StatPro Group PLC – Final Results

For immediate release
28 February 2005

STATPRO GROUP PLC

(“StatPro” or the “Group”)

Preliminary Results for the Year ended 31 December 2004

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 2004.

Year ended     Year ended     Change
                                                                            31 December    31 December
                                                                                   2004           2003

Turnover                                                                        £9.07 m        £8.43 m        +8%
Statutory Profit before tax                                                     £0.16 m        £0.15 m       +11%
Adjusted Profit before tax, amortisation and exceptional items (note 1)        
£0.64 m        £0.47 m       +37%
Basic earnings per share *                                                        5.3p           0.6p       +783%
Adjusted earnings per share (note 7)                                              2.3p           1.6p        +44%

* including exceptional tax credit (note 5)

Highlights

  • Recurring annualised software revenue up by 14% to £8.41 million (2003: £7.38 million)
  • Recurring software revenue for 2004 represents 83% of total revenue (2003: 79%)
  • Recurring annualised Risk product revenue up by 365% to £0.93 million (2003: £0.20 million)
  • Organic revenue in H2 2004 up 10% on H2 2003 and 13% on H1 2004
  • Further year of strong operating cash inflow:
  • Over £3.00 million inflow in the last two years enabling repayment of outstanding debt
  • Year end 2004 net cash position of £0.90 million achieved (2003: net debt £0.20 million)

Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: ‘There was a marked improvement in trading in the second half, leading to an overall improvement in underlying profits for the year as a whole. This trend has continued into 2005 supported by an encouraging order pipeline. With another year of strong operating cash generation expected, the Board is considering the payment of a maiden dividend for the current financial year.’

– Ends –

For further information, please contact:

StatPro Group plc

Justin Wheatley, Chief Executive 020 8410 9876
Andrew Fabian, Finance Director

Smithfield

Reg Hoare/Sara Musgrave 020 7360 4900

A briefing for analysts will be held at 9.15 for 9.30am today at the offices of Smithfield, 78 Cowcross Street, London, EC1M 6HE

High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk.

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 £9.1 million in 2004.

CHIEF EXECUTIVE’S REVIEW

Highlights of 2004

There was a marked improvement in trading in the second half of 2004, leading to an overall improvement in underlying profits for the year as a whole. This trend has continued into 2005 supported by an encouraging order pipeline. At the start of 2004 there was much activity from clients and prospects, but the rate of signing new business was similar to the level of the previous two years. However, by the third quarter of 2004, there was a pronounced improvement in all areas that continued through to the end of the year. The result was an increase in profitability and a strong operating cash inflow so that we ended the year with net cash of £0.90 million (2003: net debt £0.20 million). At the start of 2004 we repaid the £1.00 million convertible loan note and we reduced our bank debt by £0.30 million. Over the last two years we have generated more than £3.00 million of operating cash and we remain focused on improving this.

The annualised software revenue grew by 14% to £8.41 million. Two thirds by value of new software sales occurred in the second half with the result that the majority of this new revenue will be recognised in 2005. A key milestone is that our annualised recurring software revenues now exceed our recurring cash costs. Revenue from professional services was £1.21 million, slightly down from £1.24 million in 2003. However, there was a marked improvement from £0.46 million (2003: £0.58 million) in the first half to £0.75 million (2003: £0.66 million) in the second half of 2004. We remain focussed on improving the level of professional services revenues in 2005.

StatPro Risk Management (SRM)

During the course of 2004 StatPro invested in the marketing of its StatPro Risk Management system (SRM) as a credible alternative to other well-established suppliers. When we invested in Riskmap in October 2003, the business had two main Italian clients; we have since increased this to 15 during 2004 including some of the largest asset managers in the world. As a result, annualised revenues from SRM have increased from £0.20 million to £0.93 million by 31 December 2004.

The market place for risk products is significantly larger than that for performance measurement. Although there are a number of established competitors in this field, the market place for risk products is changing rapidly in the asset management sector. The prime driver for this is a raft of new regulation to control the use of derivative products. Traditional asset management risk systems focus on tracking error risk, with a bias towards equities. Often, these systems are not adapted to deal with assets that have complex risk profiles, such as derivatives. The result has been that asset managers have turned to the banking sector to find systems that can analyse derivatives. However, most banking sector systems are not adaptable to asset management analysis and can be extremely expensive.

