For immediate release
31 July 2006
STATPRO GROUP PLC
(“StatPro”, the “Group” or the “Company”)
Interim results for the six months ended 30 June 2006
StatPro Group plc, the AIM listed provider of portfolio analytics solutions for the global asset management industry, announces its interim results for the six months ended 30 June 2006. Six months ended Six months ended Change 30 June 2006.
Six months ended Six months ended Change 30 June 2006 30 June 2005 Turnover £6.33 million £5.02 million +26% Profit before tax £0.82 million £0.55 million +48% Earnings per share - basic and diluted 2.0p 1.4p +43% Dividend per share (proposed interim) 0.3p n/a -
- Recurring annualised software revenue increased by 19% to £12.0 million since year end (Dec 2005: £10.1 million)
- Recurring software revenue in the period of £5.37 million (2005: £4.22 million) represents 85% of total revenue (2005: 84%)
- Increased operating cash inflow in period and successful share placing in May resulted in increase in net funds to £4.2 million (Dec 2005: £1.8 million)
- Two acquisitions completed in the period expected to be earnings enhancing in full year
- Interim dividend of 0.3p per ordinary share declared (2005: nil)
Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: ‘StatPro’s prospects for the second half of 2006 are very positive based upon our current pipeline of business. There is strong demand for our risk and fixed income products and generally the outlook is positive for all our products in all our territories. ‘Regulation, both existing and new, continues to drive growth in our markets. By investing in powerful new software systems, such as StatPro’s, our clients and prospects can mitigate risk on a cost effective and proportionate basis. ‘Given the operational gearing of the business we expect profit margins to improve. Our medium term goal is to achieve at least 20% net operating margins.’
– 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 4HJ
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StatPro Group plc is a leading provider of portfolio analytics solutions for the global asset management industry. Over the past 12 years, StatPro has developed its products in close collaboration with international asset managers and can offer sophisticated portfolio analytics tools for risk management, fixed income analysis, performance measurement, attribution analysis, GIPS compliance and reporting. StatPro has around 250 client contracts in 25 countries, with 9 offices worldwide. StatPro has grown its annualised recurring software revenue from less than £1 million in 1999 to £12 million today.
CHIEF EXECUTIVE’S REVIEW
StatPro Group plc is a leading provider of portfolio analytics solutions for the global asset management industry with around 250 client contracts in 25 countries. StatPro now offers an integrated suite of six core products and has grown its annualised recurring software revenue from less than £1 million in 1999 to £12.0 million today. StatPro listed on the London Stock Exchange in May 2000 and was admitted to AIM in June 2003. The Company is headquartered in London and has 125 employees.
StatPro achieved a solid performance in the first half of 2006 reflecting a significant increase in new business, strong demand for our expanding range of products and a positive market place. Revenue increased by 26% to £6.33 million from £5.02 million in the comparable period in 2005 and earnings per share rose by 43% to 2.0p from 1.4p.
At the heart of StatPro’s business lies its strong recurring revenue model. The annualised value of recurring revenue grew to £12.0 million at 30 June 2006 (June 2005: £9.0 million) up from £10.1 million at 31 December 2005; of this £1.35 million resulted from net new contracts, £0.74 million was derived from acquisitions during the period, and there was an adverse impact of £0.19 million due to currency movements (see table below). The increase in organic recurring revenue since 30 June 2005 (i.e., excluding the recurring revenue acquired) is approximately 23%.
In the first half of the year StatPro made two acquisitions, both of which are expected to be earnings enhancing this year. Alphai, an Australian business, based in Sydney has become the StatPro Australian office and will help the distribution of all StatPro products in Australia and Asia. We are also using Alphai’s software as the platform for our planned application service provider (‘ASP’) service. Integration of Alphai is focusing initially on the completion of existing development schedules and then later in the year on recruitment of an expanded sales team to promote distribution in the region.
