Last checked at 28 Jan 2009 07:00
System C Healthcare plc
Half Year results for the six months ended
System C Healthcare plc ("the Group"), a leading independent provider of information solutions and services to the UK healthcare sector, announces its unaudited half-yearly results for the six months ended 30 November 2008.
Financial Highlights
The financial highlights for the six months ended 30 November 2008 are:
Revenue up 24% at £10.4m (2007: £8.4m), including 21% organic growth
Profit from operations up 35% to £1.5m (2007:£1.1m)
Profit before taxation at £1.9m (2007: £1.5m)
EPS up 45% to 1.69p per share (2007:1.14p per share)
Increased cash position, with cash (net of borrowings) of £13.7m (2007: £11.4m)
Interim dividend up 22% to 0.22 pence per share (2007: 0.18 pence per share)
Commenting on these results, chief executive Ian Denley said:
"The Group has turned in a strong all-round performance over the period. We have achieved good growth, improved profitability and strengthened our cash position.
Over the last six months we have delivered many important projects on behalf of the National Programme for IT, and have won new clients in both the public and private sectors. We have sold a range of software systems into our core hospital and treatment centre markets, and have also made our first inroads into the emerging polyclinic market. As anticipated, we are seeing increasing interest in Patient Management and Electronic Patient Record Systems (PAS/EPR) both in the UK and overseas and this is generating significant opportunities for the newly developed Medway Sigma product range.
Outlook for the full year is positive and the directors expect that profits will be in line with market expectations."
For further information please contact
| System C Healthcare plc | Tel: 01622 691 616 |
| Dr Ian Denley, chief executive | |
| Andrew Coll, finance director | |
| Collins Stewart | Tel: 0207 523 8350 |
| Mark Connelly | |
| Stewart Wallace | |
| Maitland | Tel: 0207 379 5151 |
| Emma Burdett | |
| Richard Farnsworth |
Notes to Editors
System C Healthcare plc (www.systemc.com), established in 1983, specialises in the provision of healthcare information systems, implementation services and consulting. System C's aim is to help to improve patient care and safety through the effective use of IT solutions and innovative consulting services.
System C is a specialist developer and supplier of patient management systems to the health service. The Group's product range includes advanced Patient Administration Systems and Electronic Patient Record systems for acute and mental health hospitals and out of hospital treatment centres, a reporting and management information system configured specifically to support the healthcare sector, as well as clinical systems for order communications, A&E, theatres, maternity, diabetes care and other clinical specialities/conditions. Key customers include Noble's Hospital Isle of Man, University Hospitals Aintree, Swindon and Marlborough NHS Trust, the Christie - one of the UK's leading cancer hospitals, Tameside Hospitals NHS Trust, Circle Health and Care UK.
System C has one of the UK's largest teams of healthcare IT domain experts who provide a range of IT systems implementation services. Its team of 170 professionals has an average of 15 years' healthcare experience and has helped to implement clinical and Patient Management systems at over 180 trusts and hospitals over the past few years.
System C also has a dedicated healthcare consulting division, Perigon, which focuses on the design of innovative, safe, 'future-state' healthcare services that are accessible, equitable, efficient and provide high quality care for patients.
Chairman's Statement
I am pleased to be able to report that the Group has turned in a strong trading performance over the period, against the backdrop of a difficult economic environment. Revenues are up 24% from the prior year, profit from operations up 35% and cash up by £1.3m to £13.7m since May 2008. We remain well-positioned as a niche provider of IT to the healthcare sector, and 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 healthcare.
Services
Services revenues increased by 41% against the same period in 2007, reflecting continued confidence in System C's ability to provide a successful deployment service and represented approximately 76% of total sales for the period. The Group has built a reputation as a hands-on problem solver, and is recognised as adding value wherever it works.
National demand for System C's services remains strong. Activity continues to increase in the group's traditional stronghold areas of deployment support and problem resolution. Its presence in specialist areas such as clinical design and business intelligence is also growing.
Our Connecting for Health team continues to operate successfully and has now completed 220 work packages supporting deployments within the National Programme for IT. Feedback from our NHS customers continues to be excellent, all of which augurs well for future assignments.
Products and Software Development
The product division has performed well over the half year, with successful deployments of a number of systems from our Medway Sigma product range, including: Emergency Care, Maternity, Business Intelligence and Patient Management Systems. The division represented approximately 24% of total sales for the period.
System C is in the second phase of deployment to provide a comprehensive, island-wide, electronic health and social care record for all citizens of the Isle of Man. This new phase covers ambulance, theatres, community and social services systems, and these deployments will contribute to second half performance.