SRM, which has its origin in the banking sector, has been adapted to the asset management sector, and uses a historical simulation model that can analyse the risk of any type of asset. Importantly, we are able to market the system at a price that is within the typical asset manager’s budget, as well as help them comply with local regulations. In Germany for instance, the new directive on risk (based on UCITS III) requires asset managers to compute the Value at Risk (VaR) for each portfolio and to publish this measure on a monthly basis, and one of our clients was the first German asset manager to achieve compliance with these regulations.

Regulatory organisations in other countries (including Austria, France, Ireland, Italy, Luxembourg and the Netherlands) have already published, or are about to publish, rules governing distribution of products with derivatives. Although regulations in each country may vary, the basic requirement is to calculate and publish VaR for all public portfolios and to use risk models that have comprehensive asset coverage. Whilst these developments are at an early stage, we believe that their impact represents a major opportunity for StatPro. In addition to regulation, the general increase in use of complex derivatives and greater interest in alternative asset and absolute return strategies means that we anticipate further demand for SRM in countries even where no new risk regulation is currently planned.

Regional Performance and Outlook

Owing to the demand for risk systems, continental Europe was the largest contributor to new business in 2004 with 58% by value of new business. New software contracts in the UK and US were at similar levels with both markets picking up more in the second half. However, we signed two important contracts in the last quarter of 2004 that should provide opportunities to grow our business beyond our current market focus. One deal is with a US based provider of outsource solutions to the private banking sector. This client will use the StatPro Performance & Attribution system (SPA) to provide multi-currency attribution analysis for their own clients, and our revenue is expected to grow as we are charging on a per portfolio basis. Similarly, we have been selected by the UK custodian of a US-based tier one investment bank to provide performance measurement and risk analysis on a bureau service basis to their clients; this is also charged per portfolio. We are currently in discussion with a number of other organisations that recognise StatPro’s expertise in portfolio analytics and are considering using our systems and services to supplement the services they currently offer. We believe that leveraging the larger distribution of such partners is efficient and will not compete with our traditional direct sales approach.

Products

In a competitive market it is important for a business to identify how it adds value. At StatPro our approach is to focus on making software that offers better and more sophisticated analysis than any other provider. The new multi-currency version of our StatPro Fixed Income attribution system (SFI) system will be launched later in 2005. Fixed income attribution is more complex than equity attribution as there are many more valid models compared to equity attribution analysis. If we are able to offer a system that provides the analysis bond fund managers require and can also scale up to deal with the significant quantity of data to be processed, then we believe we will have a system, which will prove to be unique in the market. Whilst we do not anticipate any material revenue generation this year from SFI, we believe that there will be solid demand for the system from many of our existing clients and prospects, which enhances the outlook for 2006.

We are making excellent progress with our new Composites Manager system. This is due to replace our market leading product StatPro Composites in early 2006. Composites Manager is an internet based product and the response we have received from clients who have seen early versions of it has been entirely positive. We are hoping to start beta tests in the fourth quarter.

Many clients, and particularly those in the US, require the ability to handle vast quantities of data. Therefore a key focus of our development efforts is to increase the speed of processing and capacity of each of our systems and we have already made significant advances in this area during 2004. The original version of SPA could manage only a few hundred portfolios. Now, the system can process tens of thousands of portfolios. SRM is already scalable, and we have one client which will be processing risk analysis on around 1.8 million portfolios in total per day.

Summary

Following three years of difficult market conditions we are seeing tentative signs of recovery but cannot yet be wholly confident that the market has turned. However, given the improved market conditions, the opportunities provided to us by new regulations in the EU, and the increase in new business in the second half of 2004, we feel positive about the outlook for 2005. Regardless of market conditions, we will continue to focus the business on steadily improving both profits and cash flow, whilst also investing for the future growth of the business. With around 40% of our staff working in product research and development, we are continuing to invest significantly in the future growth of the business.

Given two years of positive cash generation and in the light of more favourable business conditions, the Board is considering the payment of a maiden dividend for 2005.

I would like to offer all our staff my personal thanks for their excellent work in 2004. I believe the quality of the people that make up StatPro is exceptional due to the level of expertise in analytics and development and whilst this is an asset that does not show on the balance sheet, it is very valuable nonetheless.

