For immediate release
20 March 2006
STATPRO GROUP PLC
(“StatPro” or the “Group”)
Preliminary Results for the Year ended 31 December 2005
StatPro Group plc, the AIM listed provider of portfolio analytics solutions for the global asset management industry, announces its preliminary results for the year ended 31 December 2005.
Year ended Year ended Change 31 December 31 December 2005 2004 Turnover £10.79 million £9.07 million +19% Profit before tax £1.64 million £0.90 million +83% Basic earnings per share * 4.6p 7.5p -39% Adjusted earnings per share (note 7) 4.6p 3.4p +35% Dividend per share - final and total proposed for year 0.5p - n/a
* includes exceptional deferred tax credit in 2004 of 4.4p per share (note 7)
- Recurring annualised software revenue up by 20% to £10.10 million (2004: £8.41 million)
- Recurring software revenue in the year of £9.13 million (2004: £7.49 million) represents 85% of total revenue (2004: 83%)
- Successful acquisition of Delve Limited, a supplier of enterprise reporting solutions in July 2005
- Strong free cash flow (cash generated from operations less internally generated intangible assets) of £1.42 million (2004: £1.46 million) * Year end 2005 net cash position doubled to £1.82 million (2004: £0.90 million)
- Maiden dividend as a public company of 0.5p per share (final and total for year) proposed (2004: nil)
The AIM rules require AIM listed companies to adopt International Financial Reporting Standards (‘IFRS’) commencing on or after 1 January 2007 at the latest. The Board has decided to adopt IFRS early in 2005 in order to follow best practice. Therefore, these preliminary results are being reported, and the comparative results for 2004 have been restated, under IFRS.
Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: ‘We believe that 2006 will be another year of solid progress for StatPro. We have our largest ever pipeline of prospects, and a large and growing number of clients to service with our broadest ever range of existing and new products. Market conditions are the best for a number of years, and although volatile, are currently supported by new regulations, which are a major market driver for us. The fixed income market also presents an excellent opportunity and product demand plays to our strengths.’
– Ends –
For further information, please contact:
StatPro Group plc
|Justin Wheatley, Chief Executive||020 8410 9876|
|Andrew Fabian, Finance Director|
Arbuthnot Securities Limited
|Tom Griffiths/Neil Kirkton||020 7012 2000|
|Reg Hoare||020 7360 4900|
A briefing for analysts will be held at 9.15 for 9.30am today at the offices of Smithfield, 10 Aldersgate Street, London, EC1A 4AH
Notes to Editors:
StatPro Group plc is a leading provider of portfolio analytics solutions for the global asset management industry. StatPro floated on the London Stock Exchange in May 2000 and transferred its listing in June 2003 to AIM. StatPro has grown its revenue from continuing operations from £1.8 million in 1999 to £10.8 million in 2005.
CHIEF EXECUTIVE’S REVIEW
In 2005 StatPro delivered its best financial performance ever. Revenues have grown by 19% to £10.79 million (2004: £9.07 million) and more importantly operating profit has risen by 64% to £1.66 million (2004: £1.02 million). As stated in our interim report, we are aiming to achieve 20% net operating margin over the next few years as we benefit from the operational gearing of the business; the net operating margin has already improved markedly in 2005 with an increase to 15.4% from 11.2% in 2004. The rate of software sales has increased and 2006 has started with a strong new business pipeline. This is undoubtedly due to the fact that we are now able to offer our existing and potential clients a broader range of analytical products.
We continue to seek to build long term relationships with our clients and, at the end of 2005, 53% of our contracts now extend for more than one year, representing an increase from 44% in 2004. 85% of revenues are recurring and the annualised value of software contracts has risen to £10.10 million at the end of 2005 from £8.41 million at the end of 2004.
Acquisition of Delve
On 1 July 2005 we acquired Delve Ltd., a business that provides an enterprise reporting solution (SER) for asset managers. The annualised recurring revenue acquired with Delve was £0.17 million from 7 clients; at the end of December 2005 this had increased to £0.27 million from 9 clients. In the first quarter of 2006, we have signed new contracts for SER with several more clients. We believe that we will increase sales of SER during 2006 as we market the product to our client base and prospects. It is clear that being able to offer a high quality reporting solution for our clients is seen as a very beneficial offering by them.
