Final Results

RNS Number : 8867J

Allocate Software PLC

23 July 2013

 



23 July 2013

Allocate Software plc

("Allocate" or the "Company")

Final Results for the Year Ended 31 May 2013

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, announces its final audited results for the year ended 31 May 2013.

Financial Highlights

§ Total revenue increased by 1% to £37.1m

§ Healthcare revenue increased by 10% to £29.3m

§ Recurring revenue increased by 13% to £17.6m representing 47% of total revenue

§ UK Healthcare bookings exceeded UK Healthcare revenue by £5.5m

§ EBITDA* was £4.8m (2012: £6.4m)

§ Diluted adjusted EPS** was 5.6p (2012: 7.4p)

§ Operating cash flows were £8.7m (2012: £5.4m)

§ Gross cash balance was £13.1m. Net cash balance was £9.1m

§ Directors are proposing an increased dividend of 1.32p (2012:1.2p) per share in respect of the full financial year

*    EBITDA refers to earnings before interest, tax, depreciation, impairment, amortisation and share based payments and acquisition costs.

**    Diluted adjusted EPS excludes amortisation of intangible assets, impairment, acquisition costs and share-based payments, adjusted for taxation.

Business Highlights

§ UK Healthcare bookings exceeded revenue by £5.5m driven by the Allocate Cloud and Medics products. These products significantly contribute to the underlying increase in revenues and to deferred income to be recognised in future years.

§ Cash generated from operations exceeded EBITDA by £3.9m, driven by improvements in working capital and by the continuing evolution of the business model to one based more upon recurring revenues.

§ In July 2012 we acquired RealTime, the UK based supplier of Patient Flow solutions to the NHS.

§ 16 NHS Trusts selected HealthRoster after competitive tenders in 2013.  151 Trusts are now using the application which represents 51% of the 296 Acute, Mental Health and Community Care Trusts in the United Kingdom at year end.

§ The HealthRoster win rate this year was 88% and the 16 new wins included four competitive displacements.

§ 19 NHS Trusts renewed their HealthRoster contracts in 2013.  33 Trusts in total have made this commitment since the first renewal in 2010, a 100% success rate that is a clear demonstration of the value the application is delivering.

§ The Company secured 24 customers for the Allocate Cloud since the service was launched in July 2012.

§ The Medics Applications exceeded management's expectations this year with 13 NHS Trusts selecting at least one of them for the first time. The total number of NHS Trusts using the Medics Applications is now 144.

§ 37 clients have HealthRoster v10, including 22 clients who have migrated from HealthRoster v9 to HealthRoster v10, including one client in the US and a major client in Australia.

§ The Nordics business performed well driving increases in both revenue and profit margin.

Ian Bowles, Chief Executive Officer of Allocate, commented:

"The success of Allocate Software in 2013 is not fully reflected by the headline revenue in our audited financial statements. UK Healthcare bookings secured in 2013 are higher than reported revenues by £5.5m demonstrating the continued evolution of the Allocate business model, the value of which will accrue to future periods. The NHS and healthcare organisations internationally are increasingly benefiting from the broader solutions portfolio that we are able to offer. I am confident in our ability to increase success by offering our customers value added solutions that meet their needs."

Enquiries:

Allocate Software Ian Bowles - Chief Executive Officer Chris Gale - Chief Financial Officer	Tel: [phone]
Numis Securities Nominated adviser - Michael Meade / Simon Willis / Richard Thomas Corporate Broking - James Black	Tel: [phone]
Gable Communications Justine James John Bick	Tel: [phone] Tel: [phone] [e-mail]

CHAIRMAN'S STATEMENT

The 2013 financial year was an important year for Allocate. We launched the Allocate Cloud to great success, migrated the first wave of customers to HealthRoster v10, drove significant integration between the Medics Applications and HealthRoster and enjoyed a record year for cash flow.

The Company realised many achievements in 2013. The Healthcare business has continued to increase the number of customer agreements secured within the NHS and is better positioned now than at any time in its past to support the NHS leadership as it strives to meet the objectives and the vision of the Secretary of State for Health.  

The Company achieved many notable goals not reflected in this year's income statement and we continue to invest for the long term, confident that our integrated solutions will be well received by our customers and prospects around the world.

The underlying strength of Allocate can be seen in this year's Balance Sheet which shows a significant improvement in working capital management, a record year of cash generation and growth in deferred income, all of which are positive indicators for the future.