Justin Wheatley
Chief Executive

OPERATING AND FINANCIAL REVIEW

Overview

StatPro has continued its record of growing revenue each half year since its flotation in 2000 and the business has generated over £3.00 million of operating cash flow during the past two years. The value of new software contracts signed in the second half of 2004 was more than twice the amount contracted in the first half of the year and as a result we achieved a 14% overall growth in recurring software revenues to £8.41 million by the end of December 2004. The Group made investments in new products and further infrastructure, and generated an operating profit and operating cash inflow, ending the year with a net cash position of £0.90 million (2003: net debt £0.20 million). Our Risk product now delivers annualised recurring revenue of £0.93 million, representing a growth of 365% in the value of contracts since acquiring RiskMap (now StatPro Italia) in October 2003.

Turnover

Group turnover increased by 8% (9% at constant exchange rates) to £9.07 million (2003: £8.43 million). Software licence revenue grew by 12% to £7.49 million (2003: £6.66 million) and represents 83% (2003: 79%) of our turnover in the year. The level of professional services revenues of £1.21 million was at a similar level to the prior year (2003: £1.24 million), but in the second half there was a marked improvement compared to the first half. The proportion of consulting to existing clients remained relatively high at around 70%. Other recurring revenue from the TAP royalties, a legacy product which has no associated costs of delivery, fell by 30% to £0.37 million (2003: £0.53 million).

The split of revenue by type was as follows:

                                   Year to              Year to         Growth
                               31 December          31 December        year on
                                      2004                 2003           year
                                 £ million            £ million              %
Turnover
Software licences                     7.49                 6.66            +12
Professional services                 1.21                 1.24             -2
TAP royalties                         0.37                 0.53            -30
                                   -------              -------         ------
                                      9.07                 8.43             +8
                                   -------              -------         ------

Recurring revenue

The underlying recurring revenue from software licences at the end of December 2004 grew to £8.41 million (2003: 7.38 million), an increase of 14% year on year (15% at constant exchange rates). New contracts net of cancellations amounted to £1.08 million (2003: £0.81 million). Overall, foreign exchange movements resulted in a reduction of £0.05 million (1%) in the revaluation of the net value of contracts to the 2004 year-end rates compared with the 2003 year-end rates, mainly due to further weakness in the US dollar. The recurring revenue is analysed as follows:

Annualised value                  At 31   New contracted revenue     Net impact of          At 31      Growth
£ million                      December   (net of cancellations)          exchange       December     year on
                                   2003                                      rates           2004        year
                                                                                                            %
Recurring revenues
Software licences                  7.38                    1.08              (0.05)          8.41         +14
TAP royalties                      0.53                   (0.16)                 -           0.37         -30
                                 -------                 -------            -------        -------     -------
Total recurring revenue            7.91                    0.92              (0.05)          8.78         +11
                                 -------                 -------            -------        -------     -------

As well as gaining a number of important high value client contracts, around 55% of our new licence revenue was from existing clients. As a result we now have 28 client groups each subscribing more than £100,000 per annum, of which 18 subscribe more than £150,000 per annum. We concluded a number of strategic outsourcing contracts for performance measurement bureau services which have variable revenue amounts associated with them depending on the number of portfolios processed. We expect this segment of our business to grow over the coming years.

The proportion of recurring revenue on multi-year contracts increased from 33% at the end of 2003 to 44% at the end of 2004. This percentage has increased from 4% at the start of 2002, when we first changed our policy to multi-year deals.

Operating expenses

Operating expenses (before goodwill amortisation and exceptional item) increased by 7% (9% at constant exchange rates) to £8.32 million (2003: £7.78 million). The main reasons for the cost increase compared to 2003 are the full year impact of our acquisition of RiskMap in October 2003 and the associated costs in providing risk data, the opening of our South African office and the operating expenses (before goodwill amortisation) for SiSoft, for the six-month period following its acquisition in June 2004 (amounting to £0.06 million). The exceptional item of £0.09 million (2003: nil) relates to compensation for loss of office and related expenses.

