StatPro Group PLC – Interim Results

For immediate release
5 August 2002

STATPRO GROUP PLC

(“StatPro” or the “Group”)

Interim Results for the Six Months Ended 30 June 2002

StatPro Group plc, the leading listed provider of performance measurement solutions for the global asset management industry, announces its results for the six months ended 30 June 2002.

Highlights

Continued organic growth despite difficult market conditions

  • Continuing turnover up 13% to ?3.4 million (June 2001 – ?3.0 million)
  • Annual value of recurring software revenues increased by 25% to ?6.0 million (June 2001 – ?4.8 million)

Cost base reduced to accelerate path to profitability

  • Operating cash outflow reduced by 56% to ?0.6 million (June 2001 – ?1.4 million)
  • Reorganisation initiated in July 2002 to reduce cost base by an additional ?1.2 million on an annualised basis

Additional finance raised to support future growth plans

  • Convertible loan note issued on 3 July 2002 raising ?1.0 million

Commenting on the results, Carl Bacon, Chairman of StatPro said: “Against an extremely challenging background, we have continued to grow revenues and we have strengthened our market position. “Whilst we do not anticipate any improvement in our markets in the near future, we have streamlined our operations in order to maintain our objectives of month by month profitability and positive cash flow, and to ensure that we are well placed to benefit from an improvement in market conditions.”

– Ends –

For further information, please contact:

StatPro Group plc

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

Weber Shandwick Square Mile

Reg Hoare/Rachel Taylor/Claudine Cartwright 020 7950 2800

CHIEF EXECUTIVE’S REVIEW

Highlights

Despite the current turbulence in the financial markets, StatPro Group has continued to grow its revenues in the first half of 2002 to ?3.4 million from ?3.0 million in the corresponding period last year. First half operating losses were reduced by 28% to ?1.6 million from ?2.3 million and the total annual value of our recurring revenues at 30 June 2002 was ?7.0 million (which includes ?6.0 million of recurring software revenues). Existing clients generated an increased proportion of our new revenues through sales of further software and upgrades on existing systems and we expect this trend to continue. StatPro now has over 130 client contracts worldwide, providing a strong platform for future growth.

In July 2002 we raised ?1.0 million by issuing convertible loan stock with a conversion price of 60p. The proceeds provide the Group with additional flexibility to finance its strategy of expanding the product range and creating new distribution channels. We plan to achieve this by acquiring companies with complementary products, developing new products internally or licensing third party systems and integrating them with our own products.

Reorganisation

The first six months of the year were overshadowed by events in the USA. Despite a satisfactory start to the year in Europe, it has become clear that market conditions are likely to deteriorate before they improve. The recent volatility of stockmarkets worldwide will impact the spending power of asset managers globally. We believe that market conditions will remain poor for at least the next six months in both the USA and Europe. For this reason, we have taken steps to reduce our cost base by approximately ?1.2 million on an annualised basis to accelerate the path to profitability. The majority of these cost reductions result from a streamlining of our operational and administrative functions, restructuring of underperforming parts of the business and rationalisation of our European offices. As a result of these changes, we expect to incur a restructuring charge of approximately ?0.4m in the second half of the year.

As previously announced, we have appointed Mark Bramley as CEO of our US operations. Mark was previously based in London as Director of Performance Measurement. Whilst conditions remain tough in USA, we have continued to win business and grow our revenues.

New Product

We plan to launch our new Application Programme Interface (“API”) in the second half of 2002. This module allows clients to integrate our Performance System into other platforms, such as back and front office systems. The benefit for the client is to be able to access our systems directly. In our market, we believe that this functionality is unique to StatPro and it is expected to be an important part of our new sales drive.

Outlook

Whilst our markets remain challenging, we continue to expect to grow our revenues year on year and we therefore remain focused on meeting our objective of being profitable on a month-by-month basis by the end of the year. We also maintain our objective of being cash flow positive for the whole of 2002 on an underlying basis before restructuring costs. We believe that our market position continues to strengthen and that we are well placed to benefit from an improvement in market conditions.