I was delighted to welcome to the Board Dr Lynn Drummond who joined us in November 2012. Lynn has extensive experience in investment banking, healthcare and science and has already proven to be a very valuable contributor.

I would like once more to thank our customers for their business and their partnership with Allocate. Finally, I would like to recognise and thank all of the Company's growing number of employees in all parts of the world, for another year of hard work and commitment in support of the Company's success.

As an indication of our confidence in the business, the directors are pleased to propose a dividend in respect of the full financial year of 1.32 pence per share.

We remain confident of our prospects for the 2014 financial year, and of the fundamental strength of the business.

Terry Osborne

CHAIRMAN

22 July 2013

CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

2013 was another successful year for the Allocate team securing new business in all three of our vertical markets. We grew worldwide Healthcare revenue by 10% to £29.3m and continued to develop and deepen our relationship with the NHS as a supplier of solutions that are critical to the goals of the service.

We continued to evolve our business model with the growth of recurring revenues and the development of new, compelling solutions for our existing customers. The Patient Flow and Emergency Department products offered via our RealTime acquisition address areas that are a major focus for the NHS in terms of driving efficiency and improvements in patient care.

Healthcare - UK

This year has seen continued growth of our business within the Health & Care sector in all three of our principal geographical regions. The number of NHS Trusts utilising our flagship application HealthRoster has now reached 151.

This position has been the lynchpin for our introduction of additional solutions. Today over 90% of all NHS Trusts use one or more of our applications.

The UK Healthcare business had a successful year in which revenue grew by 15%. We enjoyed success across our major product lines and at the same time we launched several new products that have gained traction with our customers providing the foundation for future growth.

Our success with Nursing has led to an innovative approach to the linking of the Medical workforce via the delivered Clinical Activity.

To date it has always been a challenge to have an holistic view of the workforce. Clinical Activity Management (CAM) enables our HealthRoster users to integrate the Clinical Activity that is being delivered by the Consultant Workforce. In association with our Consultants Job Planning application, Trusts can record the planned activity of their Consultants. This planned activity is then fed into HealthRoster and the delivered Clinical Activity can be monitored against the Trusts commitments.

For the first time, Trusts can plan and monitor the use of their Medical workforce. This approach is increasingly being embraced by the 144 Trusts who are now using one of our Medics Applications.

Patient Flow and Emergency Department are areas of major focus across the NHS in terms of driving efficiency and improvements in patient care.

The RealTime acquisition extends our applications portfolio and for the first time moves Allocate Software in to the area of Clinical Decision support. Having established our position around workforce optimisation we are working with our customers to improve and optimise Patient Flow across inpatient facilities and Accident and Emergency Departments, referred to as ED. Patient Flow through Emergency Departments is a key focus for the NHS at this point in time.

Our RealTime Patient Flow and ED applications provide an extremely innovative and clinically informed approach to the management of Patient Flow, helping to deliver a significant reduction in the average length of stay (ALOS) in a hospital. This not only benefits patients but also reduces costs for the hospital facility.  We believe that these applications could have an impact over the next few years similar to that experienced by HealthRoster over the last few years.

RealTime Patient Flow is deployed within eight Trusts and the ED application is being deployed in two of those Trusts. This application area is a synergistic and value added extension of our Rostering activities that will enable Trusts to match nursing care against clinical demand.

The major event of the year was the Francis II report into the activities at Mid Staffordshire NHS Foundation Trust. Anticipating this report and its potential recommendations a new HealthRoster module called SafeCare was developed and has already been sold into a number of Trusts.  This module matches the Acuity and Dependency of patients against the supply of nursing staff to deliver the requisite care.

This module will provide evidence of the safe staffing of wards within Trusts. Demonstrations of this capability have been extremely well received and a robust pipeline already built.

The NHS has introduced five yearly revalidation of its Medical staff. To support this mandatory requirement, Allocate launched a new Revalidation module as part of the Medics Planning portfolio.  Since its launch 23 Trusts have selected the module and we are confident that many other Trusts will adopt it over time.

The Allocate Cloud service was launched at the beginning of the financial year. This service provides an alternative for Trusts who do not wish to deploy HealthRoster within their own IT environment. Providing a secure, high performance and fully managed application environment staff are able to access HealthRoster on a 24 x 7 basis from any location. Again, our Cloud Service has been very well received by customers with 24 Trusts entering into multi-year agreements since launch.  