The Business Intelligence unit continues to make good progress in line with increasing interest across the health service in improving the quality and operational efficacy of data and information. The unit is bidding for a number of new contracts and is expected to make a good contribution to revenues and margins over the coming year.
The Group continues to invest in the development of its core patient management and clinical systems, and we are now engaged in a number of procurements for Medway Sigma that are expected to generate product sales over the next two years and beyond.
Revenues on the product side showed a small decrease on the previous year. This was mainly a timing issue, as revenues are only recognised upon the achievement of delivery milestones. We are anticipating continued year on year growth in product revenues as milestones are signed off.
Acquisitions and new ventures
System C's new healthcare consultancy division Perigon, launched in March 2008, is growing in line with expectations. It has been commissioned to carry out a number of contracts, including the redesign of clinical and business processes for polyclinic/medical centres, and process and patient flow redesign work in support of the government's target 18 week treatment time. The results of Perigon are reported within Services Division.
IQ Systems Services, the business the Group acquired in 2007, has installed the Medway Sigma system into the UK's largest treatment centre and has continued to win business with independent providers and in support of GP-led services.
Care Records, the business the Group acquired in 2008, has successfully installed another maternity solution and has two more in progress. Its sales pipeline continues to grow in line with government initiatives in maternity care.
System C is continuing to evaluate new acquisition opportunities according to its strict criteria of investing in related markets and strategic related technologies.
Market
Demand for our skills and services remains buoyant, and we continue to give practical strategic and tactical support to Connecting for Health ("CfH"), Local Service providers ("LSP's"), private sector providers, strategic health authorities and individual NHS Trusts.
There is also growing interest in our next generation healthcare systems and we are engaged in a number of software tenders in the UK regions, the private healthcare sector and mainland Europe.
Healthcare IT continues to play an important role in transforming the UK health economy and in improving patient care and outcomes, and we feel confident that future governments will continue to treat IT investments as a high priority.
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. We are currently looking to increase our staff capacity to support the top-line growth and we are expecting that our reputation both as an employer and as a successful delivery organisation will support that process.
Earnings per Share and Dividends
The Board is pleased to declare an interim dividend of 0.22 pence per share, a 22% increase on prior year (2007: 0.18 pence per share). The dividend will be paid on 11 March 2009 to those shareholders on the register at the close of business on 13 Feb 2009.
Outlook and Current Trading
Trading has continued to progress well since the end of the interim period, with both the services and products sides of the business performing well. The Group retains a strong balance sheet with cash of £13.7m at November 30th 2008 and further cash generation since then. On this basis, the Board expects that profits for the full financial year will be in line with market expectations.
Jim Horsburgh, chairman
System C Healthcare plc
Consolidated Income Statement
For the six months ended 30 November 2008
| 6 months to | 6 months to | Year Ended | ||
| 30 November | 30 November | 31 May | ||
| 2008 | 2007 | 2008 | ||
| (unaudited) | (unaudited) | (audited) | ||
| £'000 | £'000 | £'000 | ||
| Revenue | 10,350 | 8,357 | 18,128 | |
| Cost of sales | (4,727) | (4,023) | (8,075) | |
| Gross profit | 5,623 | 4,334 | 10,053 | |
| Research & development costs | (910) | (573) | (1,105) | |
| Amortisation of acquired intangible assets | (129) | (40) | (183) | |
| Share based payments | (54) | (30) | (72) | |
| Administration | (3,062) | (2,605) | (6,250) | |
| Operating profit before the amortisation |
|
|
| |
| of acquired intangibles, and share based payments | 1,651 | 1,156 | 2,698 | |
| Profit from operations | 1,467 | 1,086 | 2,443 | |
| Financial income | 459 | 427 | 891 | |
| Financial expense | (11) | (16) | (48) | |
| Profit before taxation | 1,915 | 1,497 | 3,286 | |
| Taxation | (441) | (501) | (1,052) | |
| Profit for the period | 1,474 | 996 | 2,234 | |
| Earnings per ordinary share | ||||
| - Basic | 1.69 | 1.14 | 2.56 | |
| - Diluted | 1.67 | 1.13 | 2.54 | |
All of the activities of the Group are continuing.
Notes 1 to 12 form an integral part of this condensed consolidated half-yearly financial information.