Justin Wheatley
Chief Executive

OPERATING AND FINANCIAL REVIEW

Turnover

Despite the difficult market conditions experienced in the first half of the year, turnover from the continuing business increased by 13% to ?3.43 million (June 2001 – ?3.03 million). This resulted from a 56% growth in software licence revenue offset by a fall in other revenues of 37%. Licence revenue had been expected to grow at an even higher rate but recognised revenue has been impacted by delays in signing new business and, particularly on larger scale contracts, a longer average lead time for implementation and client acceptance. The fall in other revenue arose partly as a result of an expected reduction in non-core recurring revenue and partly as a result of lower consultancy fees associated with new contracts compared to the first half of 2001. The order book of signed licences and related consultancy not invoiced at 30 June 2002 amounted to ?0.29 million (June 2001 – ?0.51 million). The split of revenue by type was as follows:

 Six months to       Six months to             Year to
                                                              30 June             30 June         31 December
                                                                 2002                2001                2001
                                                            ? million           ? million           ? million
Turnover
Software licences                                                2.56                1.64                3.82
Other recurring revenue                                          0.49                0.63                1.17
Other revenue                                                    0.38                0.76                1.18
                                                                 3.43                3.03                6.17

There were 15 sales of new software in the first half, of which five were upgrades to existing contracts. The total number of contracts increased from 125 at the start of the year to 135 at the end of June 2002 (June 2001 – 110); taking into account five notified cancellations, of which only three will impact revenue in 2002, the number of continuing contracts is 130. The annual value of recurring revenue increased to ?6.97 million at 30 June 2002 from ?6.76 million at 31 December 2001 and from ?6.04 million at 30 June 2001. This is broken down as follows:

   At 30 June          At 30 June      At 31 December
                                                                 2002                2001                2001
                                                     Annualised value          Annualised          Annualised
                                                            ? million               value               value
                                                                                ? million           ? million
Recurring revenues
Software licences                                                5.98                4.79                5.59
Other recurring revenue                                          0.99                1.25                1.17
                                                                 6.97                6.04                6.76

The market for software licences in the first half was strongest in Continental Europe with net growth of 19% in recurring licence revenues. The analysis of the recurring software revenue by region is as follows:

At 30 June          At 30 June      At 31 December
                                                                 2002                2001                2001
                                                     Annualised value          Annualised          Annualised
                                                            ? million               value               value
                                                                                ? million           ? million

UK                                                               1.94                1.68                1.96
USA                                                              1.15                0.97                1.13
Europe                                                           2.54                1.99                2.13
Rest of the World                                                0.35                0.15                0.37
Software licences                                                5.98                4.79                5.59

Operating Expenses

The Board put in place plans to reduce costs in the first half and as a result operating expenses reduced by 5% to ?4.92 million (June 2001 – ?5.16 million). The average number of employees during the first 6 months of 2002 was 107, a similar level as in the comparable period (June 2001 – 106), although staff numbers had reduced to 102 by the period end. As a result of the weak outlook in the financial markets, which has deteriorated markedly since the end of the first half, the Board has implemented a further cost cutting plan with the aim of achieving net savings of approximately ?1.2 million on an annualised basis to enable the Group to meet its stated objective of being profitable on a month by month basis by the end of the current year. Cost savings are being made primarily in operations and administration, and by rationalising our European sales offices. We will also refocus the research and development functions in London and Paris on new products, as the Group’s existing products now require limited development. As a result of these measures, the overall number of employees will reduce to around 85. The Directors believe that the reduced number of personnel will not adversely impact the service provided to either existing or future clients nor restrict the growth of the business, as the existing client services infrastructure is sufficient to support a much larger client base. The cost of this restructuring is expected to be approximately ?0.4 million and will be reflected in the results for the full year ended 31 December 2002.

Goodwill Amortisation

The goodwill arising on the acquisition of AMS in 2000 continues to be amortised over five years and the amortisation for the six months to 30 June 2002 amounted to ?0.15 million (June 2001 – ?0.15 million). The operating loss before goodwill amortisation reduced by 30% to ?1.49 million (June 2001 – ?2.13 million).

