Last checked at 27 Jan 2010 07:00
System C Healthcare plc
Half year results for the six months ended
30 November 2009
System C Healthcare plc ("the Group"), a leading independent provider of information solutions and services to the UK health and social care sectors, announces its unaudited half-yearly results for the six months ended 30 November 2009.
Financial Highlights
The financial highlights for the six months ended 30 November 2009 are:
Revenue up 77% at £18.3m (2008: £10.4m), including 34% organic growth (2008: 21%)
Profit before taxation increased by 49% to £2.8m (2008: £1.9m)
EPS up 33% to 2.24p per share (2008: 1.69p per share)
Increased cash position, with cash of £16.0m (2008: £13.7m)
Interim dividend 0.25 pence per share (2008: 0.22 pence per share)
Proportion of product sales increased to 48% of group turnover (2008: 24%)
11 deployments of Medway Sigma products
Acquisition of Liquidlogic to create the UK's first major combined health and social care IT company
Healthy pipeline of product and services opportunities for this financial year and beyond
Commenting on these results, Chief Executive Dr Ian Denley said:
"We are continuing to benefit from our reputation for quality and delivery. System C is known for delivering products and solutions that work, and for delivering them on time and on budget. This, together with the strong synergy between the products and services divisions, is driving our continued year-on-year growth.
"We have worked hard to develop the Group on all fronts to ensure that we benefit from the current period of change in our market place. Indeed, our sales pipeline for both products and services looks very healthy and we are confident of reporting continuing growth through the second half of the year and beyond."
For further information please contact:
| System C Healthcare plc | |
| Ian Denley, Chief Executive | |
| Thomas Chambers, Acting Finance Director | Tel: 01622 691 616 |
| Maitland | |
| Emma Burdett | |
| Richard Farnsworth | Tel: 020 7379 5151 |
| Charles Stanley Securities | |
| Nominated Adviser | |
| Russell Cook | |
| Mark Taylor | |
| Jen Boorer | Tel: 020 7149 6000 |
Interim Report
Copies can be obtained from the Company's head and registered office: Brenchley House, Week Street, Maidstone, Kent, ME14 1RF and are available to download from the Company's website www.systemc.com.
Notes to Editors
System C Healthcare plc (www.systemc.com) specialises in the provision of health and social care information systems, systems implementation and consulting services.
System C Healthcare is quoted on the AIM market of the London Stock Exchange (SYS.L).
Chairman's statement
We have had another busy and successful half year and are pleased to report a very strong trading performance. Revenues are up 77% from the prior year and profit from operations has risen by 85%.
System C has worked hard in recent years to diversify and to build strong product and services businesses. All of our existing business lines and projects are progressing well, and despite the fact that we are in a time of political uncertainty and public sector spending constraint, we are confident of another strong performance this financial year and next.
Results
Revenue for the six months to 30 November increased 77% to £18.3 million (H1 2008: £10.4 million), with the product division revenue increasing by 249% to £8.8 million (H1 2008: £2.5 million). Organic revenue growth was 34% and gross margins increased to 57% (H1 2008: 54%).
Profit from operations before the amortisation of acquired intangibles and share based payments increased by 93% to £3.2 million (H1 2008: £1.7 million) and profit from operations was £2.7 million (H1 2008: £1.5 million).
Profit before taxation was £2.8 million (H1 2008: £1.9 million). The H1 tax charge of £0.59 million includes benefits of R&D tax credits on the development of the Company's new products (principally Sigma). Basic earnings per share increased by 33% to 2.24 pence per share (H1 2008: 1.69 pence) and diluted earnings per share increased by 31% to 2.19 pence per share (H1 2008: 1.67 pence).
Net cash generated by operating activities was £2.6 million (H1 2008: £1.6 million) and our cash position (after the share placing in August 2009 and payment of the initial cash considerations for Liquidlogic Limited, full consideration for Conscia Enterprise Systems Limited and deferred consideration on Bluestar UK Group Limited) has increased by £2.3 million to £16.0 million at 30 November 2009.
Dividends
The Board is pleased to declare an interim dividend of 0.25 pence per share, a 13.6% increase on the prior year (2008: 0.22 pence per share). The dividend will be paid on 10 March 2010 to those shareholders on the register at the close of business on 12 February 2010.