Consolidated Balance Sheet
As at 30 November 2008
| At 30 November | At 31 May | At 30 November | |
| 2008 | 2008 | 2007 | |
| (unaudited) | (audited) | (unaudited) | |
| £'000 | £'000 | £'000 | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 398 | 416 | 529 |
| Goodwill | 1,884 | 1,884 | 1,749 |
| Intangible assets | 2,394 | 2,250 | 1,079 |
| Deferred tax assets | - | - | 496 |
| Trade and other receivables | - | - | 699 |
| 4,676 | 4,550 | 4,552 | |
| Current assets | |||
| Trade and other receivables | 6,339 | 6,917 | 5,667 |
| Cash and cash equivalents | 13,658 | 12,427 | 11,621 |
| 19,997 | 19,344 | 17,288 | |
| TOTAL ASSETS | 24,673 | 23,894 | 21,840 |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 3,118 | 4,010 | 3,157 |
| Deferred consideration | 1,360 | 680 | 680 |
| Current tax liability | 497 | 162 | 188 |
| Borrowings | - | - | 198 |
| 4,975 | 5,243 | 4,223 | |
| Non-current liabilities | |||
| Deferred consideration | - | 670 | 643 |
| Deferred tax liability | 470 | 391 | 0 |
| Provisions and other liabilities | 110 | 104 | 245 |
| 580 | 774 | 888 | |
| TOTAL LIABILITIES | 5,555 | 6,017 | 5,111 |
| NET ASSETS | 19,118 | 17,877 | 16,729 |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 895 | 895 | 895 |
| Share premium account | 9,766 | 9,766 | 9,767 |
| Capital redemption reserve | 3,127 | 3,127 | 3,127 |
| Own shares held in trust | (1,235) | (1,235) | (1,235) |
| Retained earnings | 6,565 | 5,324 | 4,175 |
| TOTAL EQUITY | 19,118 | 17,877 | 16,729 |
Notes 1 to 12 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 2008 and 30 November 2007
| Share capital | Share premium account | Capital redemption reserve | Own shares held in trust | Retained earnings | Total equity | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| As at 1 June 2007 | 895 | 9,757 | 3,127 | (1,235) | 3,371 | 15,915 |
| Profit for the period | - | - | - | - | 996 | 996 |
| Share-based payment charge | - | - | - | - | 30 | 30 |
| Premium on issue of new shares | - | 10 | - | - | - | 10 |
| Deferred tax | - | - | - | - | (13) | (13) |
| Dividends | - | - | - | - | (209) | (209) |
| As at 30 November 2007 | 895 | 9,767 | 3,127 | (1,235) | 4,175 | 16,729 |
| As 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 payment charge | - | - | - | - | 54 | 54 |
| Deferred tax | - | - | - | - | 27 | 27 |
| Dividends | - | - | - | - | (314) | (314) |
| As at 30 November 2008 | 895 | 9,766 | 3,127 | (1,235) | 6,565 | 19,118 |
Notes 1 to 12 form an integral part of this condensed consolidated half-yearly financial information.
Consolidated Cash Flow Statement
For the six months ended 30 November 2008
| 6 months | 6 months | ||
| ended | ended | Year ended | |
| 30 November | 30 November | 31 May | |
| 2008 | 2007 | 2008 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Cash generated from operations | 1,633 | 2,541 | 4,710 |
| Financial expense | (1) | (16) | (21) |
| Income tax paid | - | (52) | (184) |
| Net cash generated by operating activities | 1,632 | 2,473 | 4,505 |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries, net of cash acquired | - | (913) | (1,804) |
| Purchases of property, plant and equipment | (136) | (57) | (121) |
| Purchase of intangible software | (10) | - | - |
| Capitalised development costs | (465) | (269) | (591) |
| Financial income | 524 | 343 | 747 |
| Net cash used in investing activities | (87) | (896) | (1,769) |
| Cash flows from financing activities | |||
| Repayment of borrowings | - | (330) | (528) |
| Issue of equity share capital | - | 10 | 10 |
| Dividends paid | (314) | (210) | (366) |
| Net cash used in financing activities | (314) | (530) | (884) |
| Net increase in cash and cash equivalents | 1,232 | 1,047 | 1,852 |
| Cash and cash equivalents at beginning of period | 12,427 | 10,574 | 10,574 |
| Cash and cash equivalents at end of period | 13,658 | 11,621 | 12,427 |
Cash flows from operating activities
| 6 months ended | 6 months ended | Year ended | |
| 30 November | 30 November | 31 May | |
| 2008 | 2007 | 2008 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Profit for the Period | 1,474 | 996 | 2,234 |
| Taxation | 441 | 501 | 1,052 |
| Financial income | (459) | (427) | (891) |
| Financial expense | 11 | 16 | 48 |
| Profit from operations | 1,467 | 1,086 | 2,443 |
| Decrease in receivables | 512 | 1,239 | 752 |
| (Decrease)/increase in payables | (881) | 1,224 | 2,053 |
| Movement in provisions | 6 | (7) | 2 |
| Deferred consideration | (10) | (1,323) | (1,352) |
| Charge for share based payments | 54 | 30 | 72 |
| Depreciation of property, plant and equipment | 154 | 207 | 386 |
| Amortisation of intangible assets | 331 | 85 | 353 |
| Loss on disposal of fixed assets | - | - | - |
| Net cash inflow from operating activities | 1,633 | 2,541 | 4,710 |
Notes 1 to 12 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.