Interest

Net interest expense, which results from interest accrued on bank loans and finance leases, less interest earned on cash and deposits, amounted to ?0.05 million (June 2001 – ?0.05 million).

Loss per Share

Loss before taxation reduced by 28% to ?1.68 million (June 2001 – ?2.33 million). No current liability to corporation tax is expected given the accumulated losses incurred by the Group. The loss per share before amortisation decreased to 4.8p (June 2001 – 7.3p) and loss per share after goodwill amortisation decreased to 5.2p (June 2001 – 7.8p).

Cash Flow

As a consequence of a lower level of net new business than originally expected, there was a net cash outflow of ?0.63 million from operating activities in the first half of 2002; this was significantly lower than the outflow in the corresponding period (June 2001 – ?1.44 million). The Directors remain committed to the previously stated goals of generating cash throughout the year, although the positive operating cash target will be impacted in the second half by the costs associated with implementing the reorganisation outlined above.

Capital expenditure was marginally higher than in the comparable period but remained at a very modest level of ?0.12 million (June 2001 – ?0.10 million).

Balance Sheet

The Group’s net liabilities increased to ?2.15 million from a deficit of ?0.47 million at 31 December 2001 and from shareholders’ funds of ?1.90 million at 30 June 2001. The level of debtors, of which the major component is trade debtors, decreased to ?3.08 million from ?3.54 million at 31 December 2001. The short-term creditors of ?5.52 million (December 2001 – ?5.18 million) includes deferred income, a non-cash liability, of ?3.82 million, which has increased from ?3.63 million at 31 December 2001 as a result of growth in the value of our recurring licence revenue.

The Group’s net debt at 30 June 2002 amounted to ?1.51 million compared to ?0.73 million at 31 December 2001. As previously announced, the Group has also issued an unsecured convertible loan of ?1.00 million (?0.96 million net of expenses), which was completed on 3 July 2002. This was put in place to provide the Group with additional flexibility to finance its strategy of expanding the Group’s product range and creating new distribution channels. The bank facility of up to ?3.00 million remains available for general working capital needs, and at 30 June 2002 ?1.80 million of the facility was drawn down.

Share Capital and Reserves

The share capital increased marginally to ?0.33 million representing 32,520,986 shares of 1p nominal value (December 2001 – ?0.32 million). During the period the movement related to the issue of 275,000 shares under employee share option schemes. As a result the share premium account also increased marginally to ?8.52 million (December 2001 – ?8.50 million).

Dividends

The Group’s strategy is to continue to invest in the growth of the business and the Directors are therefore not proposing a payment of any dividends in the near future.

Andrew Fabian
Finance Director

Consolidated Profit and Loss Account

otes               Unaudited           Unaudited          Audited
                                                                    Six months to       Six months to          Year to
                                                                          30 June             30 June      31 December
                                                                             2002                2001             2001
                                                                            ?'000               ?'000            ?'000

Turnover - continuing operations                                            3,432               3,031            6,174

Operating expenses before goodwill amortisation                           (4,917)             (5,162)         (10,281)

Amortisation of goodwill                                                    (146)               (146)            (292)
                                                              ------------------- ------------------- -----------------
Operating expenses                                                        (5,063)             (5,308)         (10,573)

Operating loss - continuing operations                                    (1,631)             (2,277)          (4,399)

Net interest payable                                 1                       (52)                (49)            (343)

                                                              ------------------- ------------------- -----------------
Loss on ordinary activities before taxation                               (1,683)             (2,326)          (4,742)

Taxation                                             2                         -                   -                -

                                                              ------------------- ------------------- -----------------

Loss after taxation                                                       (1,683)             (2,326)         (4,742)
                                                              =================== =================== =================

Loss per share - basic                               3                     (5.2)p              (7.8)p          (15.3)p
Loss per share - before amortisation of goodwill                           (4.8)p              (7.3)p          (13.5)p

Statement of Group Total Recognised Gains and Losses
                                                                        Unaudited           Unaudited          Audited
                                                                    Six months to       Six months to          Year to
                                                                          30 June             30 June      31 December
                                                                             2002                2001             2001
                                                                            ?'000               ?'000            ?'000