Products and software development
The product division has performed well over the half year, with revenues of £8.8m (2008: £2.5m) representing a 249% increase on prior year.
Three years ago we took the strategic decision to develop further the product side of our business to keep pace with the growth in services. As a result, we have invested heavily in expanding and developing our product range, and are very pleased to announce that product sales now account for approximately 48% of revenues for the 6 months to 30 November 2009 (H1 2008: 24%).
We announced in May 2009 that the Company had won a major contract with NHS Connecting for Health to develop and install pilot clinical intelligence systems in over a dozen NHS Trusts. This was a complex contract involving the development of over 450 dashboard metrics and the integration of data feeds from more than 50 external systems. All of the projects were completed and deployed successfully by the end of November 2009 as planned and we have received extremely positive feedback from the clinicians and the Trusts involved. System C is now receiving high levels of interest in its dashboard products and the Company anticipates that this will continue as Trusts and social care providers meet the challenge of driving up the quality of care and the efficiency with which they deliver these services.
Sales and deployments of System C's flagship Medway Sigma product suite continue to progress well. Over the last six months the Company has deployed 11 Medway Sigma products, including a clinical information system at Aintree University Hospitals NHS Foundation Trust, and deployments of its maternity, business intelligence and dashboard modules.
Services
Services revenues were £9.6m (2008:£7.8m), representing an increase of 22%, and reflecting System C's well-earned reputation for providing a successful deployment service across a wide range of third party systems including iSoft and Cerner.
Demand for our skills and services remains buoyant, and we continue to give practical strategic and tactical support to local NHS trusts, private healthcare providers, local authorities, Strategic Health Authorities, Connecting for Health (CfH) and Local Service Providers.
In addition to strong national demand for these deployment services from individual Trusts, the company has seen significant growth in specialist areas such as clinical design, clinical content, business intelligence, training and strategic and operational design services.
The services division is also increasingly involved in the deployment of the Company's own products, particularly clinical dashboards, clinical portals and Medway Sigma.
Acquisitions and new ventures
In July 2009, we completed the acquisition of Liquidlogic Limited ("Liquidlogic"), an established Leeds based provider of IT solutions to the social care market in the UK, for a total consideration of up to £14.2m in cash and shares. Through this acquisition we have created the first health and social care IT company of significant scale in the UK, and work is now underway to integrate the two complementary product suites. Sir David Nicholson, chief executive of the NHS, has made it clear in his operational review of the NHS for 2010-11 that he expects to see close co-operation between the health and social care sectors on commissioning and providing services. The acquisition of Liquidlogic has put the Group in a strong position to capitalise on this. During the half year, we also successfully deployed Liquidlogic's children's system on the Isle of Man, where System C is installing an island-wide integrated health and social care IT system as part of a 3-year project.
In conjunction with the Liquidlogic acquisition, System C successfully raised £12.0m through a placing of ordinary shares in the Company in order to fund further expansion. The shares were placed at 48p. We are very pleased to have received continued and enthusiastic support for our strategy from both our existing shareholder base and from a number of new institutional investors.
In October 2009, we announced the acquisition of Conscia Enterprise Systems Limited ("Conscia") for a maximum cash consideration of £0.8 million. Conscia is a fast growing web solutions company based in Glasgow, specialising in providing premium web applications, including e-commerce and mobile solutions to both the private and public sectors. Conscia has a strong and long-standing focus on healthcare web portals with clients including NHS24, NHS National Services Scotland, NHS Education for Scotland, Scottish Government Health Department, and a number of regional health boards.
Conscia is the fifth acquisition System C has completed in the last three years. Each of these has brought to the Group complementary products and technology, additional clients with a need for the wider group's products and services, and people who share our passion for health and social care and our drive for efficient delivery. We see scope for further acquisitions ahead provided they meet our investment criteria and offer the promise of good returns to our shareholders. We continue to evaluate new acquisition opportunities in related markets and strategic related technologies.
Also in October 2009, the earn-out arrangements of Bluestar UK Group Limited which was acquired in May 2009 were paid in a mix of shares and cash totalling £301,000 resulting in a reduction of goodwill of £333,000.
Market
In the UK, we are facing an economy burdened with unprecedented debt and with the political uncertainties associated with the coming general election. However, from the point of view of the health and social care sectors, all political parties are focused on the dual challenges of improving quality whilst making real gains in efficiency and productivity and IT has an important role to play in achieving this.