Kizen, a South African company, builds on StatPro’s existing strong presence in that market where the Group now has combined annualised recurring revenues in excess of £1.0 million. Kizen developed a compliance product that we believe will function well when integrated with our risk product (StatPro Risk Management – ‘SRM’) and will allow us to offer our clients faster, more seamless compliance processes. We are currently training our European sales and account management teams in its use and plan to launch the product in Europe in September.
In 2005, StatPro acquired Delve which had developed a reporting solution (now marketed as StatPro Enterprise Reporting) and this product has made excellent progress with annual recurring revenue now standing at £0.47 million up from £0.17 million when we acquired the business. The Delve team is now completely integrated with the London team. Prospects for the product look good and further sales are expected to be made during the second half.
Sales have been strong in all our regions and across all our products. Sales to new clients have been encouraging with around two thirds of new business being contracted with new clients. Typically, new clients are contracting an average of 2 products each with several contracting for all of the StatPro suite of products.
Sales in North America have improved markedly with new sales in the first half of 2006 more than twice the whole of last year’s achievement. The pipeline looks good for this region and we expect a similar performance for the second half.
The UK region has also performed well with new sales for the first half equal to the level of new business achieved for the whole of last year. The pipeline also looks strong in the UK region with demand for our fixed income and risk products being especially encouraging.
Continental Europe has had another outstanding half year outperforming its excellent achievement for the first half last year and contributed nearly 45% of all new business.
Our risk product, SRM, continues to sell well and we now have 35 clients with annual contract values of £2.22 million up from £1.26 million at 30 June 2005. We now have 15 clients for our fixed income product contributing £0.63 million in annual sales up from virtually nothing twelve months ago and £0.28 million at the beginning of 2006. StatPro Performance & Attribution (‘SPA’) and StatPro Composites are also selling well with 15 new contracts so far this year. These sales performances provide evidence that our strategy of acquiring products and then investing in them is delivering growth.
Regulation in the sector, in particular as a result of Sarbanes-Oxley and UCITS III, is continuing to drive growth, with continued demand for our risk product and other analytics reporting.
Our strategy remains to acquire new, but related, products to cross sell to our expanding client base. As our product offering grows, we hope to be seen as a strategic partner by our existing and prospective clients so that when they need portfolio analytic solutions they consider StatPro first.
In addition to this we are seeking to expand our relationships with custodian banks which are increasingly offering integrated outsourcing services to their clients. StatPro now has eight custodian clients globally. Each contract is structured around a minimum fee and a per portfolio fee that increases as the custodian sells to more clients. In this way we can participate in the increasingly significant outsourcing market. We anticipate winning further business from custodians as our software offers a unique combination of precision and scalability, which is backed up by the expertise of our client services’ support team.
The Company has made seven acquisitions since 2000 (the year its shares were first listed). All of these acquisitions have been successfully integrated and are contributing to our strong performance. Our strategy remains to seek and evaluate further potential acquisitions that can enhance earnings through both improvements to our product portfolio and geographical expansion.
The Company was delighted to have been awarded the Queen’s Award for Enterprise (2006) in the International Trade category. The Award, announced on Her Majesty’s eightieth birthday, recognises StatPro’s continuous achievement in international trade, resulting in substantial overseas earnings with growth and commercial success, sustained over a six year period since 1999.
We paid our maiden dividend of 0.5p per share as a public company on 31 May 2006 and now propose to pay a maiden interim dividend of 0.3p per share on 1 November 2006 to shareholders on the register at the close of business on 6 October 2006.
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.
StatPro’s prospects for the second half of 2006 look positive based upon our current pipeline of business. There is clear and strong demand for our risk and fixed income products and generally the outlook is positive for all our products in all our territories. Regulations, both existing and new, continue to drive demand in our markets. By investing in powerful new software systems such as StatPro’s our clients can mitigate risk on a cost effective and proportionate basis.
Given the operational gearing of the business we therefore expect profit margins to improve. Our medium term goal is to achieve at least 20% net operating margins.