Loss for the financial period                                             (1,683)             (2,326)          (4,742)

Exchange (losses)/gains offset in reserves                                   (20)                  22               71

                                                              ------------------- ------------------- -----------------
Total recognised gains and losses for the period                          (1,703)             (2,304)          (4,671)
                                                              =================== =================== =================

 

Consolidated Balance Sheet

Notes           Unaudited           Unaudited          Audited
                                                                            As at               As at            As at
                                                                          30 June             30 June      31 December
                                                                             2002                2001             2001
                                                                            ?'000               ?'000            ?'000

Fixed Assets

Intangible assets                                                             803               1,095              949
Tangible assets                                                               798                 928              840
                                                               ------------------- ------------------- ----------------

                                                                            1,601               2,023            1,789

Current Assets
Debtors - amount falling due after one year                                   313                 390              310
Debtors - amount falling due within one year                                2,769               2,293            3,232
Cash at bank and in hand                                                      246               2,500            1,050
                                                               ------------------- ------------------- ----------------
                                                                            3,328               5,183            4,592

Creditors - amounts falling due within one year              4            (5,517)             (3,821)          (5,183)
                                                               ------------------- ------------------- ----------------
Net current (liabilities)/assets                                          (2,189)               1,362            (591)

Total assets less current liabilities                                       (588)               3,385            1,198
Creditors - Amounts falling due after more than one year
Convertible loan notes                                                          -             (1,452)                -
Bank loans                                                                (1,562)                   -          (1,661)
Finance lease obligations                                                       -                (31)              (3)
                                                               ------------------- ------------------- ----------------
                                                                          (1,562)             (1,483)          (1,664)
                                                               ------------------- ------------------- ----------------
Net (liabilities)/assets                                                  (2,150)               1,902            (466)
                                                               ------------------- ------------------- ----------------

Capital and reserves
Called up share capital                                                        325                 322             322
Share premium account                                                        8,515               8,500           8,499
Warrant reserve                                                                424                 424             424
Profit and loss account                                                   (11,414)             (7,344)         (9,711)
                                                               ------------------- ------------------- ----------------
Equity shareholders' (deficit)/funds                                       (2,150)               1,902           (466)
                                                               =================== =================== ================

Consolidated Cash Flow Statement

Unaudited           Unaudited          Audited
                                                                    Six months to       Six months to          Year to
                                                                          30 June             30 June      31 December
                                                                             2002                2001             2001
                                                                            ?'000               ?'000            ?'000

Net cash outflow from operating activities                                  (631)             (1,441)          (2,793)

Returns on investments and servicing of finance
Interest received                                                              10                  38               96
Interest paid                                                                (54)                (48)            (128)
Issue costs in respect of bank loan                                             -                   -             (88)
                                                              ------------------- ------------------- -----------------
Net cash outflow from returns on investment                                  (44)                (10)            (120)

Taxation
Tax received/(paid)                                                             1                 (8)                7

Capital expenditure and financial investment
Purchase of tangible fixed assets                                           (119)                (99)            (151)

                                                              ------------------- ------------------- -----------------
Net cash outflow for capital expenditure                                    (119)                (99)            (151)

                                                              ------------------- ------------------- -----------------
Net cash outflow before management of liquid resources and
financing                                                                   (793)             (1,558)          (3,057)

Management of liquid resources
Movement in short-term deposits                                              600                   -            1,250

Net cash (outflow)/ inflow from financing activities
Financing
Proceeds from bank facility                                                     -                   -           1,800
Issue of ordinary shares                                                       19               1,739           1,742
Issue costs in respect of shares issued                                         -                (40)            (44)
Capital element of finance lease payments                                    (30)                (31)            (61)
Convertible loan redemption                                                     -                   -         (1,720)
                                                              ------------------- ------------------- -----------------
Net cash (outflow)/inflow from financing                                     (11)               1,668          1,717

(Decrease)/increase in cash in the period                                   (204)                 110            (90)
                                                              =================== =================== =================