The Chancellor of the Exchequer's pre-budget statement in November prompted some misinformed reports about the future of IT spending in the NHS. Since then, the Government has taken great steps to make clear its commitment to the use of IT to deliver improvements in efficiency and quality of care.
Health secretary Andy Burnham put it very clearly in his strategy document 'NHS 2010-2015: From Good to Great' published in December: "We will make more use of information-based technologies to design new models of care as well improving the performance of existing services. We will integrate information around the patient, deliver relevant information at the right time to clinicians and use technology to drive efficiency for both patients and clinicians."
He has also spelled out that cuts to the £12.7bn National Programme for IT will total £600m. This relatively modest sum is not expected to come from the areas in which System C operates.
There is also consensus across the political spectrum that the procurement process for healthcare systems needs to be opened up, allowing individual care providers greater flexibility over their choice of IT system. We are already seeing significant progress on this front in the accelerated procurement that is just beginning across the South of England. Conservative leader David Cameron this month named the NHS as the party's "number one priority", while shadow health secretary Andrew Lansley has made clear that hospitals should in future choose their own software, as long as it is inter-operable with other NHS systems.
We are expecting the move towards open procurement to benefit System C in terms of sales of both products and services. Our range of patient management, electronic patient record, business intelligence, dashboard and portal products are all about improving quality, productivity and care. An open procurement process will also provide increased opportunities for System C's implementation teams, and we are anticipating increased demand for our business change and healthcare improvement services as the NHS faces up to the necessity of treating more people for less.
The Company is already engaged in a number of procurements for its core Medway Sigma PAS/EPR which are expected to generate product sales in the coming year. In particular, the company is expecting to benefit from the ASCC framework contract that it holds with the NHS, as trusts across the South of England start their accelerated procurement for the next generation of centrally-funded computer systems.
Staff
System C is a people business and all of our teams have performed extremely well. It is their knowledge, skill, professionalism and enthusiasm that drives this company forward and I would like to thank them all for their significant contribution throughout the period. We continue to develop our position as the employer of choice in healthcare IT, with a very low staff turnover compared to the industry average. During the half year, we have increased our staff capacity in order to support top-line growth, and our reputation both as an employer and as a successful delivery organisation has supported that process.
The Company has appointed recruitment consultants to lead the search for a new group finance director following the departure of finance director Andrew Coll to take up a new post in Qatar. In the meantime, Thomas Chambers, a non executive director at System C and formerly chief financial officer for mobile phone software company Symbian, is acting group finance director.
Outlook and current trading
Trading has remained strong since the end of the interim period within both the services and products sides of the business. We have a substantial pipeline of opportunities, and a strong balance sheet with cash of £16.0m at 30 November 2009.
We firmly believe that demand for our products and services will remain strong, given our deep domain knowledge and the wide operational and financial benefits IT investment brings to both health and social care.
On this basis, the Board expects that profits for the full financial year will be in line with current market expectations.
Jim Horsburgh, Chairman
System C Healthcare plc
Consolidated Statement of Comprehensive Income
for the six months ended 30 November 2009
| 6 months to | 6 months to | Year Ended | ||
| 30 November | 30 November | 31 May | ||
| 2009 | 2008 | 2009 | ||
| (unaudited) | (unaudited) | (audited) | ||
| £'000 | £'000 | £'000 | ||
| Revenue | 18,338 | 10,350 | 21,887 | |
| Cost of sales | (7,882) | (4,727) | (9,657) | |
| Gross profit | 10,456 | 5,623 | 12,230 | |
| Research and development costs | (1,748) | (910) | (1,880) | |
| Amortisation of acquired intangible assets | (388) | (129) | (259) | |
| Share based payments | (91) | (54) | (105) | |
| Administration | (5,515) | (3,063) | (6,565) | |
| Profit from operations before the amortisation |
|
|
| |
| of acquired intangibles |
| |||
| and share based payments | 3,193 | 1,651 | 3,785 | |
| Profit from operations | 2,714 | 1,467 | 3,421 | |
| Finance income | 132 | 459 | 692 | |
| Finance costs | (2) | (11) | (11) | |
| Profit before taxation | 2,844 | 1,915 | 4,102 | |
| Taxation | (592) | (441) | (857) | |
| Profit for the period | 2,252 | 1,474 | 3,245 | |
| Total comprehensive income is equal to the 'Profit for the period' as there is no other comprehensive income for the period. | ||||
| Earnings per ordinary share | ||||
| - Basic | 2.24p | 1.69p | 3.72p | |
| - Diluted | 2.19p | 1.67p | 3.66p | |
All of the activities of the Group are continuing.