I would like to thank all the staff of StatPro for their contribution to these very successful interim results and I look forward to reporting continuing improvements on this success.
New business achieved in the first half of 2006 was significantly ahead of the comparative period. The combination of higher levels of new licences and a high retention rate resulted in revenue increasing by 26% over the comparable period in 2005, including 3% from acquisitions. The Group increased its operating profit to £0.79 million (2005: £0.57 million) and increased the net funds position to £4.22 million at the end of June 2006 (June 2005: £1.71 million). Two acquisitions were completed in the period as described in the Chief Executive’s review. The initial cash consideration amounted to £1.41 million (see note 4) of which £0.79 million (initial cash consideration net of cash acquired but before adjustment for net assets) was incurred in the first half. The initial share consideration amounted to £0.77 million, deferred consideration is currently estimated at £2.00 million and goodwill arising amounted to £3.58 million.
Turnover increased by 26% to £6.33 million (2005: £5.02 million) including a contribution of £0.17 million from the two acquisitions in the second quarter of 2006. The impact of exchange rates on turnover and profit were immaterial in the period. Software licence revenue grew by 27% and the level of professional services and other revenue increased by 20%.
The split of revenue by type was as follows:
Six months to Six months to Year to 30 June 30 June 31 December 2006 2005 2005 £ million £ million £ million Turnover Software licences 5.37 4.22 9.13 Professional services and other revenue 0.96 0.80 1.66 _________ _________ _________ 6.33 5.02 10.79
A good level of new business was achieved in the first half in all the markets in which we operate. Our risk and fixed income systems and our reporting solution achieved the fastest growth rate. The value of the recurring revenue for StatPro Risk Management systems increased to £2.22 million by the end of June 2006 from £1.60 million at the end of December 2005. StatPro Fixed Income (‘SFI’), which was formally launched in January 2006, increased recurring revenue to £0.63 million by 30 June 2006 from £0.28 million at 31 December 2005.
The StatPro Enterprise Reporting solution (‘SER’), which was acquired with the Delve acquisition in July 2005, has increased recurring revenue to £0.47 million from £0.27 million at the end of December 2005 and from £0.17 million on acquisition. The two acquisitions completed in the period (Alphai and Kizen) added £0.74 million of recurring revenue.
The proportion by value of recurring software licences on multi-year contracts (licence agreements with more than one year remaining contractually committed) increased to 56% at the end of June 2006 on an underlying basis compared to 53% at the end of December 2005 and 51% at the end of June 2005. Including the impact of the contracts acquired the level was 53%.
The annual value of continuing recurring revenue, which is analysed below, increased to £12.0 million from £10.1 million at 31 December 2005, a growth of 19%. Excluding acquisitions and at constant exchange rates the growth rate was 13% in the six month period.
Annualised value At 31 New Contracts Net impact of At Growth rate December contracted acquired with exchange 30 June (excluding 2005 revenue (net acquisitions rates 2006 contracts acquired of and at constant cancellations) exchange rates) £ million £ million £ million £ million £ million % Recurring revenues Software licences 10.10 1.35 0.74 (0.19) 12.00 +13
Operating expenses (before amortisation of intangibles) amounted to £4.75 million in the first half of 2006 (2005: £3.84 million). The growth in expenses arose mainly from a higher average level of employees (see below), and associated travel and other employee costs. There were also additional costs associated with third party data for risk and marketing as a result of our increased product offering.
The Group continues to increase its investment in research and development, to ensure we remain at the forefront of performance and risk analytics technology, including the development of an application service provider (‘ASP’) solution. Development costs are now capitalised under IFRS where recognition criteria are met. As a result there is now an intangible asset of £2.93 million (including acquired intangibles) 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 (Dec 2005: £2.31 million). Development expenditure is amortised over a three year period. 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.