Existing clients accounted for around half of new sales of software products by value thus underlining the importance of our cross-selling strategy. Once again sales were strongest in continental Europe, with Germany and Italy achieving a particularly strong growth. The UK had a positive year with sales performing strongly in the second half. Performance in the US was weak in 2005 although a number of key deals were achieved. However, sales in the US in the first quarter of 2006 have improved and we expect this to continue for the rest of the year.
New business in 2005 was led by our Risk product, SRM, which is performing strongly as a result of increased regulation in Europe. Recurring revenue relating to SRM amounted to £1.60 million at the end of December 2005, up from £0.93 million in 2004. We have also made good progress with SRM in the first quarter of 2006 and the pipeline continues to grow. We launched our new product, StatPro Fixed Income (SFI), in January 2006, but prior to the formal launch, we undertook stringent test trials for six months with various clients. The result is that at the start of 2006 we already have a number of clients contracted for SFI with annualised revenues amounting to £0.28 million. We believe that there is significant demand for a fixed income attribution system that can assist bond managers model their portfolios and analyse performance according to their chosen investment strategy. We believe that based on market feedback from the UK, continental Europe and the US, SFI meets that demand and we are therefore confident that we will see good SFI revenue growth in 2006.
Revenues from StatPro’s original core products, StatPro Performance & Attribution (SPA) and StatPro Composites (SC), are also growing, but at more modest levels. It is becoming clear that many potential clients are interested in buying products from just one provider and the combination of supplying SFI or SRM, with SPA and SC is very compelling. Our new product range will also help us win clients with legacy performance systems who need a catalyst to make the change from one system to another.
Sales of professional services also improved in 2005 increasing to £1.40 million (2004: £1.21 million). We anticipate that professional services will continue to grow in 2006, especially related to SER projects, where there is demand from clients for consulting services to configure reports and websites.
Our strategy continues to be to build strong client relationships with asset managers and increase the number of products used by each client. We have preferred to acquire new products and invest in them, rather than develop from scratch as we have felt that this reduces our risk and also brings us critical expertise in the domain of each product.
It is also clear that StatPro now has a very strong team of professionals at all levels within the business. Our expertise in analytics is now widely recognised and a number of our team have written and published books and articles on a wide range of industry topics. We continually seek to improve our offering on analytics and try to solve challenging problems faced by the industry in an efficient way. We believe that by demonstrating our expertise to our clients, coupled with excellent products and service, we will be able to build a very strong and profitable business.
We intend to continue our strategy of making small tactical acquisitions but we are also considering larger opportunities, that might enable us to extend our product portfolio or to increase our critical mass in certain markets, such as North America. Our criteria for acquisitions is that they should enhance shareholder value.
We are very pleased to be able to propose our maiden dividend as a public company of 0.5p per share to be paid on 31 May 2006. Our strong cash generation over the last few years has made this possible so that our balance sheet is now markedly stronger than it was a few years ago.
Going forward we intend to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and the growth in underlying cash and earnings per share.
We expect that 2006 will be another year of solid progress for StatPro. We have our largest ever pipeline of prospects, and a large and growing number of clients to service. Market conditions are the best for a number of years, and although volatile, are currently supported by new regulations (such as Sarbanes-Oxley and UCITS III), which are a major market driver for us. The fixed income market also presents an excellent opportunity and product demand plays to our strengths.
None of this is possible without the dedication and excellence of our employees and I would like to thank them once again for another year of hard work and I look forward to even better results in 2006.