Notes 1 to 13 form an integral part of this condensed consolidated half-yearly financial information.
Consolidated Balance Sheet
as at 30 November 2009
| At 30 November | At 30 November | At 31 May | |
| 2009 | 2008 | 2009 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 9,621 | 1,884 | 2,306 |
| Other intangible assets | 6,150 | 2,394 | 3,020 |
| Property, plant and equipment | 667 | 398 | 380 |
| Deferred tax assets | 303 | - | 373 |
| Trade and other receivables | 143 | - | 213 |
| 16,884 | 4,676 | 6,292 | |
| Current assets | |||
| Trade and other receivables | 11,166 | 6,339 | 7,435 |
| Cash and cash equivalents | 16,014 | 13,658 | 14,703 |
| 27,180 | 19,997 | 22,138 | |
| TOTAL ASSETS | 44,064 | 24,673 | 28,430 |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 7,430 | 3,118 | 4,872 |
| Deferred consideration | 2,000 | 1,360 | 326 |
| Current tax liability | 1,302 | 497 | 792 |
| 10,732 | 4,975 | 5,990 | |
| Non-current liabilities | |||
| Deferred consideration | - | - | 598 |
| Deferred tax liability | 603 | 470 | 818 |
| Provisions | 167 | 110 | 141 |
| 770 | 580 | 1,557 | |
| TOTAL LIABILITIES | 11,502 | 5,555 | 7,547 |
| NET ASSETS | 32,562 | 19,118 | 20,883 |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 1,150 | 895 | 897 |
| Share premium account | 20,927 | 9,766 | 9,805 |
| Capital redemption reserve | 3,127 | 3,127 | 3,127 |
| Own shares held in trust | (2,768) | (1,235) | (1,235) |
| Retained earnings | 10,126 | 6,565 | 8,289 |
| TOTAL EQUITY | 32,562 | 19,118 | 20,883 |
Notes 1 to 13 form an integral part of this condensed consolidated half-yearly financial information.
Consolidated Statement of Changes in Equity
for the six months ended 30 November 2009 and 30 November 2008
| Share capital | Share premium account | Capital redemption reserve | Own shares held in trust | Retained earnings | Total equity | |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 June 2008 | 895 | 9,766 | 3,127 | (1,235) | 5,324 | 17,877 |
| Profit for the period | - | - | - | - | 1,474 | 1,474 |
| Share based payments charge | - | - | - | - | 54 | 54 |
| Deferred tax | - | - | - | - | 27 | 27 |
| Dividends | - | - | - | - | (314) | (314) |
| Balance at 30 November 2008 | 895 | 9,766 | 3,127 | (1,235) | 6,565 | 19,118 |
| Balance at 1 June 2009 | 897 | 9,805 | 3,127 | (1,235) | 8,289 | 20,883 |
| Profit for the period | - | - | - | - | 2,252 | 2,252 |
| Share based payments charge | - | - | - | - | 91 | 91 |
| Deferred tax | - | - | - | - | - | - |
| Issue of new shares | 253 | - | - | (1,533) | - | (1,280) |
| Premium on issue of new shares | - | 11,122 | - | - | - | 11,122 |
| Dividends | - | - | - | - | (506) | (506) |
| Balance at 30 November 2009 | 1,150 | 20,927 | 3,127 | (2,768) | 10,126 | 32,562 |
Notes 1 to 13 form an integral part of this condensed consolidated half-yearly financial information.