The average number of employees during the first six months of 2006 increased to 114 (2005: 90). The number of employees has increased from 105 at the start of the period to a total of 125 employees, situated in nine offices (London, Paris, Milan, Frankfurt, Luxembourg, New York, San Francisco, Cape Town and Sydney) at the end of June 2006. 11 employees joined with the acquisitions completed in the period.
Net interest income, arising from interest earned on cash and deposits less interest and fees accrued on bank loans and finance leases, amounted to £0.04 million (2005: net interest expense £0.02 million) as a result of the increase in net cash during the period.
Profit before tax
The profit before tax increased by 48% to £0.82 million from £0.55 million.
Tax amounting to £0.08 million (2005: £0.01 million) has been provided on profits at a rate of approximately 10%, based on the current estimate of the effective tax rate for the Group for the full year. The level of deferred tax asset amounted to £1.46 million (Dec 2005 – £1.52 million). Deferred tax amounting to £0.44 million at end June 2005 has been reclassified as current deferred tax for comparability purposes.
Earnings per share
Earnings per share (basic and diluted) increased by 43% to 2.0p (2005: 1.4p).
There was an improved cash inflow from operations before investment in development activities during the first six months of 2006 amounting to £1.95 million (2005: £1.14 million), which was enhanced by a favourable working capital inflow. The investment in development activities was £0.97 million (2005: £0.81 million). As a result, the cash inflow from operations after investment in development activities increased to £0.98 million (2005: £0.33 million) in the first six months of 2006 (see note 2).
In the light of the various funding requirements pertaining to acquisitions and in order to strengthen the balance sheet the Company placed 3.25 million new ordinary shares at 80p per share in May 2006 with new and existing institutional investors. Net proceeds from the placing and the exercise of employee options in the first half of 2006 amounted to a total of £2.50 million.
The Group’s net assets increased to £6.92 million at June 2006 (June 2005: £1.89 million) from £3.03 million at 31 December 2005. Goodwill arising on the two acquisitions in the period amounted to £3.58 million (see note 4). The level of trade and other receivables, of which the major component is trade debtors, was lower than the level at the end of December 2005 but increased to £3.60 million at the end of June 2006 compared to last year (June 2005: £2.15 million). The cash balance at the end of June 2006 was £4.25 million (June 2005: £1.78 million). The Group’s net funds at 30 June 2006 amounted to £4.22 million (June 2005: £1.71 million).
The major component of creditors is deferred income, a non-cash liability, which amounted to £6.76 million (June 2005: £5.10 million). The level of deferred contingent consideration is estimated at £2.00 million for the two acquisitions in the period taking the total deferred contingent consideration to £3.50 million at the end of June 2006.
StatPro has now generated operating cash for four years. Having initiated a dividend payment policy in 2005, the directors intend to pay a maiden interim dividend of 0.3 pence per ordinary share (2005: nil) on 1 November 2006 to shareholders on the register at the close of business on 6 October 2006. The Board intends 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
Group Income Statement Notes Unaudited Unaudited Year to Six months to Six months to 31 December 30 June 30 June 2005 2006 2005 £'000 £'000 £'000 Group Turnover Continuing operations 6,156 5,017 10,786 Acquisitions 174 - - ______ ______ ______ Total continuing operations 6,330 5,017 10,786 Operating expenses before amortisation of intangibles (4,751) (3,841) (7,969) Amortisation of intangibles (793) (602) (1,154) Operating expenses (5,544) (4,443) (9,123) ______ ______ ______ Continuing operations 770 574 1,663 Acquisitions 16 - - Operating profit 786 574 1,663 Interest receivable 44 10 18 Interest payable (8) (30) (42) ______ ______ ______ Profit before taxation 822 554 1,639 Taxation (84) (9) - ______ ______ ______ Profit for the period 738 545 1,639 ______ ______ ______ (Loss)/profit attributable to minority interests (7) 61 69 Profit attributable to equity shareholders 745 484 1,570 ______ ______ ______ 738 545 1,639 ______ ______ ______ Earnings per share from continuing operations - basic 1 2.0p 1.4p 4.6p - diluted 1 2.0p 1.4p 4.5p
Statement of Recognised Income and Expense
Unaudited Unaudited Six months to Six months to Year to 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Profit after tax 738 545 1,639 Net exchange differences offset in reserves net of tax 28 11 (81) ______ ______ ______ Total recognised gains and losses for the period 766 556 1,558 ====== ====== ====== Attributable to: Minority interests (7) 61 78 Equity shareholders 773 495 1,480
Consolidated Balance Sheet
Notes Unaudited Unaudited As at As at As at 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Non current assets Goodwill 6,632 708 3,053 Intangible assets 2,931 1,835 2,308 Property, plant and equipment 528 468 466 Other receivables 250 285 174 Deferred tax assets 1,032 1,032 1,032 ______ ______ ______ 11,373 4,328 7,033 Current assets Trade and other receivables 3,597 2,145 3,759 Deferred tax assets 430 440 490 Cash and cash equivalents 4,254 1,775 1,853 ______ ______ ______ 8,281 4,360 6,102 Liabilities Current liabilities Financial liabilities - borrowings (35) (41) (35) Trade and other payables (2,397) (1,637) (1,987) Current tax liabilities (46) (5) (26) Deferred income (6,668) (5,035) (6,487) Provisions - contingent consideration (1,096) - - ______ ______ ______ (10,242) (6,718) (8,535) Net current liabilities (1,961) (2,358) (2,433) Non-current liabilities Financial liabilities - borrowings - (22) - Deferred income (87) (63) (75) Provisions - contingent consideration (2,404) - (1,500) ______ ______ ______ (2,491) (85) (1,575) Net assets 6,921 1,885 3,025 ====== ====== ====== Shareholders' equity Ordinary shares 393 350 350 Share premium 3,362 903 891 Other reserves 698 1,697 (90) Retained earnings 2,525 (893) 1,924 ______ ______ ______ Total shareholders' equity 6,978 2,057 3,075 Minority interest in equity (57) (172) (50) ______ ______ ______ Total equity 6,921 1,885 3,025 ====== ====== ======
Consolidated Cash Flow Statement
Unaudited Unaudited Six months to Six months to Year to 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Cash flows from operating activities Cash generated from operations 1,949 1,145 3,155 Interest received 42 7 18 Interest paid (9) (5) (13) Issue costs in respect of bank loan - (5) (5) Tax received/(paid) (34) (11) (31) ______ ______ ______ Net cash from operating activities 1,948 1,131 3,124 Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) (790) - (858) Investment in intangible assets - development costs (966) (813) (1,738) Proceeds from sale of property, plant and equipment - 22 22 Purchase of property, plant and equipment (108) (87) (188) ______ ______ ______ Net cash used in investing activities (1,864) (878) (2,762) Cash flows from financing activities Repayment of bank loan - (1,200) (1,200) Proceeds from issue of ordinary shares 2,499 564 551 Capital element of finance lease payments - (2) (2) Dividends paid to shareholders (180) - - ______ ______ ______ Net cash from/(used) in financing activities 2,319 (638) (651) ______ ______ ______ Effects of exchange rate changes (2) 11 (7) Net increase/(decrease) in cash and cash equivalents 2,401 (374) (296) ====== ====== ====== Cash and cash equivalents at start of period 1,853 2,149 2,149 Cash and cash equivalents at end of period 4,254 1,775 1,853 ====== ====== ======
Reconciliation of operating profit to net cash flow from operating activities
Unaudited Unaudited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Operating profit 786 574 1,663 Depreciation of tangible fixed assets 110 103 202 Amortisation of intangibles 793 602 1,154 Decrease/(increase) in debtors 289 206 (1,254) Increase/(decrease) in creditors (excluding deferred income) 112 (86) 193 (Decrease)/increase in deferred income (177) (276) 1,130 Share based payments 36 23 59 (Profit)/loss on disposal of fixed asset - (1) 8 ______ ______ ______ Net cash generated from operations 1,949 1,145 3,155 ====== ====== ======
Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Increase/(decrease) in cash and cash equivalents in the period 2,401 (374) (296) Movement of finance leases - (4) 2 Bank loan repayment - 1,200 1,200 Other non-cash movements - (8) 14 ______ ______ ______ Movement in net funds 2,401 814 920 Net funds at beginning of period 1,818 898 898 ______ ______ ______ Net funds at end of period 4,219 1,712 1,818 ====== ====== ======
Statement of changes in shareholders’ equity
Share Share premium Retained Other Minority Total capital account earnings reserves * interests £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 350 891 1,924 (90) (50) 3,025 Shares issued 43 2,471 - 760 - 3,274 Profit for the period - - 745 - (7) 738 Dividend - - (180) - - (180) Share based payments - - 36 - - 36 Exchange differences offset in reserves - - - 28 - 28 ______ ______ ______ ______ ______ ______ At 30 June 2006 393 3,362 2,525 698 (57) 6,921 ====== ====== ====== ====== ====== ======
* Other reserves includes warrant reserve, merger reserve, translation reserve (previously reported in retained earnings) and (as at 30 June 2005 only) non-distributable reserve.
Notes to the interim accounts
1. Basic earnings per share. Basic earnings per share has been calculated based on the profit after taxation and minority interests of £0.74 million (2005 – £0.48 million) and the weighted average number of shares of 36,393,436 (June 2005 – 33,407,258). The diluted earnings per share were 2.0p (2005: 1.4p) based on potentially dilutive shares outstanding amounting to 1,201,501 (2005: 453,970).
2. Cash generated from operations – reconciliation from statutory heading to business performance measure
Unaudited Unaudited Six months to Six months to Year to 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Cash generated from operations 1,949 1,145 2,717 Investment in intangible assets - development costs (966) (813) (1,261) ______ ______ ______ Cash generated from operations less internally generated intangible assets 983 332 1,456 ====== ====== ======
3. Dividend. An interim dividend for 2006 amounting to 0.3 pence per ordinary share (2005: nil) will be paid on 1 November 2006 to shareholders on the register on 6 October 2006. A final dividend for 2005 amounting to 0.5 pence per ordinary share was paid on 31 May 2006 to shareholders on the register on 28 April 2006. Under IFRS dividends are accounted for when paid and not when proposed or declared.
4. Acquisitions. During the period the Company acquired the entire share capital of two companies, Alphai Pty Limited and Kizen (Pty) Limited. The provisional fair value details and goodwill arising on the acquisitions are as follows:
Alphai Kizen Total £'000 £'000 £'000 Share of net assets acquired 93 54 147 Fair value adjustment 350 100 450 Goodwill 2,120 1,459 3,579 ______ ______ ______ 2,563 1,613 4,176 Initial cash consideration including costs and adjustments for net assets acquired 793 613 1,406 Initial share consideration 770 - 770 Deferred consideration - provisional estimate 1,000 1,000 2,000 ______ ______ ______ Total consideration including costs 2,563 1,613 4,176
The fair value adjustments relate to the intangible assets acquired such as acquired technology and client contracts.
5. The financial information set out in this interim statement has been prepared under IFRS on the basis of the accounting policies set out in the statutory accounts of StatPro Group plc for the year ended 31 December 2005. This report is not prepared in accordance with IAS34 which is currently not mandatory. This interim statement has not been audited but has been reviewed by the Company’s auditors PricewaterhouseCoopers LLP.
6. The financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for StatPro Group plc for the year ended 31 December 2005 reported under IFRS, on which the auditors gave an unqualified opinion, have been delivered to the Registrar of Companies.
7. Copies of this statement will be posted to shareholders. Further copies are available free of charge on request from the Company Secretary at the Company’s registered office, StatPro House, 81-87 Hartfield Road, London SW19 3TJ.