Sysgroup Regulatory News (SYS)

25 Jan 2006 07:01

System C Healthcare plc25 January 2006 System C Healthcare plc: Interim Results System C Healthcare plc ("the Company"), a leading independent provider of ITimplementation solutions for the UK healthcare sector, announces its unauditedresults for the six months ended 30 November 2005. Financial Summary • Turnover £8.6m (2004: £8.8m)• Profit before tax and exceptional items £0.6m (2004: £2.1m)• Profit before tax £0.4m (2004: £1.7m)• Basic earnings per share 0.79p (2004: 2.62p)• Operating cash outflow £0.3m (2004: £1.3m inflow)• Net cash £7.0m (2004: £3.8m net debt)• Interim dividend of 0.11 pence per share declared (see note 18) For further information please contact Jim Horsburgh, Chairman, or Ian Denley, Chief Executive Tel: 01622 691616 Brian Hudspith or Emma Burdett, The Maitland Consultancy Tel: 020 7379 5151 Half-Year Review Trading Results Six months to Six months to Year ended 31 30 November 2005 30 November 2004 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 ------------ ------------ ------------ Turnover 8,581 8,843 18,228Total operatingexpenses beforeexceptional items (1) (8,240) (6,736) (14,735) ------------ ------------ ------------Operatingprofit beforeexceptional items 341 2,107 3,493Exceptional items (191) (360) (986) ------------ ------------ ------------Operating profit 150 1,747 2,507Net interest 250 (37) 25 ------------ ------------ ------------Profit before tax 400 1,710 2,532 ------------ ------------ ------------ Note 1: Relates to cost of sales plus administrative expenses before exceptionalitems. Turnover was £8.6m in the six months ended 30 November 2005 (2004: £8.8m), withan operating profit before exceptional items of £0.3m (2004: £2.1m) whichdelivered a profit before tax of £0.4m (2004: £1.7m). Review of Activities As indicated in our December trading statement, delays to the National Programmefor IT have seriously impacted turnover and profitability for the six monthsended 30 November 2005. These delays have mostly affected the Services componentof the Company's business with a decline in demand for time and materials workon NHS projects. We have responded rapidly to this change in the market, andhave introduced a new range of fixed-price services which we are now starting todeliver into our major Local Service Provider ("LSP") customers. An example ofthis is the deployment of replacement patient administration systems at a numberof trusts in the Midlands and the East of England, for which System C is takingcomplete responsibility and ownership. The services team have been associatedwith 20 major new trust-wide projects over the period. Outside the core implementation related activities with LSPs, we continue to wincontracts directly from NHS Trusts, with 14 new contracts in the period. We havealso recently won two deployment contracts with other third-party suppliers. The product capability of the Company has benefited from the continuedinvestment during the period. Work has been undertaken to upgrade the MedWayElectronic Patient Record system to connect to the NHS Connecting for Healthcentral Choose & Book system which allows general practitioners to book hospitalappointments for their patients online. MedWay achieved its certification forChoose & Book compliance, and implementations of the new version are planned tobegin in the second half of the year. We have also successfully launched newproducts in the HealthData Suite which provide data validation, reporting andmanagement information systems configured specifically to support the healthcaresector. Seven new NHS hospital trust customers have been secured for suchproducts in the six months to 30 November 2005, with renewable licence feeagreements for the provision of such solutions. In addition to the increased awareness of the Company's capabilities, and abroadening customer base, the financial position of the Company has beenstrengthened considerably by the flotation on AIM in June which provided £8.5 mof net cash for the business. The strengthening of the balance sheet to aposition of £7.0m net cash at 30 November 2005 (£3.8m net debt at 30 November2004) is particularly important for the Company's future growth and positioning. Earnings per share and Dividends Basic earnings per share for the six months ended 30 November 2005 of 0.79 penceper share (2004: 2.62 pence) is explained in note 9 below. Reflecting the Board's confidence in the Company's prospects in the medium termand beyond, an interim dividend of 0.11pence per ordinary share is declared inline with our policy stated at the time of the Company's flotation on AIM lastJune. This will be paid on 14 March to those shareholders on the register at