Consolidated Cash Flow Statement
for the six months ended 30 November 2009
| 6 months ended | 6 months ended | Year ended | |
| 30 November | 30 November | 31 May | |
| 2009 | 2008 | 2009 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Cash generated from operations | 2,810 | 1,633 | 3,816 |
| Finance costs | (2) | (1) | (1) |
| Income tax paid | (178) | - | (52) |
| Net cash generated by operating activities | 2,630 | 1,632 | 3,763 |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries, net of cash acquired | (9,874) | - | (458) |
| Purchases of property, plant and equipment | (302) | (136) | (225) |
| Purchase of intangible software | - | (10) | (10) |
| Capitalised development costs | (510) | (465) | (1,174) |
| Finance income | 133 | 525 | 845 |
| Net cash used in investing activities | (10,553) | (86) | (1,022) |
| Cash flows from financing activities | |||
| Issue of share capital | 9, 740 | - | 41 |
| Dividends paid | (506) | (314) | (506) |
| Net cash used in financing activities | 9,336 | (314) | (465) |
| Net increase in cash and cash equivalents | 1,311 | 1,232 | 2,276 |
| Cash and cash equivalents at beginning of the period | 14,703 | 12,427 | 12,427 |
| Cash and cash equivalents at end of the period | 16,014 | 13,658 | 14,703 |
Cash flows from operating activities
| 6 months ended | Year ended | Year ended | |
| 30 November | 30 November | 31 May | |
| 2009 | 2008 | 2009 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Profit for the financial year | 2,252 | 1,474 | 3,245 |
| Taxation | 592 | 441 | 857 |
| Finance income | (132) | (459) | (692) |
| Finance costs | 2 | 11 | 11 |
| Profit from operations | 2,714 | 1,467 | 3,421 |
| (Increase)/decrease in trade and other receivables | (1,105) | 512 | (208) |
| Increase/(Decrease) in trade and other payables | 319 | (891) | (555) |
| Net movement on provisions | 26 | 6 | 37 |
| Share based payments charge | 91 | 54 | 105 |
| Depreciation of property, plant and equipment | 140 | 154 | 282 |
| Amortisation of intangible assets | 625 | 331 | 733 |
| Net cash inflow from operating activities | 2,810 | 1,633 | 3,815 |
Notes 1 to 13 form an integral part of this condensed consolidated half-yearly financial information.
Notes
1. General information
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is Brenchley House, Week Street, Maidstone, Kent, ME14 1RF.
The Company has its primary listing on AIM, a market of that name operated by the London Stock Exchange, and is registered in England no. 1754990.
These condensed consolidated interim financial results were approved for issue by the Board of Directors on 26 January 2010.
These interim financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 May 2009 were approved by the Board of Directors on 24 September 2009 and delivered to the Registrar of Companies. The Report of the Auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
Forward looking statements
Certain statements in this half-yearly report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
2. Basis of preparation
These condensed consolidated interim financial results for the half-year ended
30 November 2009 have been prepared in accordance with the AIM Rules for Companies and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. This interim condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 May 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.
3. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 May 2009, as described in those annual financial statements except as described below.
Taxes on income in interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
Adoption of new and revised standards
The following new standards and amendments to standards are mandatory for accounting periods beginning on or after 1 January 2009:
IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity to be presented separately from owner changes in equity. All non-owner changes in equity' are required to be shown in a performance statement.
Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).
The Group has elected to present one statement: a statement of comprehensive income. The interim statements have been prepared under the revised disclosure requirements.
IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segmental reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in any changes to the reportable segments presented.
Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board that makes strategic decisions.
IFRS 2 (amendment) 'Share-based payment'. This revision of an existing standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. This has resulted in no change to the share-based payments charge for the period.
The following interpretation to published standards is mandatory for accounting periods on or after 1 January 2009 but is not relevant to the Group's operations:
IFRIC 13 Customer loyalty programmes
IFRIC 15 Agreements for the construction of real estate
IFRIC 16 Hedges of a net investment in a foreign operation
IAS 39 (amendment) Financial instruments: Recognition and measurement
There has been no impact on the measurement of the Group's assets and liabilities or comparatives.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards and amendments to existing standards have been published but the Group has not early adopted them:
IFRS 3 Revised (Business combinations)
IAS 23 Revised (Borrowing costs)
IFRIC 17 Distributions of non-cash assets to owners
IFRIC 18 Transfers of assets from customers
4. Segmental reporting
The Group's primary format for segmental reporting is business segment. As the business only operates in the UK the Group does not have a secondary reporting format.