The rules of the Alternative Investment Market of the London Stock Exchange (‘AIM’) require AIM listed companies to adopt International Financial Reporting Standards (‘IFRS’) for accounting periods beginning on or after 1 January 2007 at the latest. The Board decided to adopt IFRS early during 2005 in order to follow best practice. Therefore, these results for 2005 are being reported, and the comparative results for 2004 have been restated, under IFRS. The primary standards that impact the results are as follows:
- IFRS 3, Business combinations and IAS 36, Impairment of assets (resulting in goodwill being ‘frozen’ with effect from 1 January 2004 and no longer being amortised but subject to annual impairment reviews)
- IAS 38, Intangible assets (resulting in certain software development costs being capitalised and amortised over the expected useful life of the development)
- IFRS 2, Share-based payment (resulting in costs being attributed to the value of share options issued to employees)
The impact of these changes compared with the accounting treatment under UK GAAP is summarised in note 1. Further information on the effects of IFRS is included within the relevant commentary within this financial review.
The improved level of new business achieved in the first half of 2005 and reported on at the time of the interim results, continued into the second half of 2005. The combination of higher new licence revenues over the past twelve months, a higher customer retention rate, and an increase in professional services, resulted in revenue increasing by 19% (18% before the impact of the acquisition) over 2004. The Group increased its operating profit by 64% to £1.66 million (2004: £1.02 million) and by 73% before the impact of the acquisition. The net cash position doubled to £1.82 million at the end of 2005 (2004: £0.90 million). The Group repaid all its remaining bank debt amounting to £1.20 million during the first two months of 2005 (whilst retaining its loan facility of £1.50 million).
The balance sheet was restructured during the year: the warrants issued as part of the original flotation of the Company in 2000 were restructured raising £0.52 million (net of costs) and reducing the potential future dilution of earnings per share. Following a capital restructuring, the share premium account has been used to offset the deficit on the profit and loss account in the Company balance sheet, thus allowing dividends to be paid out of future profits. As a result the Group is in a very robust financial position and the directors have proposed StatPro’s maiden dividend as a public company.
StatPro has maintained its record of growing revenue each year since its flotation in 2000 and the growth rate has picked up in 2005 to 19% (2004: 8%) including the contribution from the acquisition of Delve of 1%. The impact of exchange rates on turnover and profit was immaterial in the year. Group turnover increased to £10.79 million (2004: £9.07 million). Software licence revenue grew by 22% to £9.13 million (2004: £7.49 million) and represents 85% (2004: 83%) of annual turnover. The level of professional services revenues of £1.40 million was up by 16% compared to the prior year (2004: £1.21 million). Whilst around half of new licence revenue was from new clients, the proportion of consulting for new clients was higher at around 70% (2004: 30%) as a result of an increase in professional fees related to new projects. As anticipated, there was a further reduction in other recurring revenues from TAP royalties (StatPro’s original product, which has no associated costs of delivery) by 30% to £0.26 million (2004: £0.37 million).
The split of revenue by type was as follows:
Year to Year to Growth 31 December 31 December year on 2005 2004 year £ million £ million % Turnover Software licences 9.13 7.49 +22 Professional services 1.40 1.21 +16 TAP royalties 0.26 0.37 -30 10.79 9.07 +19 ----------------- -------- ------- ------
The annualised recurring revenue from software licences at the end of December 2005 grew to £10.10 million (2004: £8.41 million), an increase of 20% year on year (16% before impact of acquisition and at constant exchange rates). New contracts, net of cancellations, amounted to £1.54 million (2004: £1.08 million) of which £0.17 million relates to contracts that were acquired with Delve. Overall, foreign exchange movements resulted in an increase of £0.15 million (2%) in the revaluation of the net value of contracts to the 2005 year-end rates compared with the 2004 year-end rates, mainly due to a strengthening US dollar at the end of 2005.
Annualised Growth rate value (excluding contracts acquired New contracted Contracts Net and at At 31 revenue (net acquired with impact of At 31 constant December of Delve exchange December exchange 2004 cancellations) acquisition rates 2005 rates) £ million £ million £ million £ million £ million % Recurring revenues Software licences 8.41 1.37 0.17 0.15 10.10 +16 ------------- ------- ------- ------- ------- -------- ----------
The proportion by value of recurring software licences on multi-year contracts (licence agreements with more than one year remaining contractually committed) increased to 53% at the end of 2005 from 44% at the end of 2004. We now have 33 (2004: 28) client groups each subscribing more than £100,000 per annum, of which 21 (2004: 18) subscribe more than £150,000 per annum.