Earnings before interest, tax, depreciation and amortisation and exceptional items Earnings before interest, tax, depreciation, amortisation and exceptional items (‘EBITDA’) before the impact of the acquisition of SiSoft in 2004, amounted to £1.03 million (2003: £0.89 million), an increase of 16%. Including the impact of the acquisition EBITDA increased by 9% to £0.97 million (2003: £0.89 million) as shown in the following table:

  Year to        Year to       Year to
                                           31 December    31 December   31 December       Year to
                                                  2004           2004          2004   31 December
                                             £ million      £ million     £ million          2003      Change
                                            Continuing    Acquisition         Total     £ million           %

Revenue                                           9.07              -          9.07          8.43          +8
Operating expenses *                             (8.04)         (0.06)        (8.10)        (7.54)         +7
                                               --------       --------      --------      --------
EBITDA                                            1.03          (0.06)         0.97          0.89          +9
Depreciation                                     (0.22)         (0.00)        (0.22)        (0.24)         -8
Goodwill amortisation                            (0.37)         (0.01)        (0.38)        (0.32)        +19
                                               --------       --------      --------      --------
Operating profit (before exceptional item)        0.44          (0.07)        
0.37          0.33         +13
Exceptional item                                 (0.09)             -         (0.09)            -         n/a
                                               --------       --------      --------      --------
Operating profit                                  0.35          (0.07)         0.28          0.33         -15
                                               --------       --------      --------      --------

* before depreciation, goodwill amortisation and exceptional item

Our strategy remains to invest a significant proportion of our revenue in new and improved products to ensure we remain at the forefront of performance and risk analytics technology. We have now spent an average of 22% of our revenue on research and development since 2000 to improve our products and to maintain our competitive advantage. Within our operating expenses of £8.32 million (before goodwill amortisation), £1.51 million (2003: £1.17 million) was spent on research and development.

Employees

There was an increase in the average number of employees during the year from 77 to 85 mainly due to the full year effect of the acquisition of RiskMap, and the impact of the employees joining with SiSoft. During the year we also opened an office in Cape Town to deal with our growing client base in South Africa. We ended the year with a total of 89 employees, situated in eight locations (London, Paris, New York, Milan, Frankfurt, Luxembourg, South Africa and Brisbane).

Interest

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, amounted to £0.12 million (2003: £0.18 million).

Profit before tax and Taxation

The profit before taxation grew by 11% to £0.16 million (2003: £0.15 million). The current corporation tax charge for the year is £0.04 million (2003: £0.01 million) relating to an overseas subsidiary. An exceptional credit of £1.47 million for deferred tax arose in the year relating to the recognition of group tax losses. In the opinion of the directors this deferred tax asset will be recoverable with reasonable certainty against tax on trading profits in future years. The recognised deferred tax asset amounts to 53% of the potential deferred tax asset for the group (see note 5).

Equity minority interests

The equity minority interests amounting to £0.16 million (2003: £0.07 million) relate to the minorities’ share of losses in StatPro Italia, StatPro Australia and SiSoft.

Earnings per share

Basic earnings per share amounted to 5.3p (2003: 0.6p). Earnings per share benefited considerably from the tax credit referred to above. The earnings per share before goodwill amortisation and exceptional items was 2.3p (2003: 1.6p). The diluted earnings per share in 2004 is 5.3p (2003: 0.6p) based on potentially dilutive shares outstanding amounting to 371,770 (2003: 308,853).

Balance Sheet

The Group’s net liabilities reduced to £1.12 million at 31 December 2004 from £2.71 million at 31 December 2003. The main movement in the year relates to the recognition of £1.47 million of deferred tax asset on the balance sheet. The balance sheet includes deferred income of £5.37 million (2003: £5.23 million), which is a non-cash liability and has a significant adverse impact on the reported net liability position of the Group balance sheet.

Fixed assets

Total capital expenditure amounted to £0.17 million in 2004 (2003: £0.10 million). Goodwill arising during the year amounted to £0.06 million on the investment in SiSoft and there was a fair value adjustment of £0.05 million in relation to the investment in RiskMap in 2003. The other main component of the total goodwill balance of £0.47 million (2003: £0.74 million) arose on the acquisition of AMS S.A. in 2000. Goodwill is amortised over a five-year period.

Current assets

The level of debtors increased to £4.11 million (2003: £3.03 million). Included within debtors recoverable after more than one year is deferred tax of £1.47 million (2003: nil). Further improvements in working capital management resulted in lower trade debtors, the largest component of debtors, amounting to £1.99 million at the end of 2004 (2003: £2.24 million). The level of cash at bank and in hand reduced to £2.15 million (2003: £2.29 million).