The segmental information is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board that makes strategic decisions.
| 6 months ended 30 Nov 2009 | ||||
| Products | Services | Development and Shared Services | Total | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £000 | £000 | £000 | £000 | |
| Revenue | 8,772 | 9,566 | - | 18,338 |
| Profit before tax | 3,341 | 4,782 | (5,279) | 2,844 |
| Total assets | 5,800 | 5,227 | 33,037 | 44,064 |
| 6 months ended 30 Nov 2008 | ||||
| Products | Services | Development and Shared Services | Total | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £000 | £000 | £000 | £000 | |
| Revenue | 2,512 | 7,838 | - | 10,350 |
| Profit before tax | 1,234 | 3,358 | (2,677) | 1,915 |
| Total assets | 3,261 | 3,267 | 18,145 | 24,673 |
5. Capital expenditure
| Six months ended 30 November 2009 | Tangible and | |
| Intangible assets | ||
| (unaudited) | ||
| £000 | ||
| Opening net book amount 1 June 2009 | 3,426 | |
| Additions | 812 | |
| Acquisitions | 3,344 | |
| Depreciation and amortisation | (765) | |
| Closing net book amount 30 November 2009 | 6,817 |
The fixed asset additions primarily relate to the acquisition of Liquidlogic Limited (£3,217,000), capitalisation of internally generated development costs (£510,000) and new computer equipment (£249,000).
| Six months ended 30 November 2008 | Tangible and | |
| Intangible assets | ||
| (unaudited) | ||
| £000 | ||
| Opening net book amount 1 June 2008 | 2,665 | |
| Additions | 612 | |
| Depreciation and amortisation | (485) | |
| Closing net book amount 30 November 2008 | 2,792 |
The fixed asset additions primarily relate to the capitalisation of internally generated development costs (£465,000) and new computer equipment (£106,000).
There were no capital commitments as at 31 May 2009 (2008: nil).
6. Share capital
The Group has 115,005,126 ordinary 1p shares in issue with a nominal value of
£1,150,000 (2008: £895,000). The increase represents an issue of 25,000,000 ordinary 1p shares from an institutional placing. The placing raised proceeds of £11,273,000 (net of placing costs of £727,000). A loan of £1,533,000 from the placing proceeds was used to fund the purchase of 3,100,000 ordinary 1p shares by the System C Healthcare PLC Employee Benefit Trust resulting in a net cash flow of £9,740,000 to the Group. These shares were admitted to AIM on 5 August 2009.
There were no employee share options exercised during the six months to
30 November 2009 (2008: nil).
7. Income tax
The tax expense recognised is based on management estimates of the tax charge for the period.
The tax charge has been calculated using the standard rate of UK Corporation Tax of 28% (2008: 28%) before adjustment for Research and Development tax credits in the period.
8. Earnings per share
Earnings per share attributable to equity shareholders of the Company arises from continuing operations as follows:
| Six months ended | Six months ended | |
| 30 Nov | 30 Nov | |
| 2009 | 2008 | |
| (unaudited) | (unaudited) | |
| Earnings per share for profit from continuing | ||
| operations attributable to the equity of the Company | ||
| - basic | 2.24p | 1.69p |
| - diluted | 2.19p | 1.67p |
The calculation of earnings per share excludes 5,387,741 (2008: 2,287,741) ordinary shares held by The System C Healthcare plc Employee Benefit Trust in accordance with IAS 33 'Earnings per share'.
9. Dividends
A dividend that related to the year ended 31 May 2009 and amounted to £506,000 was paid on 9 November 2009 (2008: £314,000)
In addition, the Directors propose an interim dividend of 0.25 pence per share payable on 10 March 2010 to shareholders who are on the register at 12 February 2010 (2008: 0.22 pence per share) This interim dividend amounting approximately to £251,000 has not been recognised as a liability in this half-yearly financial report.
10. Related party transactions
Key management compensation amounted to £569,000 for the six months to 30 November 2009 (2008 - £630,000)
| Six months ended | Six months ended | |
| 30 Nov 2009 | 30 Nov 2008 | |
| (unaudited) | (unaudited) | |
| £000 | £000 | |
| Salaries and other short-term benefits | 537 | 595 |
| Pension | 32 | 35 |
| Share-based payments | 91 | 54 |
| 660 | 684 |
Transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
11. Acquisitions
Liquidlogic Limited
On 15 July 2009, the Company purchased the entire issued share capital of Liquidlogic Limited for £10,434,000 in cash (including acquisition expenses of £288,000) plus further potential deferred consideration of £4,000,000 dependent on the achievement of certain performance criteria. Management's best estimate of the deferred consideration at the date of signing the interim financial statements is £2,000,000. Historically, the trading results of Liquidlogic Limited in the months after the approval of these interim statements have been significantly more profitable than earlier in the year. Therefore, the full extent of the deferred consideration will only be determinable towards the end of the earn-out period to 30 June 2010.