The vast majority of our contracts are on a distributed software basis. However, we have concluded a number of strategic contracts in 2004 and 2005 with, for example, custodian banks for hosted solutions or performance measurement bureau services, which generate revenue depending on the number of portfolios processed. Whilst the recurring revenue from these contracts is currently modest, we expect this segment of our business to grow over the coming years.
The range of products in our current offering has been greatly enhanced in the last two years with the addition of StatPro Risk Management (‘SRM’), StatPro Fixed Income (‘SFI’) and StatPro Enterprise Reporting (‘SER’). The directors believe that these products have an even larger market potential than the products that have hitherto been the core revenue for the Group, namely StatPro Performance and Attribution (‘SPA’) and StatPro Composites (‘SC’).
There was an increase in the average number of employees during the year as a result of both organic growth and acquisitions from 85 to 98. We have recruited people in all the regions in which we operate in order to strengthen our client services team in line with increased sales. During the year we opened an office in San Francisco to service our growing client base on the west coast of the US. The increased average number also reflects the full year effect of the acquisition of SiSoft (four people), and the impact of the employees joining with Delve (six people). We ended 2005 with 105 employees situated in nine offices (London, Paris, Milan, New York, San Francisco, Frankfurt, Luxembourg, Cape Town and Brisbane).
Operating expenses (before amortisation of intangibles and exceptional item) increased by 12% to £7.97 million (2004: £7.09 million). Around two thirds of our cost base relates to headcount and the average number of staff outlined above is the main driver of the cost increase compared to 2004. The operating expenses relating to Delve, for the six-month period following its acquisition in July 2005 amounted to £0.21 million. Additional costs associated with the provision of the risk data service to our increased client base, together with the costs of the opening of our San Francisco office, also had an impact. Nevertheless, the average cost per person (before the effect of capitalisation and amortisation of intangible development costs) was virtually unchanged year on year.
Share based payments
In common with many high-growth technology enterprises, StatPro has issued a number of share options to executives and employees. Under IFRS, the options must be valued based on a market or estimated market value at inception and this cost is spread over the option vesting period (generally three years). As there is no readily available market price for the options the Board has used an independent model to evaluate the fair value of the options. There are a number of assumptions which affect the value and the Board has considered carefully these assumptions in order to derive an appropriate charge for the cost of options. As a result there is a charge of £0.06 million (2004: £0.03 million) relating to share based payments. There is no cash impact to the Group as a result of this new accounting standard.
Investment in research and development
The Group continues to increase its investment in research and development, partly as a natural consequence of our increased product offering; our strategy is to ensure we provide high value portfolio analytics solutions. In the last six years we have invested around 21% of our revenue on research and development. Development costs, which were previously written off under UK GAAP, are now capitalised under IFRS, where the recognition criteria are met. As a result there is now an intangible asset (including acquired software) amounting to £2.31 million (2004: £1.62 million) recognised on the Group’s balance sheet relating to the carrying value of previous developments where the Board expects the benefits to be recovered through incremental revenue from future sales. The Board has decided to amortise its development expenditure over a three year period as this is the period that the directors expect the benefits to arise from the investments in intangibles. The amortisation of intangibles amounted to £1.15 million in 2005 (2004: £0.88 million). The carrying values, which are analysed by product, are considered carefully by the Board and if there has been any impairment in any development costs then the carrying value is written down accordingly.
Under IFRS, goodwill on acquisitions has been ‘frozen’ with effect from 1 January 2004 and is no longer amortised but subject to annual impairment reviews. Goodwill on acquisitions since 1 January 2004 is reviewed and allocated to its underlying intangible components. As a result £0.16 million of goodwill for our investment in SiSoft and Delve has been categorised as software product costs and amortised over a three year period. Goodwill arising on acquisitions prior to 1 January 2004 has been reviewed and to the extent that some of the goodwill would now be deemed to be development costs under IFRS then a reduction to the previously reported goodwill has been made and an equivalent increase in the value of intangible assets (development costs) applied. These adjustments result in corresponding adjustments to the goodwill carrying value at 1 January 2004 and the amortisation of intangibles since that date. As a result there is no amortisation of goodwill in the restated accounts for 2004 or 2005. Under UK GAAP, the goodwill amortisation would have amounted to £0.41 million (2004: £0.38 million).