Creditors

The main movement in creditors has arisen following the repayment of the £1.00 million convertible loan note and £0.30 million of bank debt in early 2004. Deferred income increased by 3% to £5.37 million from £5.23 million. Of the £5.37 million, £5.29 million is expected to be recognised in 2004. The level of short-term creditors (excluding deferred income and short-term debt) increased by 8% to £1.73 million (2003: £1.61 million). Long-term creditors include £1.19 million of bank debt (2003: £1.46 million).

Cash flow and financing

We generated an operating cash inflow of £1.45 million during 2004 (2003: £1.57 million). Whilst the operating cash flow was 8% lower than the previous year, the underlying cash flow in 2004 was stronger than 2003, which had benefited from some one-off working capital movements. The net cash position at 31 December 2004 was £0.90 million (2003: net debt £0.20 million).

Share capital and reserves

The issued share capital amounted to £0.33 million (2003: £0.33 million) representing 33,199,244 shares of 1p nominal value (2003: 33,089,244) as a result of the issue of 110,000 shares issued on exercise of options under employee share option schemes. The share premium account was £8.56 million (2003: £8.56 million). The equity minority interests of £0.23 million (2003: £0.07) have been deducted in computing the total capital employed.

Dividend

Following two years of cash generation, the directors are considering its dividend policy. The directors are not proposing to recommend a dividend for the year ended 2004 but plan to apply to the Court to reduce the Company’s share premium account and eliminate the deficit on the profit and loss account so as to enable the payment of dividends in the future. A resolution to reduce the share premium account will be proposed at the Annual General Meeting. Subject to the confirmation of the reduction of share premium account by the Court, the Company intends to be in a position to pay its maiden dividend for 2005.

Andrew Fabian
Finance Director

Consolidated profit and loss account for the year ended 31 December 2004

                                                                                        Unaudited    Audited
                                                                                 Note        2004       2003
                                                                                            £'000      £'000

Group turnover
Continuing operations                                                                       9,072      8,426
                                                                                        ---------   ---------
Operating expenses before goodwill amortisation and exceptional items                      (8,317)    (7,775)
Amortisation of goodwill                                                                     (383)      (321)
Exceptional item                                                                    4         (93)         -
                                                                                         ---------  ---------

Operating expenses                                                                         (8,793)    (8,096)
                                                                                          --------- ---------

                                                                                          --------- ---------
Continuing operations                                                                         349        330
Acquisition (after goodwill amortisation of £7,000)                                           (70)         -
                                                                                          --------- ---------

                                                                                          --------- ---------
Operating profit                                                                              279        330

Net interest payable                                                                         (117)      (184)
                                                                                          --------- ---------
Profit on ordinary activities before taxation                                                 162        146
Taxation (including exceptional deferred tax credit of £1,472,000 (2003: nil))  
   5       1,435        (14)
                                                                                          --------- ---------
Profit on ordinary activities after taxation                                                1,597        132
Equity minority interests                                                           6         163         70
                                                                                          --------- ---------
Retained profit for the financial year                                                      1,760        202
                                                                                          ========= =========

Earnings per share - basic and diluted                                              7         5.3p       0.6p
                                                                                          --------- ---------
Earnings per share - before amortisation of goodwill and exceptional items      
   7         2.3p       1.6p
                                                                                          --------- ---------

The results above all relate to continuing operations

Statement of group total recognised gains and losses

                                                                 Unaudited         Audited
                                                                      2004            2003
                                                                     £'000           £'000

Retained profit for the financial year                               1,760             202
Exchange differences offset in reserves                                (11)            (52)
                                                                  ---------       ---------
Total recognised gains and losses for the year                       1,749             150
                                                                  =========       =========

Consolidated balance sheet at 31 December 2004

                                                                                           Unaudited         Audited
                                                                                    Note        2004            2003
                                                                                               £'000           £'000

Fixed assets
Intangible assets                                                                                470             737
Tangible assets                                                                                  509             561
                                                                                            ---------       ---------
                                                                                                 979           1,298
Current assets
Debtors
- Amounts falling due after one year (including deferred tax of £1,472,000 (2003: nil))        1,758             297
- Amounts falling due within one year                                                          2,350           2,728
Cash at bank and in hand                                                                       2,149           2,292