The table below sets out the Group's assessment of the fair values of assets and liabilities acquired. Adjustments have been made to separately identify intangible assets acquired.
| Book value per management accounts | Adjustments to fair values | Provisional fair value to the Group | |
| £'000 | £'000 | £'000 | |
| Intangible assets: | |||
| - Software & intellectual property | - | 1,400 | 1,400 |
| - Customer contracts | - | 1,817 | 1,817 |
| Property, plant and equipment | 101 | - | 101 |
| Trade and other receivables | 2,379 | - | 2,379 |
| Cash and cash equivalents | 1,902 | - | 1,902 |
| Trade and other payables | (2,037) | - | (2,037) |
| Net assets acquired | 2,345 | 3,217 | 5,562 |
| Goodwill | 6,872 | ||
| Consideration (including costs of acquisition) | 12,434 |
Goodwill of £6,872,000 represents the expected synergies particularly in respect of the ability of System C to access the social care market as well as the value of the industry specific knowledge/technical skills within this market.
In its last financial period of 12 months to 31 March 2009, Liquidlogic Limited made a profit before tax of £252,000, after charging one-off non-recurring pre-acquisition expenses.
Between the date of acquisition and 30 November 2009 Liquidlogic Limited contributed revenues of £2,632,000 and profit before taxation of £336,000.
Conscia Enterprise Systems Limited
On 7 October 2009, the Company purchased the entire issued share capital of Conscia Enterprise Systems Limited for £856,000 in cash (including acquisition expenses of £56,000).
The table below sets out the Group's assessment of the fair values of assets and liabilities acquired. Adjustments have been made to separately identify intangible assets acquired.
| Book value per management accounts | Provisional fair value to the Group | |
| £'000 | £'000 | |
| Property, plant and equipment | 26 | 26 |
| Trade and other receivables | 222 | 222 |
| Cash and cash equivalents | 38 | 38 |
| Trade and other payables | (196) | (196) |
| Net assets acquired | 90 | 90 |
| Goodwill | 766 | |
| Consideration (including costs of acquisition) | 856 |
Goodwill of £766,000 represents the expertise of the workforce.
In its last financial period of 12 months to 30 June 2009, Conscia Enterprise Systems Limited made a profit before tax of £162,000.
Between the date of acquisition and 30 November 2009 Conscia Enterprise System Limited contributed revenues of £334,000 and profit before taxation of £67,000.
If Liquidlogic Limited and Conscia Enterprise Systems Limited had been included in the Group from the start of the financial year it is expected that the combined revenue and profit before tax for the Group including these acquisitions would have been approximately £19,169,000 and £2,770,000.
Bluestar UK Group Limited
On 8 October 2009, the terms of the earn-out arrangements pursuant to the agreement for the acquisition of Bluestar UK Group Limited dated 5 May 2009 were revised. Under the terms of the revised arrangements the earn-out was satisfied for a total of £301,000, of which £200,000 was settled in cash and £101,000 by the issue of 166,667 1p ordinary shares.
This resulted in a reduction of goodwill of £333,000.
12. Events occurring after the balance sheet date
Details of the interim dividend proposed are given in Note 9.
13. Risks and Uncertainties
The key risks and uncertainties as disclosed on page 19 of the Group's Annual Report for the year ended 31 May 2009 remain valid for the six months ended 30 November 2009.
Statement of directors' responsibilities
The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and the AIM Rules for Companies.
The Directors of System C Healthcare plc are listed in the System C Healthcare plc Annual Report for the year ended 31 May 2009 with the exception of A Coll who resigned on 31 December 2009. A list of current directors is maintained on the System C Healthcare plc website: www.systemc.com.
By Order of the Board
Name: Jim Horsburgh
Title: Chairman
Date: 26 January 2010
Independent Review Report to System C Healthcare plc
Introduction
We been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 November 2009, which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 November 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.
PricewaterhouseCoopers LLP
Chartered Accountants
Gatwick
26 January 2010
Notes:
(a) The maintenance and integrity of the System C Healthcare plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.