theclose of business on 17 February 2006 (see note 18). Prospects During the first six months of the current financial year we maintained capacityduring a period of high opportunity. However, the slippage in the NationalProgramme has had a significant impact on the outcome of the current financialyear. Although prospects for the medium term remain good, the Company isrestructuring to maintain profitability against slower market conditions atpresent. With trading conditions in the second half of the year likely to besimilar to those in the six months ended 30 November 2005, we intend to reduceour operating cost base in the second half. We intend to ensure that theannualised operating cost base is reduced by between approximately £1.5m to£2.5m depending upon market conditions. This reduction will mainly impact thefinancial year ending 31 May 2007. However, the Company has made considerable progress in terms of its marketpositioning, and we remain confident that the medium term outlook for healthcareIT is positive. Accordingly, we intend to maintain our operational anddevelopment capacity with a core level of direct staff remaining focused onrevenue generating and product development activities. In summary, the Companyhas a strong balance sheet and is well positioned to benefit from any upturn inthe healthcare IT sector and generate significant profitability in the mediumterm and beyond. Ian Denley - Chief ExecutiveJim Horsburgh - Chairman25 January 2006 Profit and loss account for the six months ended 30 November 2005 Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 Note (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ---------- Turnover 3 8,580,971 8,842,818 18,228,185Cost of sales 3 (4,134,987) (4,286,383) (8,757,318) ---------- ----------- ----------Gross profit 3 4,445,984 4,556,435 9,470,867 ---------- ----------- ---------- Administrationexpenses - before 3 (4,104,984) (2,449,477) (5,978,204) exceptional itemsAdministrationexpenses - exceptional 3,4 (190,632) (359,522) (986,004) items ---------- ----------- ---------- Administrationexpenses - total (4,295,616) (2,808,999) (6,964,208) ---------- ----------- ---------- Operating profit 3 150,368 1,747,436 2,506,659 Interest receivable andsimilar income 5 345,067 157,420 351,830Interest payable andsimilar charges 6 (95,011) (194,953) (326,914) ---------- ----------- ----------Profit on ordinary activitiesbefore taxation 400,424 1,709,903 2,531,575 Tax on profit on ordinaryactivities 7 267,472 (136,315) (421,882) ---------- ----------- ----------Profit for the financialperiod 667,896 1,573,588 2,109,693 Dividends and appropriations 8 (12,796) (34,271) (66,742) ---------- ----------- ----------Retained profit for thefinancial period 655,100 1,539,317 2,042,951 ---------- ----------- ---------- Earnings per share (as restated)Basic 9 0.79 2.62 3.48Diluted 9 0.77 2.31 3.08 ---------- ----------- ---------- The results above relate entirely to continuing operations The Company has no recognised gains and losses other than the results above andtherefore no separate statement of total recognised gains and losses has beenpresented. There is no difference between the profit on ordinary activities before taxationand the results for the periods stated above and their historical costequivalents. Details of the restatement in respect of the earnings per share figures aregiven in note 2. Balance sheet as at 30 November 2005 Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 Note (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ---------- Tangible fixed assets 1,563,697 1,962,656 2,017,883 ---------- ----------- ---------- Debtors 10 8,358,017 8,425,059 8,318,821Cash at bank and in hand 9,450,289 332,261 1,223,242 ---------- ----------- ----------Current assets 17,808,306 8,757,320 9,542,063 Creditors: amounts falling due within one year 11 (3,525,544) (4,137,584) (4,314,872) ---------- ----------- ----------Net current assets 14,282,762 4,619,736 5,227,191 ---------- ----------- ----------Total assets lesscurrent liabilities 15,846,459 6,582,392 7,245,074 Creditors: amounts falling due after more than one year 12 (1,024,511) (1,996,668) (1,520,488)Provisions forliabilities and charges 13 (97,683) (90,497) (233,895) ---------- ----------- ---------- (1,122,194) (2,087,165) (1,754,383) ---------- ----------- ----------Net assets 14,724,265 4,495,227 5,490,691 ---------- ----------- ---------- Called up share capital 14 884,594 3,795,630 3,821,683Share premium account 15 9,624,055 3,774,613 -Capital redemption reserve 15 3,127,023 134 134Special reserve 15 - - 1,308,496Own shares held in trust 15 (1,235,381) - -Profit and loss account 15 2,323,974 (3,075,150) 360,378 ---------- ----------- ----------Total