Of the 24 customers who chose the service in 2013, 14 were HealthRoster customers new to Allocate and 10 were existing HealthRoster customers. On exiting 2013, we had a pipeline of over £10m for the Cloud service. Cloud subscription income is incremental to HealthRoster licence income, not in substitution for it, so it therefore drives increasing recurring revenue as well as customer retention.

We secured 16 new HealthRoster customers this year, with a win rate of 88%, including four customers where we replaced a competitive product. Over time, the HealthRoster win rate has been 81% and over the last five years, we have replaced competitive applications in 26 accounts. We secured 19 HealthRoster renewals this year making 33 in total since this process started three years ago. The 33 renewals represent a 100% renewal rate on terms broadly similar to those of the original contracts. These statistics make very clear the value attributed to HealthRoster by our customers in the NHS.

Our Medics products enjoyed a successful year securing 40 new sales to customers and growing revenue by 14% on an annualised basis. As noted, the new Revalidation product was a major contributor to this success.

The transition of our business model has gathered pace with UK Healthcare recurring revenues growing by 13% over the prior year. Importantly, bookings for UK Healthcare exceeded revenue by revenue of £5.5m. The excess was driven by multiyear bookings for Cloud, Medics and HealthAssure. This provides improved predictability and visibility into future revenue streams.

The performance of the HealthAssure application has continued to be below management's expectations in this period.  Whilst we secured nine new customers this year, the non-renewal rate amongst the existing customers, mainly PCTs, has been higher than expected.

Healthcare - Nordic & Australia

The Nordic regional team once again performed very well delivering a significant contribution in both revenue and margin terms.

We secured 22 new customers including eight municipalities, bringing our market share of municipalities to 49%.

We invested in new sales resource last year and have been rewarded with a record year for revenue and a significant pipeline build on exiting 2013.

Services enjoyed a strong year with the Human Logistics Services, Planning Academy and the Resource Utilisation Services being well received.

In Australia the Healthcare business has progressed steadily.

The principal new business success for HealthRoster has been securing two phases of work with a major Healthcare area in Queensland. 

RosterOn secured an important five year contract with Hume Rural Health Alliance in Victoria.  This is one of the largest health services in the state of Victoria, and will deliver over £1.0m over the term of the contract.

Defence

The Defence business had another solid year, without the benefit of the significant licence deal in 2012, delivering revenue of £5.0m (2012: £7.6m).

The Company received a follow on order for a substantial sum with the Royal Australian Air Force (RAAF). This contract win means that we now support the operations of all three (Land, Sea and Air) Services within the Australian Defence Force, driven by the Joint Vice Chief Defence Force group.

At the end of the financial year, we secured a Proof of Concept from the UK Army, which is shedding 20,000 staff in a reduction to a strength of 82,000, compensated for by doubling the Reserves to 30,000. The resulting complex and high-profile restructuring issues in project Future Reserves 2020 (FR20) will be managed under a services contract using Defence Suite.

Maritime

The Maritime business had a very successful year, delivering revenue of £2.8m (2012: £2.1m).

We secured significant new Maritime Contracts in the Offshore Oil sector with McDermott and Technip based in the USA, and Subsea 7 an existing customer in the UK. These are major global players with their engineering operations now being supported in the US, the UK, the Middle East, Africa and South America. Technip in particular is important as it was the fastest we have ever installed MaritimeSuite (a matter of weeks) and this has been viewed by the customer as such a success that they plan on implementing the solution worldwide within the Offshore Group.

Research & Development

HealthRoster v10 is in deployment at 37 customers, a mixture of new agreements and migrated customers in the UK, USA and Australia. Major new releases this year include Clinical Activity Management, SafeCare and BankStaff for Locums. The focus of resource has been mainly on supporting the early adopters of v10. As part of this, we invested significantly in building support for the Australian market place for HealthRoster.

We had major new releases for e-Appraisal and e360 in our Medics Suite. We have completely upgraded the user interface for HealthAssure and we developed an enhanced version of the Patient Flow product from RealTime, currently in use by eight trusts across the UK.

During 2013, resource was focused on a new e-expenses module compatible with HealthRoster v10, and a new Emergency Department (ED) product which works alongside the Patient Flow product from RealTime, for release in the first part of financial year 2014.

We have invested in internationalisation for both Australia and Sweden. We have spent considerable time working with our Australian customers and colleagues to understand the requirements of the market and as a result have introduced specific pay/employment practice by integrating with the Awards Interpretation engine brought to us via the acquisition of RosterOn. We also support Australian department for health mandatory reporting, introduced terminology changes and built a significant number of other functional changes.