Net interest expense, which results from interest accrued on the bank loans, including related financing costs, and finance leases, less interest earned on cash and deposits, reduced to £0.02 million (2004: £0.12 million) as a result of the cash generation and repayment of debt.
Profit before tax
The profit before taxation grew by 83% to £1.64 million (2004: £0.90 million). The adjusted earnings before interest, tax, depreciation, amortisation of intangibles and exceptional items, (‘EBITDA’), a performance measure previously reported under UK GAAP, amounted to £1.34 million (as shown in note 4) in 2005 (2004: £0.98 million).
There was a £0.05 million movement on deferred taxation which offset the current tax charge for the year, resulting in a nil tax charge overall for 2005 (2004: £1.44 million credit). An exceptional credit of £1.47 million for deferred tax was recognised in 2004 relating to group tax losses. The Group level of deferred tax recognised increased by £0.05 million in 2005 resulting in a carrying balance of £1.52 million at 31 December 2005 (2004: £1.47 million). In the opinion of the directors this deferred tax asset will be recoverable with reasonable certainty against tax on trading profits in future years and the level of the deferred tax balance is considered reasonable in the light of future probability of recovery of the whole amount of deferred tax. The recognised deferred tax asset amounts to 61% (2004: 53%) of the potential deferred tax asset for the Group. £0.32 million of deferred tax in 2004 has been reclassified as current deferred tax for comparability purposes.
Equity minority interests
The equity minority interests amounting to £0.07 million (2004: net loss of £0.16 million) relate to the minorities’ share of profits less losses for the year. £0.11 million has been transferred from minority interest to goodwill on the acquisition of the minority interest in StatPro Australia.
Earnings per share
Basic earnings per share amounted to 4.6p (2004: 7.5p). Earnings per share in 2004 benefited considerably from the deferred tax credit referred to above. Adjusted earnings per share before exceptional items were 4.6p (2004: 3.4p). Fully diluted earnings per share in 2005 were 4.5p (2004: 7.5p) based on potentially dilutive shares outstanding amounting to 426,591 (2004: 371,770).
The Group’s net assets increased to £3.03 million at 31 December 2005 from £0.74 million at 31 December 2004. The main drivers for the increased net assets were the profits attributable to equity shareholders of £1.57 million for the year and the net proceeds from shares issued of £0.55 million. The balance sheet includes deferred income of £6.56 million (2004: £5.37 million), which is a non-cash liability and has a significant adverse impact on the reported net asset position of the Group balance sheet.
Non-current and current assets
Goodwill arising during the year amounted to £2.35 million, the bulk of which related to the acquisition of Delve. Total capital expenditure amounted to £0.19 million in 2005 (2004: £0.17 million). Included within non-current assets is deferred tax of £1.03 million (2004: £1.16 million). The level of current assets (including current deferred tax) increased to £6.10 million (2004: £4.82 million). Increased new business resulted in an increase in trade debtors, the largest component of debtors, amounting to £3.09 million at the end of 2005 (2004: £1.99 million). Deferred tax included within current assets amounted to £0.49 million (2004: £0.32 million). The level of cash and cash equivalents reduced to £1.85 million (2004: £2.15 million).
Current and non-current liabilities
The main movements in creditors has arisen following the repayment of £1.20 million of bank debt in early 2005 and the recognition of an estimated £1.50 million deferred consideration arising on the acquisition of Delve, which is the directors’ current projection of the amount that will ultimately be due under the transaction. However, this amount is uncertain and the eventual payment may be higher or lower than this amount, subject to a maximum of around £3.45 million. The directors will review this estimate from time to time and adjustments, if any, will be made to the goodwill carrying value and the deferred consideration. The level of trade and other payables (excluding finance leases, corporation tax and deferred income) increased by 15% to £1.99 million (2004: £1.72 million).