shareholders' funds 16 14,724,265 4,495,227 5,490,691 ---------- ----------- ---------- Represented by:Equity shareholders' funds 15 14,724,265 950,937 1,909,093Non-equityshareholders' funds 15 - 3,544,290 3,581,598 ---------- ----------- ----------Total 14,724,265 4,495,227 5,490,691 ---------- ----------- ---------- Cash flow statement for the six months ended 30 November 2005 Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ---------- ---------- Operating profit 150,368 1,747,436 2,506,659Depreciation of tangible fixed assets 490,699 424,964 892,135Loss on disposal of fixed assets - - 17,498Exceptional charge on share options - 359,522 986,004Movement in provisions (136,212) 49,700 54,536Decrease in stocks - 7,902 7,902Decrease/(increase) in debtors 207,306 (2,012,417) (2,177,636)(Decrease)/increase in creditors (1,047,234) 740,583 1,923,589 ---------- ---------- ----------Net cash (outflow)/ inflowfrom operating activities (335,073) 1,317,690 4,210,687 Returns on investments and servicingof financeInterest received 355,552 157,420 341,345Interest paid (95,011) (194,953) (326,914)Dividends paid to non-equity preference shareholders (123) - - ---------- ---------- ----------Net cash inflow/(outflow)from returns on investments and servicing of finance 260,418 (37,533) 14,431 Taxation - 105,638 105,638 Capital expenditure and financialinvestmentPurchase of tangible assets (42,252) (372,972) (890,728) ---------- ---------- ----------Cash outflow from capitalexpenditure and financialinvestment (42,252) (372,972) (890,728) ---------- ---------- ----------Net cash outflow/(inflow)before financing (116,907) 1,012,823 3,440,028 FinancingIssue of equity share capital 11,059,720 - 138,362Issue costs (1,354,461) - -Payments to acquire ownshares held in trust (1,235,381) - -Redemption of non-equitypreference shares (71,000) - -Net repayment of financing loans (457,049) (473,689) (912,502) ---------- ---------- ----------Net cash inflow/(outflow)from financing 7,941,829 (473,689) (774,140) ---------- ---------- ----------Increase in cash 7,824,922 539,134 2,665,888 ---------- ---------- ---------- Notes to interim report and accounts 1. Status of interim report and accounts The interim report and accounts are unaudited but have been reviewed by theauditors and their independent review report is set out on page 18. The interimreport and accounts are not full accounts within the meaning of section 240 ofthe Companies Act 1985. The figures for the year ended 31 May 2005 have been extracted from the auditedannual report and accounts that have been filed with the Registrar of Companies.The audit report on that annual report and accounts was unqualified and did notcontain a statement under Section 237(2) or (3) of the Companies Act 1985. 2. Accounting policies The interim report and accounts have been prepared using the accounting policiesto be applied in the annual report and accounts for the year ending 31 May 2006.These are consistent with those included in the annual report and accounts forthe year ended 31 May 2005 with the exception of the effect, if any, on theadoption of FRS 21, FRS 22 and UITF 38. Adoption of FRS 21 "Events after the balance sheet date"The adoption of FRS 21 has not had any material impact on the Company. There isno prior period adjustment required for the six months ended 30 November 2004and the year ended 31 May 2005 in respect of dividends as all the requisiteconditions required by FRS 21 had been satisfied. Adoption of FRS 22 "Earnings per share"FRS 22 "Earnings per share" has been adopted, which prohibits the presentationof non-standard earnings per share measures on the face of the profit and lossaccount. Following the conversion of the Company's convertible participating preferenceshares (note 14), and in accordance with the requirements of FRS 22, theearnings per share figures for the year ended 31 May 2005 as previously reportedof 5.15p per share and 4.30p per share respectively have been restated toinclude the number of additional ordinary shares arising on conversion in thecalculation of the weighted average number of ordinary shares in issue duringthe period. Adoption of UITF 38 "Accounting for ESOP Trusts"The System C Healthcare plc Employee Benefit Trust has been accounting for inaccordance with UITF 38 which requires the shares held by the trust to bededucted from shareholders' funds. Further details of the System C Healthcareplc Employee Benefit Trust are given in note 15. 