HealthRoster has also been translated into Swedish and we are working with our first Swedish customer to implement the software after making localisation changes, to commence in the first part of financial year 2014.

Organisation

The number of employees at the end of the year was 305 (2012: 298).

The employee voluntary attrition rate during the year was 13%, a decline from the prior year.

In 2013 we increased our investment in training. Focus areas include ensuring that we are using the latest technology in software development to keep our products at the highest level of quality. Additionally we have invested in sales training as needed throughout the organisation but particularly in areas where we have integrated our acquired companies. With regards to employee career development we have invested in leadership training to improve the quality of people management generally and to ensure that individuals are encouraged to develop through the organisation.

Financial report

Revenue in the financial year was £37.1m (2012: £36.6m), an increase over the prior year of 1%. EBITDA was £4.8m (2012: £6.4m) a 25% decrease over the prior year. Diluted adjusted EPS (excluding amortisation of intangibles, impairment, share-based payments, acquisition costs and the deferred tax adjustment) was 5.6p (2012: 7.4p) a 24% decrease over the prior year.

Recurring revenue increased by 13% to £17.6m and 47% of total revenue (2012: £15.6m and 43%). Within the recurring revenue, subscription revenue grew by 17% to £6.3m (2012: £5.4m) and Support and Maintenance increased by 12% to £11.3m (2012: £10.1m).

Healthcare revenue in the period increased by 10% to £29.3m (2012: £26.7m), driven largely by the growth of recurring revenues and by growth in the Nordics region. Defence revenues were £5.0m (2012: £7.6m). Maritime revenue was £2.8m (2012: £2.1m).

Organic revenue at the consolidated level declined by 5% compared with 2012, but Healthcare organic revenue rose by 3%.

Total operating costs in 2013 were £32.2m (2012: £30.3m) an increase of 6% or £1.9m. This increase has arisen mainly as a result of the costs brought on board with the RealTime acquisition, approximately £1.0m, plus higher sales commissions paid against the bookings of recurring revenue products, approximately £0.5m.

EBITDA margins were 12.9% (2012: 17.5%), a decline brought about by higher costs of RealTime and commission payments paid against bookings that exceeded the revenue recognised in the income statement.

Cash generated from operations was £8.7m (2012: £5.4m). This very strong result has been driven by improvements in working capital management and also by the transition of the business to one based more on recurring revenue. Cash generated from operations exceeds EBITDA by £3.9m, which was principally driven by a reduction in Days Sales Outstanding to 64 days and an increase in deferred income, partially offset by an increase in accrued income arising from extended billing cycles on certain licence sales.

The total acquisition related cash spending was £1.9m, dividend paid in the year was £0.7m, shares purchased for the LTRP were £0.6m and capital expenditure was £0.5m.

Taxes paid were £0.7m, an increase over prior year of £0.4m. These taxes arose principally in Sweden and in Australia. We paid no taxes in the UK as a result of losses brought forward. It should be noted that the Swedish authorities announced recently a reduction in the corporation tax rate from 26.3% to 22%.

Deferred income was £14.6m an increase of £2.0m over prior year, driven by increasing recurring revenues.

In summary, after taking into account the above, closing net cash on the Balance Sheet was £9.1m, consisting of gross cash of £13.1m and debt of £4.0m. Net cash, gross cash and debt at the end of 2012 were, respectively, £4.3m, £8.3m and £4.0m.

The performance of Dynamic Change has continued to be disappointing in 2013 resulting in a further impairment of intangible assets relating to this acquisition of £1.3m.

As previously stated, we propose to pay a dividend in respect of the full financial year of 1.32 pence per share (2012: 1.2 pence).

Outlook

2014 will be a significant year for Allocate.

The key goals for 2014 are to successfully launch the RealTime products into the market place; to migrate a significant number of customers to HealthRoster v10 thereby enabling higher cross sell and upsell rates of our new products and to drive further adoption of our Cloud and Medics products.

Our broad applications portfolio provides opportunities for continued and significant growth. Our plans for 2014 are well underpinned by the high visibility that we now have into recurring and predictable revenues.

The outlook for Allocate Software remains positive and I am confident that we will continue to be a growing, successful and cash generative business.

Our success would not be possible without the support of our customers and the growing team at Allocate and I would like to add my own thanks to all of them but especially our customers for their on-going support and commitment.

