRS21 on each Balance Sheet is to restate the amount of creditorsand reserves. As a result the creditors due within one year has reduced by£306,000 (30 June 2004) and £872,000 (31 December 2004) with the profit and lossaccount being increased by the same amount. An additional restatement has been made to the comparative balance sheet for 30June 2004 whereby accruals have been included within creditors in accordancewith the Group's standard reporting policy. This has resulted in the amount ofcreditors due within one year at 30 June 2004 being increased by £2,477,000 witha corresponding decrease in deferred income. 9 Statement of Total Recognised Gains and Losses Unaudited Unaudited Audited Six months to Six months to Twelve months to 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Profit for the financial period 2,448 1,190 2,334Exchange adjustments 4 56 20 Total recognised gains and losses 2,452 1,246 2,354relating to the period 10 Interim Dividend An interim dividend of 2.0p per share (2004: 1.3p) will be paid on 5 January2006 to shareholders on the register on 23 September 2005. The shares areexpected to go ex-dividend on 21 September 2005. Interim Report The Interim Report will be posted to shareholders shortly and copies will beavailable from CODASciSys plc's Registered Office, Methuen Park, Chippenham,Wiltshire, SN14 0GB. This information is provided by RNS The company news service from the London Stock Exchange