Cash flow and financing
There was an improved cash generated from operations before investment in development activities during 2005 amounting to £3.16 million (2004: £2.72 million). The free cash flow (cash generated from operations less internally generated intangible assets) of £1.42 million (2004: £1.46 million), was marginally lower year on year (see note 5). The investment in acquisitions amounted to £0.86 million during the year, the bulk of which related to the initial cash consideration and associated costs for Delve.
The restructuring of the warrants resulted in a reduction of potential dilution to shareholders and the net proceeds amounted to £0.52 million. In combination with other exercises of employee options and shares issued under the Share Plan a total of £0.55 million of cash was received on issue of shares in 2005. The net cash position at 31 December 2005 was £1.82 million (2004: £0.90 million).
Share capital and reserves
The issued share capital amounted to £0.35 million (2004: £0.33 million) representing 35,049,744 shares of 1p nominal value (2004: 33,199,244) as a result of the issue of 1,850,500 shares during the year. Following the balance sheet restructuring the share premium account has been reduced to £0.89 million (2004: £8.56 million) and the warrant reserve virtually eliminated (2004: £0.42 million). The equity minority interests of £0.05 million (2004: £0.23 million) have been deducted in computing the total capital employed.
Following three years of cash generation and the balance sheet restructuring carried out in 2005, the directors now consider that the Company is in a sound position to pay its maiden dividend. As a result, the directors are proposing a final (and total) dividend for 2005 of 0.5p per share (2004: nil). Under IFRS, this dividend is not accrued in these financial statements. If approved by a resolution at the Annual General Meeting, it is intended to pay the dividend on 31 May 2006 to all shareholders on the register at the close of business on 28 April 2006. Going forward we intend to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and the growth in underlying cash and earnings per share.
Group income statement for the year ended 31 December 2005
Notes Year to Year to 31 31 December December 2005 2004 £'000 £'000 Group Turnover Continuing operations 10,666 9,072 Acquisition 120 - Total continuing operations 10,786 9,072 ------------------------- ------- ---------- ---------- Operating expenses before amortisation of intangibles and exceptional item (7,969) (7,087) Amortisation of intangibles (1,154) (877) Exceptional item 3 - (93) ------------------------- ------- ---------- ---------- Operating expenses (9,123) (8,057) ------------------------- ------- ---------- ---------- Continuing operations 1,752 1,015 Acquisition (89) - ------------------------- ------- ---------- ---------- Operating profit 1,663 1,015 Interest receivable 18 22 Interest payable (42) (139) Profit before taxation 1,639 898 Taxation (including exceptional deferred tax credit of nil (2004: £1,472,000)) 3 - 1,435 Profit for the year 1,639 2,333 Profit/(loss) attributable to minority interests 69 (163) Profit attributable to equity shareholders 1,570 2,496 1,639 2,333 Earnings per share from continuing operations - basic 7 4.6p 7.5p - diluted 7 4.5p 7.5p
Statement of recognised income and expense
Year to Year to 31 December 31 December 2005 2004 £'000 £'000 Profit after tax 1,639 2,333 Net exchange differences offset in reserves net of tax (81) (11) ------ ------ Total recognised income for the year 1,558 2,322 ------ ------ Attributable to: Minority interests 78 (163) Equity shareholders 1,480 2,485
Consolidated balance sheet at 31 December 2005
Notes As at As at 31 December 31 December 2005 2004 £'000 £'000 Assets Non-current assets Goodwill 3,053 708 Intangible assets 2,308 1,624 Property, plant and equipment 466 509 Other receivables 174 286 Deferred tax assets 1,032 1,155 ------ ------ 7,033 4,282 Current assets Trade and other receivables 3,759 2,350 Deferred tax assets 490 317 Cash and cash equivalents 1,853 2,149 ------ ------ 6,102 4,816 Liabilities Current liabilities Financial liabilities - borrowings (35) (40) Trade and other payables (1,987) (1,723) Current tax liabilities (26) (7) Deferred income (6,487) (5,289) ------ ------ (8,535) (7,059) Net current liabilities (2,433) (2,243) Non-current liabilities Financial liabilities - borrowings - (1,211) Deferred income (75) (85) Provisions - contingent consideration (1,500) - ------ ------ (1,575) (1,296) Net assets 3,025 743 ------ ------ Shareholders' equity Ordinary shares 350 332 Share premium 891 8,562 Warrant reserve 2 424 Retained earnings 1,832 (8,342) ------ ------ Total shareholders' equity 3,075 976 Minority interest in equity 6 (50) (233) ------ ------ Total equity 3,025 743 ------ ------