Ian Bowles

CHIEF EXECUTIVE OFFICER

22 July 2013

ALLOCATE SOFTWARE PLC

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MAY 2013

				2013	2012
				£'000	£'000
Support revenue				11,274	10,121
Subscription revenue				6,304	5,436
Total recurring revenue				17,578	15,557
Licence revenue				9,707	10,413
Service revenue				9,676	10,620
Other revenue				111	59
Total revenue				37,072	36,649
Costs of goods sold				(11,005)	(11,069)
Research and development				(7,482)	(6,789)
Sales, general and administration				(13,747)	(12,394)
Total costs before interest, tax, depreciation, amortisation, share based payments and acquisition costs				(32,234)	(30,252)
EBITDA before share based payments and acquisition costs				4,838	6,397
Acquisition costs				(524)	(1,754)
Share based payments				(417)	(477)
Depreciation				(431)	(395)
Amortisation				(4,439)	(4,538)
Impairment				(1,277)	(3,935)
Total costs				(39,322)	(41,351)
Operating loss				(2,250)	(4,702)
Finance income				49	108
Foreign exchange (losses) / gains				(69)	231
Finance charges				(115)	(123)
Net finance (expense) / income				(135)	216
Loss for the year before taxation				(2,385)	(4,486)
Tax on loss for the year				952	1,089
Loss for the year				(1,433)	(3,397)
Loss per share
Basic (pence per share)				(2.26p)	(5.35p)
Diluted (pence per share)				(2.26p)	(5.35p)

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2013

							2013				2012
							£'000				£'000
Loss per the income statement									(1,433)				(3,397)
Exchange differences on translation of foreign operations								678				(951)
Total comprehensive loss attributable to the owners of the Company									(755)				(4,348)

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2013

			2013	2012
			£'000	£'000
Non-current assets
Property, plant and equipment			868	908
Goodwill			7,280	6,939
Intangible assets			5,949	9,661
Other financial assets			-	60
Deferred tax asset			861	561
Trade and other receivables			615	85
Total non-current assets			15,573	18,214
Current assets
Corporation tax receivable			93	120
Trade and other receivables			12,887	14,753
Cash and cash equivalents			13,134	8,338
Total current assets			26,114	23,211
Total assets			41,687	41,425
Equity and liabilities
Equity
Share capital			3,210	3,192
Share premium account			8,030	7,908
Own shares held			(600)	-
Share-based payment reserve			1,452	1,035
Foreign exchange reserve			1,045	367
Retained earnings			1,062	3,258
Total equity			14,199	15,760
Non-current liabilities
Trade and other payables			2,817	1,810
Borrowings			-	4,000
Deferred tax liability			1,449	2,129
Total non-current liabilities			4,266	7,939
Current liabilities
Trade and other payables			18,832	17,085
Borrowings			4,000	-
Corporation tax			390	641
Total current liabilities			23,222	17,726
Total liabilities			27,488	25,665
Total equity and liabilities			41,687	41,425

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2013

	Share capital	Share premium account	Own shares held	Share-based payment  reserve	Foreign exchange reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 June 2011	3,154	7,752	-	694	1,318	6,655	19,573
Equity settled share options	38	156	-	477	-	-	671
Deferred tax on share options	-	-	-	(136)	-	-	(136)
Total transactions with owners	38	156	-	341	-	-	535
Loss for the year	-	-	-	-	-	(3,397)	(3,397)
Other comprehensive loss	-	-	-	-	(951)	-	(951)
Total comprehensive loss	-	-	-	-	(951)	(3,397)	(4,348)
At 31 May 2012	3,192	7,908	-	1,035	367	3,258	15,760
Equity settled share options	13	46	-	417	-	-	476
Dividend	5	76	-	-	-	(763)	(682)
Purchase of own shares by EBT	-	-	(600)	-	-	-	(600)
Total transactions with owners	18	122	(600)	417	-	(763)	(806)
Loss for the year	-	-	-	-	-	(1,433)	(1,433)
Other comprehensive income	-	-	-	-	678	-	678
Total comprehensive loss	-	-	-	-	678	(1,433)	(755)
At 31 May 2013	3,210	8,030	(600)	1,452	1,045	1,062	14,199