These condensed consolidated half yearly financial results were approved for issue by the Board of Directors on 27 January 2009.
These haly yearly financial results do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 May 2008 were approved by the Board of Directors on 9 September 2008 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 237 of the Companies Act 1985.
2. Basis of preparation
These condensed consolidated half yearly financial results for the half-year ended 30 November 2008 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 half year condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 May 2008, 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 2008, as described in those annual financial statements.
The following interpretation is mandatory for the first time for the financial year ending 31 May 2009 but is not relevant for the Group.
IFRIC 14 IAS 19 - 'The limit on a defined benefit asset, minimum funding requirements and their interaction'.
IFRIC 12 - 'Service Concession Arrangements'.
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.
| 6 months ended 30 Nov 2008 | ||||
| Products | Services | Development | Total | |
| and Shared | ||||
| Services | ||||
| (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 |
| Net assets | 2,811 | 2,338 | 13,969 | 19,118 |
| 6 months ended 30 Nov 2007 | ||||
| Products | Services | Development | Total | |
| and Shared | ||||
| Services | ||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| £000 | £000 | £000 | £000 | |
| Revenue | 2,818 | 5,539 | - | 8,357 |
| Profit before tax | 1,568 | 1,848 | (1,919) | 1,497 |
| Net assets | 3,090 | 2,361 | 11,278 | 16,729 |
5. Capital expenditure
| 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).
Six months ended 30 November 2007
| Tangible and | ||
| Intangible | ||
| assets | ||
| (unaudited) | ||
| £000 | ||
| Opening net book amount 1 June 2007 | 1,024 | |
| Additions | 2,625 | |
| Depreciation and amortisation | (292) | |
| Closing net book amount 30 November 2007 | 3,357 |
The fixed asset additions primarily relate to the acquisition of IQ Systems Services Ltd (£2,299,000) and the capitalisation of internally generated development costs (£269,000).
6. Share capital
The Group has 89,548,464 ordinary 1p shares in issue with a nominal value of £895,000 (2007 - £895,000).
There were no employee share options exercised during the six months to 30 November 2008.
7. Income tax
The tax expense recognised is based on management estimates of the tax charge for the period.
8. Earnings per share
Earnings per share attributable to equity shareholders of the company arises from continuing operations as follows:
| Six months | Six months | |||
| ended | ended | |||
| 30 Nov | 30 Nov | |||
| 2008 | 2007 | |||
| (unaudited) | (unaudited) | |||
| Earnings per share for profit from continuing | ||||
| operations attributable to the equity of the Company | ||||
| - basic | 1.69p | 1.14p | ||
| - diluted | 1.67p | 1.13p | ||
The calculation of earnings per share excludes 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 2008 and amounted to £314,000 was paid on 10 October 2008.
In addition, the Directors have declared an interim dividend of 0.22 pence per share payable on 11 March 2009 to shareholders who are on the register at 13 February 2009 (2007: 0.18 pence per share) This interim dividend amounting approximately to £192,000 has not been recognised as a liability in this half-yearly financial report.
10. Related party transactions
Key management compensation amounted to £931,000 for the six months to 30 November 2008 (2007 - £605,000)
| Six months | Six months | |
| ended | ended | |
| 30 Nov 2008 | 30 Nov 2007 | |
| (unaudited) | (unaudited) | |
| £000 | £000 | |
| Salaries and other short-term benefits | 896 | 573 |
| Pension | 35 | 32 |
| 931 | 605 |
Transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
11. Events occurring after the balance sheet date
Details of the interim dividend proposed are given in Note 9.
The company paid a total of £680,000 in December 2008 in respect of the year 1 additional consideration due under the IQ earn out agreement. This represented the full amount payable under the year 1 performance criteria.
12. 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 2008 remain valid. The principal risks and uncertainties of the Group for the remaining six months of the current financial year are disclosed in the half year management report for the half-year ended 30 November 2008.
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 2008. 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 | 27th January 2009 |
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 2008, which comprises the consolidated income statement, 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 2008 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
27 January 2009
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.