                                                                                            ---------       ---------
                                                                                               6,257           5,317
Creditors: amounts falling due within one year                                         8      (7,059)         (7,690)
                                                                                            ---------       ---------
Net current liabilities                                                                         (802)         (2,373)
                                                                                            ---------       ---------
Total assets less current liabilities                                                            177          (1,075)
                                                                                            ---------       ---------
Creditors: amounts falling due after more than one year                                       (1,296)         (1,634)
                                                                                            ---------       ---------
Net liabilities                                                                               (1,119)         (2,709)
                                                                                            =========       =========
Capital and reserves
Called up share capital                                                                          332             331
Share premium account                                                                          8,562           8,559
Warrant reserve                                                                                  424             424
Profit and loss account                                                                      (10,204)        (11,953)
Equity shareholders' deficit                                                                    (886)         (2,639)
Equity minority interests                                                              6        (233)            (70)
                                                                                            ---------       ---------
Capital employed                                                                              (1,119)         (2,709)
                                                                                            =========       =========

 

Consolidated cash flow statement for the year ended 31 December 2004

           2004            2003
                                                                                               £'000           £'000

Net cash inflow from operating activities                                                      1,453           1,572
                                                                                            ---------       ---------
Returns on investments and servicing of finance
Interest received                                                                                 16              34
Interest paid                                                                                    (99)           (138)
Issue costs in respect of bank loan                                                               (5)            (10)
                                                                                            ---------       ---------
Net cash outflow from returns on investments and servicing of finance                            (88)           (114)

Taxation                                                                                         (44)              -
                                                                                            ---------       ---------

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                               (175)            (99)
                                                                                            ---------       ---------
Net cash outflow from capital expenditure and financial investment                              (175)            (99)
                                                                                            ---------       ---------

Acquisitions and disposals
Cash subscription on acquisition of subsidiary undertaking                                      (100)           (282)
Costs incurred on acquisition of subsidiary undertaking                                           (6)            (32)
Cash acquired on acquisition of subsidiary undertaking                                           120             411
                                                                                            ---------       ---------
Net cash inflow from acquisitions and disposals                                                   14              97
                                                                                            ---------       ---------

Net cash inflow before management of liquid resources and financing                            1,160           1,456

Management of liquid resources
Movement in short-term deposits                                                                  799            (448)

Financing
Repayment of bank loan                                                                          (300)           (499)
Repayment of convertible loan                                                                 (1,000)              -
Repayment of debt assumed on acquisition                                                           -            (167)
Proceeds from issue of ordinary shares                                                             4              21
Capital element of finance lease payments                                                         (7)             (5)
                                                                                            ---------       ---------
Net cash outflow from financing                                                               (1,303)           (650)
                                                                                            ---------       ---------
Increase in cash in the year                                                                     656             358
                                                                                            =========       =========

Reconciliation of operating profit to net cash inflow from operating activities

 Unaudited         Audited
                                                                                                2004            2003
                                                                                               £'000           £'000

Operating profit                                                                                 279             330
Depreciation of tangible fixed assets                                                            221             239
Amortisation of goodwill                                                                         383             321
Decrease in debtors                                                                              389             461
Increase/(decrease) in creditors (excluding deferred income)                                      38              (9)
Movement in deferred income                                                                      146             282
Exchange differences                                                                              (3)            (52)
                                                                                            ---------       ---------
Net cash inflow from operating activities                                                      1,453           1,572
                                                                                            =========       =========

 

Reconciliation of net cash flow to movement in net cash/(debt)

 Unaudited         Audited
                                                                                                2004            2003
                                                                                               £'000           £'000

Increase in cash in the year                                                                     656             358
Movement in short-term deposits                                                                 (799)            448
Movement on finance leases                                                                         7               5
Convertible loan repayment                                                                     1,000               -
Bank loan repayment                                                                              300             499
Loan assumed on acquisition                                                                      (30)           (167)
Repayment of loan assumed on acquisition                                                           -             167
Other non-cash movements                                                                         (39)            (79)
                                                                                            ---------       ---------
Movement in net cash/(debt)                                                                    1,095           1,231
Net debt at beginning of year                                                                   (197)         (1,428)
                                                                                            ---------       ---------
Net cash/(debt) at end of year                                                                   898            (197)
                                                                                            =========       =========

Analysis of net cash/(debt)

Cash at bank and in hand (excluding short-term deposits)                                       1,749           1,093