3. Segmental reporting The Company's sole activity is the design, development and implementation ofcomputer hardware and software. The directors consider it appropriate to analysethe results and financial position of the Company as given below: Six months ended 30 November 2005 (unaudited) Development and shared Products Services services Total £ £ £ £ -------- -------- -------- --------Turnover 1,896,429 6,684,542 - 8.580,971Cost of sales (1,434,141) (2,700,846) - (4,134,987) -------- -------- -------- --------Gross profit/(loss) 462,288 3,983,696 - 4,445,984Administration expenses - before exceptional items (155,617) (1,381,262) (2,568,105) (4,104,984) -------- -------- -------- --------Administration expenses - exceptional items - - (190,632) (190,632) -------- -------- -------- --------Operating profit/(loss) 306,671 2,602,434 (2,758,737) 150,368Net interest 56,852 - 193,204 250,056 -------- -------- -------- --------Profit/(loss) before tax 363,523 2,602,434 (2,565,533) 400,424 -------- -------- -------- --------Net assets 3,120,584 2,656,883 8,946,798 14,724,265 -------- -------- -------- -------- Six months ended 30 November 2004 (unaudited) Development and shared Products Services services Total £ £ £ £ -------- -------- -------- --------Turnover 1,110,055 7,732,763 - 8,842,818Cost of sales (1,322,905) (2,963,478) - (4,286,383) -------- -------- -------- --------Gross profit/(loss) (212,850) 4,769,285 - 4,556,435Administration expenses - before exceptional items (129,075) (921,462) (1,398,940) (2,449,477) -------- -------- -------- --------Administration expenses - exceptional items - - (359,522) (359,522) -------- -------- -------- --------Operating profit/(loss) (341,925) 3,847,823 (1,758,462) 1,747,436Net interest 8,282 (36,483) (9,332) (37,533) -------- -------- -------- --------Profit/(loss) before tax (333,643) 3,811,340 (1,767,794) 1,709,903 -------- -------- -------- --------Net assets 1,877,729 2,166,269 451,229 4,495,227 -------- -------- -------- -------- Year ended 31 May 2005 (unaudited) Development and shared Products Services services Total £ £ £ £ -------- -------- -------- -------- Turnover 2,966,764 15,261,421 - 18,228,185Cost of sales (2,330,372) (6,426,946) - (8,757,318) -------- -------- -------- --------Gross profit/(loss) 636,392 8,834,475 - 9,470,867Administration expenses - before exceptional items (272,981) (1,918,823) (3,786,400) (5,978,204) Administration expenses - exceptional items - - (986,004) (986,004) -------- -------- -------- --------Operating profit/(loss) 363,411 6,915,652 (4,772,404) 2,506,659Net interest 72,316 (62,666) 15,266 24,916 -------- -------- -------- --------Profit/(loss)before tax 435,727 6,852,986 (4,757,138) 2,531,575 -------- -------- -------- --------Net assets 2,044,603 2,504,230 941,858 5,490,691 -------- -------- -------- -------- The Products segment relates to business where the Company contracts directlywith local NHS trusts and other clinical organisations. The Services segment relates to the business where the Company is subcontractedto perform work on behalf of other organisations where the end customer is alsoeither the NHS or other clinical organisations. Development and shared services relates to the Company's central research anddevelopment activities and support services provided to the Products and Servicesegments. There is no difference between the geographical origin and destination ofturnover, all of which arises in the United Kingdom. 4. Exceptional items Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- UITF 17 charge - 318,725 806,645UITF 25 charge - 40,797 179,359Flotation costs 190,632 - - ----------- ---------- ----------- Total 190,632 359,522 986,004 ----------- ---------- ----------- UITF 17 and UITF 25 charges The charges above arise on the re-pricing of certain share options on 10November 2004, together with the issue of additional share options during theyear ended 31 May 2005. Flotation costs Such costs comprise amounts incurred in connection the Company's admission toAIM which have not been set off against the share premium account. 5. Interest receivable and similar income Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- Bank interest receivable 195,154 1,379 20,458Other interest receivable 149,913 156,041 331,372 ----------- ---------- ----------- 345,067 157,420 351,830 ----------- ---------- ----------- 6. Interest payable and similar charges Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- Interest payable on bankloans and overdrafts 1,950 47,194 67,858Interest on financing loans 93,061 147,759 259,056 ----------- ---------- ----------- 95,011 194,953 326,914 ----------- ---------- ----------- 7. Tax on profit on ordinary activities (a) Analysis of tax (credit)/charge in the period Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- Analysis of charge in the periodCurrent taxUnited Kingdom corporationtax at 19% on profit for the period - 262 3,887 ----------- ---------- -----------Total