ALLOCATE SOFTWARE PLC

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 2013

			2013	2012
			£'000	£'000
Cash flow from operating activities
Loss for the year			(1,433)	(3,397)
Adjustments for:
Net finance charge			66	15
Foreign exchange			69	(231)
Income tax			(952)	(1,089)
Loss on disposal of intangible assets			9	12
Depreciation			431	395
Acquisition and related costs			524	1,754
Amortisation			4,439	4,538
Impairment of intangibles and goodwill			1,277	3,935
Share-based payment			417	477
Decrease / (increase) in trade and other receivables			1,618	(2,628)
Increase in trade and other payables			2,278	1,604
Net cash generated from operations before acquisition and related costs			8,743	5,385
Acquisition and related costs			(703)	(1,544)
Net cash generated from operations after acquisition and related costs			8,040	3,841
Interest expense			(115)	(123)
Income tax			(721)	(301)
Net cash generated from operating activities			7,204	3,417
Cash flows from investing activities
Interest received			49	108
Investment to acquire subsidiaries			(1,162)	(8,664)
Cash acquired with subsidiaries			85	1,843
Proceeds from disposal of intangible assets			92	50
Payments to acquire intangible assets			(178)	(268)
Payments for property, plant and equipment			(353)	(485)
Net cash used in investing activities			(1,467)	(7,416)
Cash flows from financing activities
Purchase of shares by EBT			(600)	-
Dividend			(682)	-
Proceeds from loan			-	2,000
Proceeds from the issue of equity shares			59	194
Net cash (used in) / generated from financing activities			(1,223)	2,194
Net increase / (decrease) in cash and cash equivalents			4,514	(1,805)
Foreign exchange differences			282	(255)
Cash and cash equivalents at the start of the year			8,338	10,398
Cash and cash equivalents at the end of the year			13,134	8,338

ALLOCATE SOFTWARE PLC

NOTES TO THE FINANCIAL INFORMATION

1.         Publication of Non-Statutory Accounts

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated cash flow statement and related notes, does not constitute full accounts within the meaning of s435 of the Companies Act 2006.

The auditors have reported on the Group's statutory accounts for the year ended 31 May 2013 under s495 of the Companies Act 2006.  The auditor's report does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified.  The statutory accounts for the year ended 31 May 2013 will be filed with the Registrar of Companies, sent to shareholders and published on the Company's website at www.allocatesoftware.com in due course.

2.         Basis of Preparation

The Group's accounting policies are consistent with those applied in the year to 31 May 2012, amended to reflect any new standards. The adoption of new standards in the year has not resulted in a significant impact to the Group's accounting policies.

3.         Segmental Reporting

Management has determined the operating segments based on the revenue streams within the reports reviewed by the strategic decision maker comprising the board of Directors.  These segments are consistent with how the business is structured, managed and its resources are deployed by the board.

Licence and subscription revenue represents revenue from the sale of non-cancellable software licence agreements and subscriptions associated with that software. Support and service revenue represents revenue from the provision of installation, consulting, training and product support.

2013	Licence	Subscriptions	Support	Services	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	9,707	6,304	11,274	9,676	111	37,072
Costs of goods sold	(210)	(1,038)	(2,094)	(7,650)	(13)	(11,005)
	9,497	5,266	9,180	2,026	98	26,067
Research and development costs						(7,482)
Sales, general and administration (*)						(20,835)
Operating loss						(2,250)
Finance income						49
Foreign exchange losses						(69)
Finance charges						(115)
Loss before tax						(2,385)

2012	Licence		Subscriptions	Support	Services	Other	Total
	£'000		£'000	£'000	£'000	£'000	£'000
Revenue	10,413		5,436	10,121	10,620	59	36,649
Costs of goods sold	(827)		(1,245)	(2,049)	(6,915)	(33)	(11,069)
	9,586		4,191	8,072	3,705	26	25,580
Research and development costs							(6,789)
Sales, general and administration (*)							(23,493)
Operating loss							(4,702)
Finance income							108
Foreign exchange gains							231
Finance charges							(123)
Loss before tax							(4,486)

(*)  includes acquisition costs, amortisation, impairment of intangible assets and share-based payment charges.

Under IFRS 8 there is a requirement to show operating profit and total assets for the operating segments, however, attributable expenses and total assets cannot be allocated on a reasonable basis and, as a result, the analysis is limited to the Group revenue less costs of goods sold which is then reconciled to the profit before tax.  

There are no material intersegment revenues.

Revenues from external customers in the Group's domicile, the United Kingdom, as well as its major markets, the European Union, Australia and the USA, have been identified on the basis of the customer's geographical location.  Non-current assets are allocated based on their physical location.