Short-term deposits                                                                              400           1,199
Convertible debt (net of deferred issue costs)                                                     -          (1,000)
Bank loan (net of deferred issue costs)                                                       (1,191)         (1,457)
Other loans                                                                                      (35)              -
Finance leases                                                                                   (25)            (32)
                                                                                            ---------       ---------
Net cash/(debt)                                                                                  898            (197)
                                                                                            =========       =========

Notes to the preliminary financial statements

1. Profit before tax, amortisation and exceptional item

 Unaudited         Audited
                                                                                                2004            2003
                                                                                               £'000           £'000

Profit on ordinary activities before taxation                                                    162             146
Add: Amortisation of goodwill                                                                    383             321
Exceptional item                                                                                  93               -
                                                                                            ---------       ---------
Adjusted Profit before taxation, amortisation, and exceptional item                              638             467
                                                                                            =========       =========

2. Segmental Analysis

Analysis of revenue by destination is as follows:
                                                                                                       Growth
                                                                   Unaudited         Audited          year on
                                                                        2004            2003             year
                                                                       £'000           £'000                %

United Kingdom                                                         2,136           2,330               -8
Rest of Europe                                                         4,557           4,057              +12
North America                                                          1,552           1,350              +15
Rest of the World                                                        827             689              +20
                                                                     --------        --------
Total revenue                                                          9,072           8,426               +8

3. Acquisition. In June 2004 the Company invested £0.11 million (including related costs) in acquiring a 51% stake in a French company, SiSoft Sarl, which has developed an internet based composites management reporting system and SiSoft Sarl will receive commissions on sales of the product. StatPro has an option to acquire the remaining 49% of SiSoft between 31 March 2009 and 31 December 2014.

4. Exceptional items. The exceptional item of £0.09 million (2003 – nil) relates to compensation for loss of office and related expenses. Included within the taxation is an exceptional credit relating to deferred tax – see note 5 on taxation.

5. Taxation. The current tax charge for the year is £0.04 million (2003: £0.01 million) relating to an overseas subsidiary. There is a deferred tax credit of £1.47 million (2003: nil) relating to corporation tax losses, which in the opinion of the directors will be recoverable with reasonable certainty against trading profits in future years. The recognised deferred tax asset amounts to 53% (2003: nil) of the potential deferred tax asset for the group of £2.75 million (2003: £2.73 million).

Unaudited         Audited
                                                                  2004            2003
                                                                 £'000           £'000

Current tax                                                        (37)            (14)
Deferred tax credit (exceptional item)                           1,472               -
                                                              ---------        ---------
Taxation                                                         1,435             (14)
                                                              ---------        ---------

6. Equity minority interests. The £0.16 million equity minority interests (2003: £0.07 million) relate to the minorities’ share of losses in StatPro Italia, StatPro Australia and SiSoft. The cumulative equity minority interests of £0.23 million (2003: £0.07 million) have been deducted in computing the total capital employed.

7. Basic earnings per share. Basic earnings per share has been calculated based on the profit after taxation and minority interests of £1.76 million (2003: £0.20 million) and the weighted average number of shares of 33,115,271 (2003: 32,913,328). The adjusted earnings per share has been calculated based on the profit after taxation and minority interests, before exceptional items and amortisation of goodwill, amounting to £0.76 million (2003: £0.52 million). The diluted earnings per share in 2004 are 5.3p (2003: 0.6p) based on potentially dilutive shares outstanding amounting to 371,770 (2003: 308,853).

8. Creditors – amounts falling due within one year. The largest component of short-term creditors relates to deferred income, which is a non-cash liability, as shown in the following analysis:

 Unaudited          Audited
                                                        As at            As at
                                                  31 December      31 December
                                                         2004             2003
                                                        £'000            £'000

Bank loans, other loans and finance leases                 40                5
Convertible loan                                            -            1,000
Trade creditors                                           394              335
Corporation tax                                             7               14
Other creditors and accruals                              827              857
Other taxation and social security                        502              401
Deferred income                                         5,289            5,078
                                                     ---------        ---------
                                                        7,059            7,690
                                                     ---------        ---------

This announcement was approved by the Directors on 25 February 2005. The preliminary results for the year ended 31 December 2004 are unaudited. The financial information set out in the announcement does not constitute the Company’s statutory accounts for the years ended 31 December 2004 or 31 December 2003. The financial information for the year ended 31 December 2003 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.

– Ends –

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