current tax charge (note 7b) - 262 3,887 Deferred taxOrigination and reversalof timing differences (267,472) 136,053 417,995 ----------- ---------- -----------Total deferred tax (credit)/charge (267,472) 136,053 417,995 ----------- ---------- -----------Tax on profit on ordinary activities (267,472) 136,315 421,882 ----------- ---------- ----------- (b) Factors affecting the tax charge in the period The tax for the period differs from the standard rate of corporation tax in theUK (30% for six months ended 30 November 2004 and the year ended 31 May 2004 and19% for the six months ended 30 November 2005). The differences are explainedbelow: Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- Profit on ordinaryactivities before tax 400,424 1,709,903 2,531,575Profit on ordinaryactivities multiplied bystandard rate of corporation tax in the UK of 30% 120,127 512,971 759,473 ----------- ---------- ----------- Effects of:Expenses not deductiblefor tax purposes 7,673 11,798 35,797Differences between capital allowances and depreciation 23,390 29,285 51,543Unutilised losses/(lossesutilised) 476,746 (633,229) (1,084,135)Other timing differences (232,664) 96,904 243,280Other permanent differences (395,272) - -Net difference betweenstandard rate of tax andsmall company rate - (17,467) (2,071) ----------- ---------- -----------Total current tax charge(note 7a) - 262 3,887 ----------- ---------- ----------- 8. Dividends and appropriations Six months Six months ended ended 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- ----------- Dividend appropriations on£1 preference shares - 4 7Dividends/dividendappropriations on £1convertible participatingpreference shares 12,796 34,267 66,735 ----------- ---------- ----------- 12,796 34,271 66,742 ----------- ---------- ----------- Dividends on the Company's convertible participating preference shares werecalculated on a basis to give a constant rate of charge on the nominal value ofsuch shares until their conversion immediately prior to the admission of theCompany's ordinary shares to AIM as described in note 14. Please see note 18 in respect of the declaration of dividends after 30 November2005. 9. Earnings per share Six months ended Six months ended (as restated) 30 November 30 November Year ended 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ---------- -----------Retained profit for thefinancial period 655,100 1,539,317 2,042,951Adjustment (See note a) 12,796 34,267 66,735 ----------- ---------- -----------Retained profit for theperiod adjusted forappropriations ofdividends on non-equityshares 667,896 1,573,584 2,109,686 Number Number Number ----------- ---------- ----------- Weighted average numberof ordinary shares usedfor calculating basicearning per share (seenote b) 84,509,607 59,774,032 60,568,411Potentially dilutiveshares arising fromshare options (see note c) 2,089,602 7,768,908 7,890,523 ----------- ---------- -----------Used for calculatingdiluted earning per share 86,599,209 67,542,940 68,458,934 Pence Pence Pence ----------- ---------- ----------- Basic earnings per share 0.79 2.62 3.48Diluted earnings per share 0.77 2.31 3.08 ----------- ---------- ----------- Details of the restatement in respect of the earnings per share figures aregiven in note 2. Note a: Adjustment relates to non-equity dividend/dividend appropriations on theCompany's £1 convertible participating preference shares which were convertedinto ordinary shares immediately prior to the admission of its ordinary sharesto AIM as described in note 14. Note b: Includes number of shares arsing from conversion of the Company's £1convertible participating preference shares which were converted into ordinaryshares immediately prior to the admission of its ordinary shares to AIM asdescribed in note 14. Note c: For the six months ended 30 November 2004 and the year ended 31 May2005, the share price used to determine the number of potentially dilutiveshares arising from share options was 54p per share - i.e. the price at the timeof admission to AIM. The average share price for the six months ended 30November 2005 has been used to calculate the number of potentially dilutiveshares arising from share options in the period ended 30 November 2005. 