Group cash flow statement for the year ended 31 December 2005
Year to Year to 31 December 31 December 2005 2004 £'000 £'000 Cash flows from operating activities Cash generated from operations 3,155 2,717 Interest received 18 16 Interest paid (13) (99) Issue costs in respect of bank loan (5) (5) Tax paid (31) (44) ------ ------ Net cash from operating activities 3,124 2,585 ------ ------ Cash flows from investing activities Acquisition of/increased investment in subsidiaries (net of cash acquired) (858) 14 Investment in intangible assets - development costs (1,738) (1,261) Proceeds from sale of property, plant and equipment 22 - Purchase of property, plant and equipment (188) (175) ------ ------ Net cash used in investing activities (2,762) (1,422) ------ ------ Cash flows from financing activities Repayment of bank loan (1,200) (300) Repayment of convertible loan - (1,000) Proceeds from issue of ordinary shares 551 4 Capital element of finance lease payments (2) (7) ------ ------ Net cash used in financing activities (651) (1,303) ------ ------ Effects of exchange rate changes (7) (3) Net decrease in cash and cash equivalents (296) (143) Cash and cash equivalents at start of year 2,149 2,292 ------ ------ Cash and cash equivalents at end of year 1,853 2,149 ------ ------
Reconciliation of net cash flow to movement in net cash/(debt)
2005 2004 £'000 £'000 Decrease in cash and cash equivalents in the year (296) (143) Repayment on finance leases 2 7 Convertible loan repayment - 1,000 Bank loan repayment 1,200 300 Loan assumed on acquisition - (30) Other non-cash movements 14 (39) ------ ------ Movement in net cash 920 1,095 Net cash/(debt) at beginning of year 898 (197) ------ ------ Net cash at end of year 1,818 898 ------ ------
The difference between the net decrease in cash and cash equivalents reported above under IFRS and the amount reported under UK GAAP relates to the wider definition of cash and cash equivalents which under IFRS includes money market deposits.
Reconciliation of operating profit to net cash inflow from operating activities
2005 2004 £'000 £'000 Operating profit 1,663 1,015 Depreciation of tangible fixed assets 202 221 Amortisation of intangibles 1,154 877 (Increase)/decrease in debtors (1,254) 389 Increase in creditors (excluding deferred income) 193 38 Movement in deferred income 1,130 146 Share based payments 59 31 Net loss on disposal of fixed assets 8 - ------ ------ Net cash inflow from operating activities 3,155 2,717 ------ ------
Notes to the preliminary financial statements
1. Reconciliation between UK GAAP and IFRS
Reconciliation of profit before tax for the year under UK GAAP and IFRS
2005 2004 £000 £000 Profit before tax - UK GAAP 708 162 Investment in intangible assets - development 1,738 1,261 costs Amortisation of intangibles (1,154) (877) Amortisation of goodwill 406 383 Share based payments (59) (31) ------ ----- 931 736 ------ ----- Profit before tax - IFRS 1,639 898 ------ -----
Reconciliation of capital employed under UK GAAP and total equity under IFRS
2005 2004 £000 £000 Retained earnings - UK GAAP Opening position - UK GAAP (10,204) (11,953) Development costs - opening position 1,521 1,098 Goodwill - opening restatement 383 - Goodwill - fair value adjustment - - Intangibles - opening restatement (42) (3) ------- ------- Opening position - IFRS (8,342) (10,858) Total recognised income for the year 1,558 2,322 Credit in respect of share based payments 59 31 Gain from warrant conversion 66 - Transfer from share premium account/other reserve 8,560 - ------- ------- 1,901 (8,505) Minority interests (69) 163 ------- ------- Retained earnings - IFRS 1,832 (8,342) ------- -------
2. Turnover by destination
2005 2005 2005 2004 £'000 £'000 £'000 £'000 Continuing operations Acquisition Total Total United Kingdom 2,358 120 2,478 2,136 Continental Europe 5,559 - 5,559 4,557 North America 1,778 - 1,778 1,552 Rest of World 971 971 827 -------- ------ ------- ------- Total 10,666 120 10,786 9,072 -------- ------ ------- -------
3. Exceptional item. There were no exceptional items in 2005. The exceptional item of £0.09 million in 2004 relates to compensation for loss of office and related expenses. In 2004 there was an exceptional deferred tax credit of £1.47 million.