Revenue arises from customers in the following locations:

	2013	2012
	£'000	£'000
UK	20,525	17,978
Europe	8,712	7,829
USA	1,794	1,149
Australia	5,887	9,284
Rest of World	154	409
	37,072	36,649

In addition to the requirements of IFRS 8, the directors present a schedule of revenue analysed by vertical business sector:

	2013	2012
	£'000	£'000
Healthcare	29,279	26,706
Defence	4,999	7,615
Maritime	2,794	2,111
Other	-	217
	37,072	36,649

There were no customers (2012: 1) who contributed in excess of 10% of total revenues. The prior year significant customer's aggregated contribution to revenue amounted to 15% of revenue.

The internal reporting of the Group's performance does not require that statement of financial position information is gathered on the basis of the business streams 'Licences', 'Subscriptions', 'Services' and 'Other' reported above.  This information is therefore not accessible and, as a result, the segmental analysis does not include statement of financial position details.  However, the Group operates within discrete geographical markets and the non-current assets of the Group are split between these locations:

Non-current assets by location	UK	Europe	USA	Australia	R o W	Total
2013	£'000	£'000	£'000	£'000	£'000	£'000
Intangible assets	4,258	1,064	-	627	-	5,949
Goodwill	4,010	2,434	-	836	-	7,280
Property, plant and equipment	678	108	6	75	1	868
Trade and other receivables	615	-	-	-	-	615
Deferred tax assets	791	-	-	70	-	861
Total non-current assets	10,352	3,606	6	1,608	1	15,573

Non-current assets by location	UK	Europe	USA	Australia	R o W	Total
2012	£'000	£'000	£'000	£'000	£'000	£'000
Intangible assets	5,633	3,209	-	819	-	9,661
Goodwill	3,946	2,168	-	825	-	6,939
Financial assets	-	60	-	-	-	60
Property, plant and equipment	778	83	10	35	2	908
Trade and other receivables	85	-	-	-	-	85
Deferred tax assets	561	-	-	-	-	561
Total non-current assets	11,003	5,520	10	1,679	2	18,214

4.         Income Tax

	2013	2012
	£'000	£'000
Current tax:
Corporation tax on loss for the year	-	-
Prior period adjustments	-	(184)
Overseas tax	429	813
Total current tax	429	629
Deferred tax:
Origination and reversal of temporary differences :
Current period	(1,295)	(1,716)
Prior period adjustments	27	97
Rate change adjustment	(113)	(99)
Total deferred tax	(1,381)	(1,718)
Tax on loss for the year	(952)	(1,089)

Amounts recognised directly in equity

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity:

	2013	2012
	£'000	£'000
Net deferred tax - (credited)/charged to equity	-	136
	-	136

The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading domains where the Group operates. The differences are explained below:

	2013	2012
	£'000	£'000
Loss for the year before tax	(2,385)	(4,486)
Loss for year multiplied by the respective standard rate of corporation tax applicable in each domain 23.83% (2012: 25.67%).	(568)	(1,152)
Effects of:
Tax rate change adjustment	(113)	(99)
Adjustment to tax in respect of prior periods	27	(87)
Difference in overseas tax rates	(302)	11
Movement on deferred tax not recognised	71	(36)
Research and development enhanced relief	(584)	(511)
Share based payments	62	-
Sundry items	5	(20)
Uncertain tax positions	-	189
Expenses not deductible for tax purposes
-       Acquisition costs	125	429
-       Impairment of goodwill	304	139
-       Other	21	48
Tax on loss for the year	(952)	(1,089)

5.         Loss per share

	31 May	31 May
	2013	2012
	£'000	£'000
Loss for the year attributable to shareholders	(1,433)	(3,397)
Loss per share
Basic (pence per share)	(2.26p)	(5.35p)
Diluted (pence per share)	(2.26p)	(5.35p)
Weighted average number of shares	Number of shares	Number of shares
Shares in issue at opening	63,841,253	63,074,353
Shares issued during the year	364,275	766,900
Shares in issue at closing	64,205,528	63,841,253
Weighted average shares for basic earnings per share	63,559,952	63,409,261
Effect of dilutive potential ordinary shares	1,311,580	1,671,842
Weighted average shares for diluted earnings per share	64,871,532	65,081,103

Adjusted earnings per ordinary share

An adjusted earnings per share has been calculated in addition to the post tax earnings per share which eliminates the effects of share-based payments, impairment and amortisation of intangibles, acquisition costs and the deferred tax adjustment. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group. The basis of the calculation of the basic and diluted adjusted earnings per share is set out below:

	2013	2012
	£'000	£'000
Loss for the year attributable to shareholders	(1,433)	(3,397)
Amortisation of intangibles	4,439	4,538
Impairment charge	1,277	3,935
Share-based payments	417	477
Acquisition costs	524	1,754
Tax on amortisation, share-based payment and acquisition costs	(1,586)	(2,480)
Adjusted profit for the year attributable to shareholders	3,638	4,827
Basic adjusted earnings per share	5.72p	7.60p
Diluted adjusted earnings per share	5.60p	7.42p

6.         Business Combinations

Acquisitions have been accounted for by the purchase method of accounting. The goodwill arising on these acquisitions is subject to annual impairment review. The following tables set out the book values of the identifiable assets and liabilities acquired during the year ended 31 May 2013 and their fair values:

RealTime Health Limited

On 30 July 2012 the Group acquired 100% of the share capital of RealTime Health Limited, a UK supplier of patient flow management software to the NHS; the acquisition is expected to enlarge the range of products that can be offered to customers. The maximum consideration, of up to £7,162,000 was structured as an initial payment of £1,162,000 and an earn-out of up to £6,000,000 in tranches. The initial consideration of £1,162,000 was paid in cash during the year from existing cash resources. Deferred consideration of up to £6,000,000, payable in cash, is contingent upon the meeting of conditions, including achieving a number of demanding billings targets and key staff retentions, during the 24 months following acquisition. 

Included within acquisition costs in the prior year Income Statement was £76,000 incurred prior to 31 May 2012 in relation to the acquisition of RealTime Health.

The following table sets out the book values of the identifiable assets and liabilities acquired during the year ended 31 May 2013 and their fair values:

			Book value		Provisional fair value adjustment		Fair value
			£'000		£'000		£'000
Cash			85		-		85
Intangible assets identified at acquisition			-		1,533		1,533
Property, plant and equipment			23		-		23
Trade and other receivables			233		-		233
Trade payables and other payables			(248)		-		(248)
Deferred income			(204)		-		(204)
Deferred tax liability			44		(368)		(324)
Net (liabilities) / assets			(67)		1,165		1,098
Goodwill arising on acquisition							64
Total purchase consideration							1,162
Acquisition Costs							489
Total cost of investment							1,651
Analysis of cash flows on acquisition:
Purchase consideration							1,162
Net cash acquired with the subsidiary (included in cash flows from investing activities)							(85)
Net cash flow on acquisition							1,077
Transaction costs of the acquisition (included in cash flows from operating activities)							489

For accounting purposes IFRS3 'Business Combinations' requires the £6,000,000 deferred consideration to be treated as remuneration and not consideration. Consequently this will be expensed to the Income Statement if the conditions for payment have been satisfied. This charge will be included within the 'Acquisition and related costs' line of the Income Statement. To date no deferred consideration has been expensed or paid.

The Group has completed its assessment of the provisional fair values of the assets acquired as part of the business combination resulting in the recognition of goodwill of £64,000 and an intangible asset of £1,533,000 in relation to the software product acquired. The useful life of the intangible asset has been assessed as 8 years and this asset will therefore be amortised over 8 years.

The goodwill of £64,000 comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected value of synergies and an assembled workforce. Goodwill is allocated entirely to the RealTime cash generating unit. None of the goodwill is expected to be deductible for income tax purposes.

In the period since acquisition, RealTime Health Limited contributed revenues of £552,000 and a loss after tax of £606,000 to the Group for the period from 30 July 2012 to 31 May 2013.  If the acquisition had occurred on 1 June 2012, the Group's annualised consolidated revenue and loss after tax for the year ended 31 May 2013 would have been £37,182,000 and £2,538,000 respectively.  This includes not only an estimate of the full year contribution of RealTime Health Limited but also the impact of a full year of amortisation charge (after tax) of the intangible assets which arose on the acquisition.

RosterOn Pty Ltd

During the year, the Group paid the final component of the consideration in relation to the RosterOn acquisition (which occurred during the year ended 31 May 2012).  £264,000 (A$400,000) was paid in February 2013. 

For accounting purposes, IFRS 3 'Business Combinations' required this to be treated as remuneration and not consideration.  Consequently this did not form part of the cost of acquisition and instead was expensed to the Income Statement on a straight line basis over the 18 month period between the date of acquisition and payment date.  This charge is included in the 'Acquisition & related costs' line of the Income Statement.

7.         Directors' Remuneration

Group	2013	2012
	£'000	£'000
Short term employee benefits	1,057	1,179
Post-employment benefits	46	58
Remuneration benefits	3	3
Share-based payments	162	193
	1,268	1,433

 

END

 

 

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