10. Debtors 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- -----------Amounts falling due within one year:Trade debtors 1,987,458 3,898,282 3,399,174Other debtors 70,748 4,055 28,705Prepayments and accrued income 5,220,334 3,428,775 4,078,937Deferred tax asset (see below) 1,079,477 1,093,947 812,005 ---------- ----------- ----------- 8,358,017 8,425,059 8,318,821 ---------- ----------- ----------- Prepayments and accrued income as at 30 November 2005, 30 November 2004 and 31May 2005 include amounts of £4,804,391, £3,089,484 and £3,592,329 in respect ofrevenue that has been recognised by the Company but which had not been invoicedto the customer as at the period end. The balance as at 30 November 2005reflects an additional £232,000 recognised following a review by management withthe corresponding amount included in turnover for the six month period thenended. Of the total amount of accrued income as at 30 November 2005, 30 November2004 and 31 May 2005, £1,904,788, £1,224,009, and £1,923,372 respectively weredue after more than one year at the end of each of the financial periods. Deferred tax asset 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ----------- Balance at start of period 812,005 1,230,00 1,230,000Credited/(charged) to theprofit and loss account (note 7a) 267,472 (136,05 (417,995) ---------- ----------- -----------Balance at end of period 1,079,477 1,093,947 812,005 ---------- ----------- ----------- 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- -----------Deferred tax recognised comprises:Accelerated capital allowances (86,741) (132,388) (110,131)Unutilised tax losses 1,153,802 1,127,631 677,056Short term timingdifferences - 95,618 241,994Other 12,416 3,086 3,086 ---------- ----------- -----------Deferred tax asset (net) 1,079,477 1,093,947 812,005 ---------- ----------- ----------- The Company had no unrecognised deferred tax as at the end of each of thefinancial periods above 11. Creditors - Amounts falling due within one year 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ----------- Bank loans and overdrafts 414,887 1,248,535 12,762Financing loans 972,091 895,796 933,163Trade creditors 266,672 347,935 736,030Other taxation and social security 759,556 1,015,149 1,311,804Proposed dividends - - 166,923Corporation tax 4,796 1,171 4,796Accruals and deferred income 1,107,542 628,998 1,149,394 ---------- ----------- ----------- 3,525,544 4,137,584 4,314,872 ---------- ----------- ----------- 12. Creditors - Amounts falling due after more than one year 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ----------- Financing loans 1,024,511 1,996,668 1,520,488 ---------- ----------- ----------- 13. Provisions for liabilities and charges 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ---------- ----------- ----------- Dilapidations provision 65,648 49,700 54,536UITF 25 provision 32,035 40,797 179,359 ---------- ----------- ----------- 97,683 90,497 233,895 ---------- ----------- ----------- 14. Called up share capital Authorised 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) Number £ Number £ Number £ -------- -------- -------- -------- -------- -------- 1p ordinary shares 405,000,000 4,050,000 65,000,000 650,000 65,000,000 650,000£1 convertibleparticipatingpreference shares - - 3,400,000 3,400,000 3,400,000 3,400,000£1 Preference shares - - 71,000 71,000 71,000 71,000 -------- -------- --------At end of period 4,050,000 4,121,000 4,121,000 -------- -------- -------- Allotted, called up and fully paid 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) Number £ Number £ Number £ -------- -------- -------- -------- -------- --------1p ordinary sharesAt beginningof period 38,863,080 388,631 38,863,080 388,631 38,863,080 388,631Allotments in period 49,596,279 495,963 - - 2,605,253 26,053 -------- -------- -------- -------- -------- --------At end of period 88,459,359 884,594 38,683,080 388,631 41,468,333 414,684 -------- -------- -------- -------- -------- --------£1 convertibleparticipatingpreference sharesAt beginningof period 3,335,999 3,335,999 3,335,999 3,335,999 3,335,999 3,335,999Conversion inthe period (3,335,999) (3,335,999) - - - - -------- -------- -------- -------- -------- --------At end of period - - 3,335,999 3,335,999 3,335,999 3,335,999 -------- -------- -------- -------- -------- --------£1 Preference sharesAt beginning of period 71,000 71,000 71,000 71,000 71,000 71,000Redemption inthe period (71,000) (71,000) - - - - -------- -------- -------- -------- -------- --------At end of period - - 71,000 71,000 71,000 71,000 -------- -------- -------- -------- -------- --------Total share capital 884,594 3,795,630 3,821,683 -------- -------- -------- Changes to share capital prior to admission to AIM Immediately prior to the first admission of the Company's ordinary shares to AIMon 28 June 2005 each convertible participating preference share converted into6.27 1p ordinary shares and 93.73 1p non-voting deferred shares. The cumulativeunpaid dividend of £179,596 on the Company's convertible participatingpreference shares was also settled through this conversion mechanism and thecorresponding entry has been credited to the share premium account. Immediately following the conversion the Company repurchased the non-votingdeferred shares for nil consideration, cancelled them and re-designated theunissued non-voting deferred shares as 1p ordinary shares. The Company's redeemable preference shares were redeemed at par, plus thecumulative unpaid dividend, three business days after the admission of theCompany's ordinary shares to AIM. Placing of shares and admission to AIM The first tranche of the Company's 1p ordinary shares were admitted to tradingon AIM on 28 June 2005 following the placing of 7.2m such shares at a price of54p per share. A second admission of 11.1m ordinary shares of 1p each occurredon 29 June 2005 also at a placing price of 54p per share. 15. Share premium account and reserves Share Capital Own shares premium redemption Special held Profit and account reserve reserve in trust loss account £ £ £ £ £ --------- --------- --------- --------- --------- As at 1 June 2004 3,774,613 134 - - (4,967,463)Retained profit forthe period - - - - 1,539,317Credit on appropriationof non-equity dividends - - - - 34,271UITF17 charge on repricing/grant of share options - - - - 318,725 --------- --------- --------- --------- ---------As at 30 November 2004 (unaudited) 3,774,613 134 - - (3,075,150) --------- --------- --------- --------- ---------Retained profit forthe period - - - - 503,634Credit on appropriationof non-equity dividends - - - - 32,471UITF17 charge on grant of share options - 487,920Premium on 1p ordinaryshares issued 112,309 - - - -Transfer on capitalreduction (see below) (3,886,922) - 864,522 - 3,022,400Additional transfer on capital reduction(see below) - - 443,974 - (443,974)Accrual for non-equitydividends previouslyappropriated - - - - (166,923) --------- --------- --------- --------- ---------As at 31 May 2005 (audited) - 134 1,308,496 - 360,378 --------- --------- --------- --------- --------- Retained profit forthe period - - - - 655,100Credit arising on conversion of the Company's £1 convertibleparticipating preference shares - 3,126,889 - - -Premium arising onsettlement of accrueddividend (see note 14) 179,596 - - - -Premium on 1p ordinaryshares issued 10,798,920 - - - -Issue costs (1,354,461) - - - -Release of specialreserve (see below) - - (1,308,496) - 1,308,496Employee benefits trust - - - 1,235,381 - --------- --------- --------- --------- ---------As at 30 November 2005 (unaudited) 9,624,055 3,127,033 - 1,235,381 2,323,974 --------- --------- --------- --------- ---------Capital reduction and transfer of special reserve An amount of £3,886,922 was standing to the credit of the Company's sharepremium account as at 31 January 2005 representing the aggregate of premiums atwhich shares of the Company have been issued. This amount could not bedistributed by way of dividend but, with the approval, by special resolution, ofthe Company's shareholders in a general meeting and an order of confirmation ofthe High Court, it would be available to eliminate the deficit on the Company'sprofit and loss reserve, and hence enable the Company to re-register as a publiccompany in advance of its admission to AIM. Accordingly, on 4 April 2005 the directors made an application to the Court toreduce the amount standing to the credit of the share premium account of£3,886,922 to £nil, which would result in the elimination of the deficit by thetransfer of £3,022,400 to the profit and loss account and £864,522 to a specialnon-distributable reserve, in accordance with the instructions of the Court. In order to obtain the requisite confirmation from the Court for the reductionof the share premium account, the Company furnished the Court with the requiredundertakings to provide assurance in respect of the protection of the interestsof the Company's creditors, which included the transfer of such profits earnedby the company between 1 February 2005 and the effective date of the capitalreduction to the afore-mentioned special reserve. Profits earned by the Companyduring this period amount to £443,974. The Court order specified that the Company would be able to reduce the amountcredited to the special reserve equivalent to any increase in its paid up sharecapital or its share premium account arising from new consideration.Accordingly, the Company transferred £1,308,496 from the special reserve to theprofit and loss reserve following the placing and admission of its ordinaryshares to AIM. Own shares held in trust The System C Healthcare plc Employee Benefit Trust (the "Trust") holds 2,287,741ordinary shares of 1p each with a cost of £1,235,381 and a market value as at 30November 2005 of £1,092,396. The Trust acquired these shares at 54p each on theplacing and admission of the Company's ordinary shares to AIM. The Trust used the funds loaned to it by System C Healthcare plc to meet theobligations under the various share option schemes that the Company operates.Share options are granted to the employees at the discretion of the Company andshares are awarded to employees by the Trust in accordance with the wishes ofSystem C Healthcare plc. The loan provided to the Trust will be repaid from theproceeds payable by employees to exercise share options that have been grantedto them. 16. Reconciliation of movements in shareholders' funds Six months ended Six months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ----------- ---------- Profit for the financial period 667,896 1,573,588 2,109,693Dividends and appropriations (12,796) (34,271) (66,742) ----------- ----------- ----------Retained profit for thefinancial period 655,100 1,539,317 2,042,951 Credit arising on appropriation in respect of non-equity shares - 34,271 66,742Accrual for appropriatednon-equity dividends - - (166,923)UITF 17 charge on grant ofshare options - 318,725 806,645Proceeds from equityshares subscribed at par 260,800 - 26,053Premium on new share capital subscribed (net of issue costs) 9,624,055 - 112,309Own shares held in trust (1,235,381) - -Redemption of preference shares (71,000) - - ----------- ----------- ----------Net increase in shareholders' funds 9,233,574 1,892,313 2,887,777Opening shareholders' funds 5,490,691 2,602,914 2,602,914 ----------- ----------- ----------Closing shareholders' funds 14,724,265 4,495,227 5,490,691 ----------- ----------- ---------- Analysis of shareholders' funds 30 November 30 November 31 May 2005 2005 2004 (unaudited) (unaudited) (audited) £ £ £ ----------- ----------- ----------Equity shareholders' funds 14,724,265 950,937 1,909,093 ----------- ----------- ----------- £1 preference shares - 71,000 71,000 ----------- ----------- ----------- Cumulative appropriations in respect of £1 preference shares - 120 123 ----------- ----------- ---------- 71,120 71,123- £1 convertible participating preference shares - 3,335,999 3,335,999 ----------- ----------- ----------- Cumulative appropriations in respect of £1 preference shares - 137,171 174,476 ----------- ----------- ---------- - 3,473,170 3,510,475 ----------- ----------- ----------Non-equity shareholders' funds - 3,544,290 3,581,598 ----------- ----------- ----------Total shareholders' funds 14,724,265 4,495,227 5,490,691 ----------- ----------- ---------- 17. Analysis of net funds/(debt) 30 November 30 November 2005 2004 31 May 2005 (unaudited) (unaudited) (audited) £ £ £ ----------- ----------- ----------Cash at bank and in hand 9,450,289 332,261 1,223,242Bank overdraft (414,887) (1,248,535) (12,762) ----------- ----------- ----------Net cash/(overdraft) 9,035,402 (916,274) 1,210,480 Financing loans due withinone year (972,091) (895,796) (933,163)Financing loans due inmore than one year (1,024,511) (1,996,668) (1,520,488) ----------- ----------- ----------Net funds/(debt) 7,038,800 (3,808,738) (1,243,171) ----------- ----------- ----------18. Post balance sheet events On 17 January 2006, the directors declared an interim dividend for the periodended 30 November 2005 of 0.11p per ordinary share. This interim dividend hasnot been reflected in the profit and loss account to 30 November 2005 inaccordance with the requirements of FRS 21 as the requisite approvals had notbeen obtained at that date. The directors expect that the dividend will be paidon 14 March 2006. Independent review report to System C Healthcare plc IntroductionWe have been instructed by the company to review the financial information forthe six months ended 30 November 2005 which comprises the summarised profit andloss account, summarised balance sheet information as at 30 November 2005,summarised cash flow statement and the related notes. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the AIM rules.The accounting policies are consistent with those that the directors intend touse in the preparation of the next annual financial statements.The maintenance and integrity of the System C Healthcare plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. Legislation in the UnitedKingdom governing the preparation and dissemination of financial information maydiffer from legislation in other jurisdictions. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the company for the purposeof compliance with the AIM rules and for no other purpose. We do not, inproducing this report, accept or assume responsibility for any other purpose orto any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 November 2005. PricewaterhouseCoopers LLPChartered AccountantsGatwick25 January 2006 This information is provided by RNS The company news service from the London Stock Exchange