4. Adjusted earnings before interest, tax, depreciation, amortisation of goodwill (‘EBITDA’)
2005 2004 £'000 £'000 Profit before tax - UK GAAP 708 162 Add back: Interest 24 117 -------- ------ Operating profit - UK GAAP 732 279 Add back: Depreciation of tangible fixed assets 202 221 Amortisation of goodwill 406 383 Exceptional operating item - 93 -------- ------ EBITDA - UK GAAP 1,340 976 -------- ------
This additional information is being presented in order to assist the reader to understand the underlying performance of the Group.
5. Free cash flow – reconciliation from statutory heading to business performance measure
2005 2004 £'000 £'000 Cash generated from operations 3,155 2,717 Investment in intangible assets - development costs (1,738) (1,261) -------- ------ Cash generated from operations less internally generated intangible assets 1,417 1,456 -------- ------
6. Equity minority interests
Equity minority interests at the year end relating to minority interests in StatPro Italia and SiSoft were as follows:
2005 £'000 At 1 January 2005 233 Acquisition of remaining 49% of StatPro Australia Pty Ltd (105) Profit and loss account (69) Exchange differences (9) ------- At 31 December 2005 50 -------
7. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year as set out below.
Earnings per share - basic and diluted Weighted Weighted average Earnings average Earnings number of per number of per Earnings shares share Earnings shares share 2005 2005 2005 2004 2004 2004 £'000 '000 Pence £'000 '000 Pence Earnings per share - basic 1,570 34,211 4.6 2,496 33,115 7.5 Potentially dilutive shares - 427 (0.1) - 372 - Earnings per share - diluted 1,570 34,638 4.5 2,496 33,487 7.5
Adjusted earnings per share
Weighted Weighted average Earnings average Earnings number of per number of per Earnings shares share Earnings shares share 2005 2005 2005 2004 2004 2004 £'000 '000 Pence £'000 '000 Pence Earnings per share - basic 1,570 34,211 4.6 2,496 33,115 7.5 Effect of operating exceptional item - - - 93 - 0.3 Effect of deferred tax exceptional item - - - (1,472) - (4.4) Adjusted earnings per share excluding goodwill amortisation and exceptional items 1,570 34,211 4.6 1,117 33,115 3.4 Potentially dilutive shares - 427 (0.1) - 372 (0.1) Diluted earnings per share excluding goodwill amortisation and exceptional items 1,570 34,638 4.5 1,117 33,487 3.3 --------------- ------ -------- ------- ------- -------- ------
The adjusted earnings per share information has been provided in order to assist the reader to understand the underlying performance of the business on a comparable basis.
The directors are proposing a final (and total) dividend for 2005 of 0.5p per share (2004: nil). Under IFRS, this dividend is not accrued in these financial statements. If approved by a resolution at the Annual General Meeting, it is intended to pay the dividend on 31 May 2006 to all shareholders on the register at the close of business on 28 April 2006.
This announcement was approved by the Directors on 17 March 2006. The preliminary results for the year ended 31 December 2005 are unaudited. The financial information set out in the announcement does not constitute the Company’s statutory accounts for the years ended 31 December 2005 or 31 December 2004. The financial information set out in the announcement has been prepared on the basis of the accounting policies set out in the statutory accounts of StatPro Group plc for the year ended 31 December 2004 except that adjustments have been made to reflect changes in accounting standards from UK GAAP as a result of the introduction of IFRS. The financial information for the year ended 31 December 2004 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified.