Final Results

FOR RELEASE 7.00AM 15 March 2007 ACCESS INTELLIGENCE PLC ("Access Intelligence" or "the Group") (Access Intelligence is a Software and Computer Services group of companies providing business critical compliance and legislative driven services to both public and private sectors on a recurring revenue basis) PRELIMINARY RESULTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2006 2006 2005 Change £000 £000 Turnover 3,677 1,943 +89% Profit before tax, amortisation of goodwill and 570 175 +226% interest on preference shares Profit/(loss) before tax 246 (26) Basic earnings / (loss) per share 0.12p (0.13p) Adjusted earnings per share 0.55p 0.18p +206% Dividends per share Nil Nil Highlights Good progress across both divisions Compliance software and services division * Successful acquisition of Management Services 2000 Limited - Provides compliance software to the retail financial services industry - Clients include: Royal Bank of Scotland Group, National Australia Group, Axa Sunlife and Liverpool Victoria and many other blue chip financial services organisations * Due North growth impacted by the rate that the public sector is implementing the government's e-procurement initiative designed to reduce public expenditure by £20bn across 1000 public sector organisations * Contract won for South East Centre of Excellence, the largest of the nine regional centres representing 74 local authorities in addition to the North East (NEPO) representing 25 councils Data Storage back-up retrieval division * Contract to manage and support a mission critical email system for a leading public body * Further increase in sales force to attack high end data storage and retrieval market * Successful launch of StarscanTM, the managed anti virus and spamming email service Outlook * Markets still buoyant * Investment in new products and people * Looking to another significant step forward in 2007 For further information: Access Intelligence plc 01904 520 840 Jeremy Hamer (Non Executive Chairman) Brendan Austin (Chief Executive) Colin Davies (Finance Director) Cubitt Consulting 020 7367 5100 Brian Coleman-Smith / Leanne Denman /Allison Reid Corporate Synergy 020 7448 4400 Rhod Cruwys / David Seal Background note Access Intelligence is a Software and Computer Services group of companies providing business critical compliance and legislative driven services to both public and private sectors on a recurring revenue basis. Since the flotation on AIM in November 2003, the Group has made three acquisitions focused in the areas of compliance software and data backup and recovery. The group today Access Intelligence is based in York with subsidiaries in York, Stockport, Greater Manchester, Chorley, Lancashire and Newcastle upon Tyne. The company has two principle divisions which are: Compliance software and services division: This includes a range of software including The Virtual Compliance Officer™ which enables companies in the retail financial services sector to support their customer acquisition process whilst also ensuring that they comply with ever increasing regulations from the EU and the FSA. Our suite of sourcing and procurement software streamlines and reduces costs of tendering and contract management for both buyers and suppliers in the public and private sectors. The government has the objective that all public sector bodies comply with its directive to use methods such as electronic tendering for goods and services in order to meet its planned reductions in public spending of £20bn per annum. Data storage back-up retrieval division: The architecture and provision of high availability systems for mission critical applications that enable customers' data to be available at all times in the event of computer failure. Online offsite data storage and retrieval through Backup&Running™ via secure data centers. Email monitoring. There is an ever increasing compliance emphasis driven by initiatives such as Sarbanes-Oxley to ensure data is held appropriately and can be retrieved easily when required. The business model The Group's income strategy is to build recurring revenues delivered through extendable contracts ranging between one and five years. This model should provide excellent visibility of future revenues and, with effective customer retention, outstanding gross margins over the longer term. The strategy for growth The strategy is to acquire businesses which have good management and high growth potential that fit the revenue model while, at the same time, adding value to the Group's existing services. The businesses acquired will have substantial autonomy to develop within budgets agreed with the Group Chief Executive and Finance Director, whilst benefiting from the experience and cross selling opportunities provided by being part of an expanding group of companies. New companies to the group can take advantage of back office facilities where appropriate thus enabling them to concentrate on the core activities of customer acquisition, service delivery and product development. At this stage of the Group's development, the Central Group Executive Team, which is based in York, will be kept to a maximum of three people, including support staff. The Non-Executive Directors will continue to be involved in sourcing and evaluating potential acquisitions and monitoring the performance of the Group. ACCESS INTELLIGENCE PLC PRELIMINARY RESULTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2006 Chairman's statement I am pleased to announce our results for the year ended 30th November 2006. This year has seen the Group further increase its compliance software division with the acquisition of Management Services 2000 Limited ("MS2M"). Based in York MS2M provides a range of software targeted at the retail financial services sector. Its customer base includes several blue chip financial institutions. We have continued to make progress in our existing businesses albeit there has been a slow down in public sector spending pushing opportunities out beyond this financial year. Results Group turnover was up by 89% to £3.7m (2005: £1.9m). Operating profit before amortisation has increased to £560,000 (2005: £100,000). Adjusted earnings per share improved to 0.55p (2005: 0.18p). The Group is not proposing to pay a dividend on the ordinary shares. The Year in focus We made good progress throughout the year across both divisions. However, the rate at which the public sector implemented the government's e-procurement initiative was slower than anticipated. This had an impact on the growth rate of Due North our e-sourcing software company. The government still has a declared aim of reducing public expenditure by £20bn a year across 1000 public sector organisations through the use of electronic procurement systems such as ours. I am encouraged by our contract win at the South East Centre of Excellence which is the largest of the nine regional centres and represents 74 local authorities in South East England. We have now built and handed over the portal and are now actively engaged in marketing our electronic tender solution to the 74 councils. The majority of the revenue from this win will fall into future financial periods. In our data storage and recovery division we won a contract to manage and support a mission critical email system for a leading public body valued at £ 128,000 pa. We further increased our sales resource to attack more of the high end data storage and retrieval market and have increased our sales pipeline for 2007. Take up of Starscan™ , our managed anti virus and spamming email service, since its launch in quarter 3 has been encouraging. In October we acquired MS2M, a developer of compliance software for the financial services industry, for an initial consideration of £1,950,000, £ 1,450,000 in cash and £500,000 in new Ordinary Shares. Deferred consideration will be paid based on five times the average operating profit for the two years ending 31 May 2007 and 31 May 2008 less the amount of the initial consideration. Total deferred consideration will not exceed £ 2,500,000. MS2M generated operating profits of £299,000 on a turnover of £893,000 in the year ended 31 May 2005 and profits, before taxation, of £452,000 for the 18 months ended 30 November 2006. It has recurring revenues of approximately £ 300,000 per annum. The acquisition of MS2M is, we believe, another excellent acquisition for Access Intelligence. It has a blue chip client base among some of the leading banks, building societies and financial institutions and is currently tendering on several material projects. With the increasing compliance requirements both in the UK and the European Union, we believe that MS2M has tremendous growth opportunities particularly in the UK where its "Virtual Compliance Officer" helps companies comply with the Financial Services Authority's regulatory requirements. Our other two companies: The Marketing Guild Limited ("Marketing Guild"), which provides marketing and business development information and support to small and medium sized businesses, and Wired Gov Limited ("Wired Gov", which provides an electronic distribution service of government initiatives, policies and finance affecting businesses, have both continued to develop their services during the year. However, both companies remain non-core. Our business model and strategy The Group's objective is to acquire and build businesses which provide compliance based software or data storage and retrieval services to both the private and the public sector by way of recurring revenue contracts lasting between one and five years. This model should provide excellent visibility of future revenues and, with effective customer retention, outstanding gross margins over the longer term. Staff Our future prosperity is in large measure dependent on the ability and loyalty of our staff. Their specialist knowledge and skills are key to providing our value added services to our customers. Staff turnover is low and we continue to attract high calibre people. On behalf of the board I would like to thank our employees for their continued commitment. Current trading and outlook We have begun the new financial year in line with market expectations. The markets where we compete are still buoyant and together with our continuing investment in both new products and sales people enable us to view the Group's outlook with optimism. We continue to look for businesses to join the Group, clearly focusing on compliance software and data storage and retrieval. In conclusion we are looking forward to another significant step forward in 2007 founded in particular on a full year contribution from MS2M. Jeremy Hamer Chairman 15 March 2007 Chief Executive's Review 2006 perspective In October we completed the acquisition of MS2M who provide compliance software to the retail financial services industry. The company's software products manage the ever complex process of ensuring compliance with regulations from the Financial Services Authority (FSA) and ever increasing legislation from the EU. Companies using the software benefit from being able to easily see the current risk status of their organisation as a whole, with the ability to drill down through their management structure to view compliance adherence at an individual sales level. This enables them to be proactive in managing any potential risk. Sales leads are also tracked through the system which enables the measurement of the quality of business secured. Companies using the software include the Royal Bank of Scotland Group, National Australia Group, Axa Sunlife, Liverpool Victoria and many other blue chip financial services organisations. Due North who provide sourcing software solutions which streamline and manage the process of sourcing products and services, tender evaluation, contract award and subsequent contract management has seen an increase in recurring revenues to £272,342 (2005:£151,662). This growth is in spite of a slow down in the public sector's adoption of the governments e-government initiatives and public spending reductions. The local authority market has structured itself into 9 regional centres of excellence. Whereas previously individual councils tendered for their own portal and software, the centres represent the participating local authorities in that region. Practice has been that the Centre of Excellence uses a tender process to let a contract to develop a portal for that region. Each authority then goes out to tender for its e-planning, e-sourcing, e-tender, e-auction and contract management software. Currently Due North has won two Centres of Excellence: the North East (NEPO) representing 25 councils and the South East which represents the largest group at 74 councils. To date we have signed up 18 councils in the North East and 3 in the South East. The South East portal was completed late in 2006. There are 6 centres that have yet to award contracts. One of the six is currently evaluating tenders and is expected to announce its decision in April. Our data backup and restore division has had a successful year with Willow Starcom's recurring revenues showing an increase of 7% to £1,187,689. Our newly launched Starscan™ and Starmon™ services which manage email virus and spamming and system performance respectively have already generated annualised recurring revenues of £20,000. During the year we won a significant contract supporting mission critical e-mail system for a leading public body. Our marketing services and information division continued to perform as expected. The year ahead The regulation of the general insurance market in 2004 is now having an effect with a number of leading names receiving fines or being censured. This is heightening awareness of the need for systems such as MS2M's Virtual Compliance Officer™. We are actively talking with a number of companies in this section of the market. We will continue to develop our existing customer base as well as targeting strategic market sectors. We are currently assessing the contribution which we could make to assist companies facing the challenges raised by the Market in Financial Instruments Directive (MiFID). We have recently signed a partnership agreement with CedarOpenAccounts (COA), to market our e-Sourcing software suite to their public sector clients. CedarOpenAccounts (COA) is the UK's fastest growing supplier of Accounting, Financial Management & Reporting, Procurement, HR & Payroll software solutions to the public and private service sector. Market conditions continue to look promising for our data backup and recovery division. There seems to be no let up in the growth of data and we plan to launch additional managed services in the third quarter of 2007. We are increasing our sales resource and support infrastructure in support of these initiatives. In summary, we have positioned ourselves to take advantage of the opportunities that are available to us and we remain confident, that we will have another successful year. Brendan Austin Chief Executive 15 March 2007 ACCESS INTELLIGENCE PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2006 Notes 2006 2005 (restated) £000 £000 Turnover Continuing operations 3,541 1,943 Acquisitions 136 - -------------- -------------- 3,677 1,943 Cost of sales (1,653) (782) -------------- -------------- Gross profit 2,024 1,161 Operating expenses (1,776) (1,246) -------------- -------------- Operating profit /(loss) Continuing operations 490 100 Acquisitions 70 - Amortisation of goodwill (312) (185) -------------- -------------- Operating profit/ (loss) 248 (85) Interest receivable 17 79 Interest payable (7) (4) Preference shares interest (12) (16) -------------- -------------- Profit/(loss) on ordinary activities 246 (26) before taxation Taxation 3 (154) (50) ----------- ----------- Profit/(loss) transferred to reserves 92 (76) ===== ===== Basic earnings per share 2 0.12p (0.13p) ====== ====== Adjusted earnings per share 2 0.55p 0.18p ====== ====== Diluted earnings per share 2 0.12p (0.12p) ====== ====== Diluted adjusted earnings per share 2 0.52p 0.17p ====== ====== ACCESS INTELLIGENCE PLC CONSOLIDATED BALANCE SHEET AT 30 NOVEMBER 2006 Notes 2006 2005 (restated) £'000 £'000 Fixed assets Intangible 5 8,251 5,731 Tangible 157 122 -------------- -------------- 8,408 5,853 -------------- -------------- Current assets Stocks 314 278 Debtors 1,216 1,122 Cash at bank and in hand 1,002 603 -------------- -------------- 2,532 2,003 Creditors: amounts falling due within one (2,101) (2,436) year -------------- -------------- Net current assets/(liabilities) 431 (433) -------------- -------------- Total assets less current liabilities 8,839 5,420 Creditors: amounts falling due after more (708) (150) than one year ------------- ------------- 8,131 5,270 ====== ====== Capital and reserves Called up share capital 549 317 Share premium account 7,906 5,369 Capital redemption reserve 24 - Profit and loss account (348) (416) ------------- ------------- Equity shareholders funds 8,131 5,270 ====== ====== ACCESS INTELLIGENCE PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2006 2006 2005 £'000 £'000 Net cash inflow/(outflow) from operating 365 (172) activities ------------ ------------ Returns on investments and servicing of finance Interest paid (7) (4) Interest received 17 79 Preference dividends paid (12) (16) ------------ ------------ Net cash (outflow) / inflow from returns on (2) 59 investments and servicing of finance ------------ ------------ Taxation (41) (24) ------------ ------------ Capital expenditure and financial investment Purchase of intangible fixed assets (332) (92) Purchase of tangible fixed assets (71) (57) ------------ ------------ Net cash outflow from capital expenditure (403) (149) ------------ ------------ Acquisitions Purchase of subsidiary undertakings (1,708) (1,971) Net cash acquired with subsidiaries 818 276 ------------ ------------ Net cash outflow from acquisitions (890) (1,695) ------------ ------------ Net cash outflow before financing (971) (1,981) ------------ ------------ Financing Issue of share capital 1,500 3,000 Costs of Fundraising (101) (192) Net movement on loans (24) (213) Capital element of hire purchase agreements (5) ------------ ------------ Net cash inflow from financing 1,370 2,595 ------------ ------------ Increase in cash 399 614 ====== ====== NOTES TO THE FINANCIAL INFORMATION 1. Basis of preparation and financial information The financial information in this preliminary announcement has been prepared in accordance with the accounting policies set out in the financial statements of Access Intelligence PLC for the financial year ended 30 November 2006 which have remained unchanged from the financial year 2005, with the exception of the reclassification of the redeemable preference shares as debt rather than equity. The related preference dividend has also been reclassified as part of interest costs. The comparative figures for 2005 have been restated accordingly. The financial information in this document does not constitute the company's statutory accounts for the financial year ended 30 November 2006 or financial year 2005, but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies and those for 2006 will be delivered following the company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under sections 237 (2) or (3) of the Companies Act 1985. 2. Earnings per share Earnings per share is calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue for 2006 of 74,089,471 (2005: 59,152,498). Diluted earnings per share is calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue for 2005 adjusted for the dilutive effect of options granted which totals 78,439,471 (2005: 62,502,498). An adjusted earnings per share and a diluted adjusted earnings per share, which exclude goodwill amortisation, have also been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group. 2006 2005 Earnings Weighted Per Earnings Weighted Per Average No Share Average No Share £'000 of shares Amount £'000 of shares Amount pence pence Earnings attributable to ordinary shareholders 92 74,089,471 0.12p (76) 59,152,498 (0.13p) ---- --------- ---- ---- --------- ---- Amortisation of goodwill 312 - - 185 - - ---- --------- ---- ---- --------- ---- Adjusted earnings per share 404 74,089,471 0.55p 109 59,152,498 0.18p ==== ========== ==== ==== ========= ==== Dilutive effect of options - 4,350,000 - - 3,350,000 - ---- --------- ---- ---- --------- ---- Diluted earnings per share 92 78,439,471 0.12p (76) 62,502,498 (0.12p) ---- --------- ---- ---- --------- ---- Diluted adjusted earnings per share 404 78,439,471 0.52p 109 62,502,498 0.17p ==== ========= ==== ==== ========= ==== 3. Taxation 2006 2005 £'000 £'000 Corporation tax at 30% (2005: 19%) 140 41 Deferred tax 14 9 ----------- ----------- 154 50 ===== ===== Factors affecting the tax charge for the year The corporation tax assessed for the year is higher than the standard rate of corporation tax in the United Kingdom of 30% (2005: 19%). The differences are explained below: 2006 2005 £'000 £'000 (restated) Profit / (loss) on ordinary activities before 246 (26) tax ===== ===== Profit /(loss) on ordinary activities multiplied 74 (5) by standard rate of corporation tax in the UK of 30% (2005: 19%) Effect of: Expenses not deductible for tax purposes 1 1 Capital allowances in excess of depreciation (1) (1) Permanent timing differences 84 38 Utilisation of loss relief (12) - Adjustment due to marginal rates of tax (6) 8 ----------- ----------- Current tax charge for the year 140 41 ===== ===== 4. Acquisitions The acquisition of the Group for the year was as follows: On 16 October 2006, the entire issued share capital of Management Services 2000 Limited was acquired for an initial consideration of £1,950,000 satisfied by the issue of 7,598,784 shares at 6.5p per share and cash of £1,450,000. Deferred consideration of up to £2.5m is payable dependent on the results for the year ended 30 November 2007 and 30 November 2008. A provision has been made for additional consideration payable of £1,000,000. The acquisition has been accounted for using the acquisition method of accounting, and goodwill arising on consolidation has been capitalised and will be amortised over a period of 20 years, its expected useful life. The following table sets out the identifiable assets and liabilities acquired: Total £'000 Tangible fixed assets 22 Debtors 84 Cash 818 Creditors (157) Taxation (85) ------------- Net assets acquired 682 Fair value adjustments Goodwill 2,527 ------------- 3,209 ====== Satisfied by: Cash 1,450 Issue of shares 500 Deferred consideration 1,000 Acquisition costs 259 ------------- 3,209 ====== Management Services 2000 Limited achieved a profit before taxation of £452,350 for the 18 months ended 30 November 2006. 5. Intangible fixed assets Goodwill Development Total costs £'000 £'000 £'000 Cost At 1 December 2005 5,846 232 6,078 Additions 2,527 352 2,879 Fair value adjustments (17) - (17) -------------- -------------- -------------- At 30 November 2006 8,356 584 8,940 -------------- -------------- -------------- Amortisation At 1 December 2005 307 40 347 Charge for the year 312 30 342 -------------- -------------- -------------- At 30 November 2006 619 70 689 -------------- -------------- -------------- Net book amount At 30 November 2006 7,737 514 8,251 ====== ====== ====== At 30 November 2005 5,539 192 5,731 ====== ====== ====== The useful economic life of the goodwill in respect of all acquisitions is 20 years, based on the directors' assessment of the income streams of the acquired businesses. Copies of the preliminary announcement are available from the company's Registered Office at Regency House, Westminster Place, York Business Park, York, YO26 6RW. The Annual Report and Accounts for the financial year ended 30 November 2006 will be posted to shareholders on or about 10 April 2007.

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