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

 Unaudited           Unaudited          Audited
                                                                   Six months to       Six months to          Year to
                                                                         30 June             30 June      31 December
                                                                            2002                2001             2001
                                                                           ?'000               ?'000            ?'000

(Decrease)/increase in cash in the period                                  (204)                 110             (90)
Movement in short-term deposits                                            (600)                   -          (1,250)
Movement on finance leases                                                    30                  31              61
Increase from financing - convertible loan                                     -                (27)               -
Convertible loan redemption                                                    -                   -            1,720
Exceptional interest relating to loan redemption                               -                   -            (268)
Bank loan (net of ?88,000 of issue costs)                                      -                   -          (1,712)
Other non-cash movements                                                     (9)                   -             (34)
                                                              ------------------- ------------------- -----------------
Movement in net debt                                                       (783)                 114          (1,573)
Net (debt)/funds at beginning of period                                    (729)                 844             844
                                                              ------------------- ------------------- -----------------
Net (debt)/funds at end of period                                        (1,512)                 958             (729)
                                                              =================== =================== =================

Reconciliation of operating loss to net cash flow from operating activities

Unaudited           Unaudited          Audited
                                                                   Six months to       Six months to          Year to
                                                                         30 June             30 June      31 December
                                                                            2002                2001             2001
                                                                           ?'000               ?'000            ?'000

Operating loss                                                           (1,631)             (2,277)           (4,399)
Depreciation of tangible fixed assets                                        160                 143               282
Amortisation of goodwill                                                     146                 146               292
Decrease/(increase) in debtors                                               456                  85             (767)
(Decrease)/increase in creditors (excluding deferred income)                  67                (74)               131
Movement in deferred income                                                  187                 514             1,623
Exchange differences                                                        (16)                  22                45
                                                              ------------------- ------------------- ------------------
Net cash outflow from operating activities                                 (631)             (1,441)           (2,793)
                                                              =================== =================== ==================

Notes to the interim financial statements

1. Interest. Net interest payable in the second half results of 2001 included an exceptional amount of ?0.27 million relating to the difference between the carrying value and the nominal value of the convertible loan notes which were redeemed in August 2001.

2. Taxation. No current year corporation tax has been provided as the Group is not anticipating a corporation tax liability given the accumulated taxable losses.

3. Loss per share. Loss per share has been calculated based on the loss after taxation of ?1.68 million (June 2001 – ?2.33 million) and the weighted average number of shares of 32,322,284 (June 2001 – 29,793,764). The diluted loss per share is the same as the basic loss per share since the Group is making losses.

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

 Unaudited           Unaudited             Audited
                                                                          As at               As at               As at
                                                                        30 June             30 June         31 December
                                                                           2002                2001                2001
                                                                          ?'000               ?'000               ?'000

Trade creditors                                                             588                 459                 370
Bank loans and finance leases                                               196                   -                 115
Other creditors and accruals                                                705                 751                 697
Taxation and social security                                                213                  92                 373
Deferred income                                                           3,815               2,519               3,628
                                                              ------------------- ------------------- ------------------
                                                                         5,517               3,821               5,183
                                                              =================== =================== ==================

5. Post balance sheet events. On 3 July 2002 the Company issued unsecured convertible loan notes at par value of ?1.00 million. The loan notes are redeemable at par by the Company at any time on or before 2 January 2004. In July 2002 the Company initiated a reorganisation to reduce costs by ?1.2 million on an annualised basis. The cost of this is expected to be approximately ?0.4 million and will be reflected in the results for the full year to 31 December 2002.

The Group’s interim results for the six months ended 30 June 2002, which are not audited but have been reviewed by the Auditors, have been prepared in accordance with the accounting policies adopted in the financial statements for the year ended 31 December 2001. The Group’s interim results for the six months ended 30 June 2002 do not constitute full statutory accounts. The results for the year ended 31 December 2001 have been extracted from the financial statements for that year. The Group accounts for the year ended 31 December 2001 received an unqualified audit report and did not contain a statement under section 237(2) or (3) of the Companies Act and have been filed with the Registrar of Companies. This interim results announcement was approved by the Board on 5 August 2002.

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