Half Yearly Report

RNS Number : 0993X

Allocate Software PLC

05 February 2013

 



5 February 2013

Allocate Software plc

("Allocate" or the "Company")

Interim results for the six months ended 30 November 2012

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, today announces its results for the six months ended 30 November 2012.

Financial Highlights

§ Revenue in the period was £16.1m (H1 2011: £16.0m)

-     Healthcare revenue  £12.7m (H1 2011: £12.4m)

-     Recurring revenue up by 11% to £8.2m (H1 2011: £7.4m) and to 51% of total revenue (H1 2011: 46%)

-     Subscription revenue up by 16% to £2.9m (H1 2011: £2.5m)

§ Adjusted EBITDA* was £0.6m, (H1 2011: £1.6m)

§ Diluted adjusted EPS** was a loss per share of 0.1p (H1 2011: earnings per share of 1.8p)

§ Operating cash flows were £0.9m  (H1 2011: (£0.6m))

§ Gross cash balance was £6.1m (H1 2011: £4.0m).

*   Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments, acquisition and related costs and, in 2011, impairment charges.

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

Business Highlights

§ HealthRoster new business performed well in the period after a slow start in Q1, continuing the historical high win rate of 80%. In the period we again successfully replaced competitors in a number of major customers. Since 2010, we have replaced competitors in 17 accounts. Additionally, the pipeline remains robust and is presently at levels similar to those of the last two years.

§ HealthRoster term licence renewals continued the 100% rate achieved in prior periods with, cumulatively, 20 renewal contracts now won at terms broadly similar to the original contracts. Of the six renewals that been contracted in this period, two have also contracted to the Allocate Cloud.

§ The Allocate Clinical Staff Planning business continues to perform ahead of management expectations with agreements won with customers new to Allocate as well as cross sell into the HealthRoster installed base. 23 HealthRoster customers have now purchased an Allocate Clinical Staff Planning product since the acquisition of Zircadian in August 2011.

§ The development of the HealthRoster Cloud business has exceeded management targets.  Since the launch in July pipeline has built to a current value of circa £8.0m. In the period, we won contracts with 13 customers with a total contract value of £1.4m of which less than £0.1m was recognized as rateable revenue in the period. Five of these were also new HealthRoster customers.

§ The Allocate RealTime Patient Flow application has progressed steadily since launch with pipeline building at a satisfactory rate. Progress has also been made in the integration of the application into HealthRoster in support of our strategy of integrated solutions.

§ Recurring revenue continues its upward trend reaching 51% in the period. Our renewal rates remain high for support and maintenance and across our subscription business.

§ Australia healthcare is meeting expectations with the business development ongoing.

§ Our Swedish business continues to trade well both in terms of new customer acquisition and customer retention.

§ The Maritime business secured important follow on licence agreements with existing customers.

§ The Defence business traded at a satisfactory level during the period.

Ian Bowles, Chief Executive Officer of Allocate commented on the period:  "I am pleased with the overall performance in the first half, particularly after such a slow start in the first quarter.

"The principal drivers of our HealthCare business are performing to expectation with the number of new HealthRoster customers remaining strong; the continuing 100% close rate on HealthRoster renewals; the rapid growth of the Cloud business and the continued adoption of Allocate RealTime Patient Flow application within the HealthRoster customer base.

"As well as success with each of our individual product lines, we are now seeing customers embrace our strategy of providing integrated solutions that deliver positive return on investment. For example, two of the Cloud based contracts that we won in the period, were among the highest value Healthcare contracts we have closed in the UK. They both included multiyear commitments not just to Cloud, but also to HealthRoster and Allocate Clinical Staff Planning. I expect the Allocate RealTime Patient Flow application will form an increasingly important additional component of the solution based contracts that we win, particularly within our installed base of HealthRoster customers.

"I believe that the trend towards integrated solutions will continue. We are a trusted vendor that is able to provide the capabilities and solutions that customers are seeking and we understand how to deliver the solutions to them in a manner that achieves what they need.

"As noted in the trading update, I am confident that we will carry the strong momentum of the second quarter into the rest of the financial year, building the quality and predictability of our revenue streams as we do so."

Enquiries:

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

 Interim results for the six months ended 30 November 2012

Interim Statement

§   Revenue in the period was £16.1m (2011: £16.0m), an increase over the prior year of 1% meaning that after allowing for the impact of acquisitions, organic revenue has fallen slightly. The main reason for the modest revenue increase over the prior year has been the increasing impact of our changing business model. This change is the evolution of the business towards one with a growing proportion of agreements based upon annual recurring revenues.

The key elements of revenue in the period were:

§ Healthcare revenue in the period was £12.7m (2011: £12.4m), driven principally the increasing impact of subscription revenues from Allocate Clinical Staff Planning but also supported by an initial contribution from the Allocate HealthRoster Cloud.

§ Allocate's recurring revenues of £8.2m represented 51% of total revenues for the period (2011: 46%). The principal components of recurring revenue are subscription revenues of £2.9m and support and maintenance revenues of £5.3m. Subscription revenues have risen 16% from £2.5m in the prior year, driven principally by an increase in the number of new Allocate Clinical Staff Planning contracts secured. Additionally, the rising proportion of recurring revenue as a percentage of total revenue reflects the drive to evolve the Company's business model to one with increasing visibility of future revenue streams.

§   Defence revenue was a little lower at £2.1m (2011: £2.4m) whilst Maritime/other revenue grew to £1.3m (2011: £1.2m).

Adjusted EBITDA, EPS, Cash and Deferred Revenue

Adjusted EBITDA for the period was £0.6m (2011: £1.6m). The adjusted EBITDA margin was 4.0% (2011: 10.0%) reflecting the impact of the flat revenue and increased costs.

Total operating costs increased 8% during the period to £15.5m (2011: £14.4m), an increase of £1.1m. This increase in costs is attributable largely to the acquisitions of RosterOn, Zircadian and RealTime. It is also driven by our continued level of investment in R&D which grew by £0.4m over the prior year.

Diluted adjusted EPS (excluding impairment charges, acquisition and related costs, amortisation of intangibles and share-based payments) was (0.1p) (2011: 1.8p).

Operating cash flows during the period were inflows of £0.9m, (2011: outflows of (£0.6m)), reflecting an improved working capital position, driven by an improved ageing of receivables and increased deferred revenues, from which billings, we are able to derive an earlier receipt of cash.

In the period the company paid its first dividend at a rate of 1.2 pence per share (2011: nil). The total cash outlay of the dividend was approximately £0.7m.

Deferred revenue at the end of the period was £11.8m (2011: £8.3m) an increase of £3.5m. This increase reflects the progress of the company's transition to a business model based upon recurring revenues.

Business

Healthcare

The major milestones in Healthcare this period have been the successful launch of the Allocate Cloud service and the acquisition of RealTime, both in July 2012.

§ The Allocate Cloud service provides the opportunity for Allocate to manage customers' HealthRoster software. The service is provided on an annual basis for a yearly fee, although the significant majority of contracts secured to date have been multiyear. Fees for the Cloud service are in addition to the fees for the HealthRoster software for which agreements continue under our typical licencing schemes. As noted earlier, the Cloud pipeline has reached circa £8.0m and 13 agreements were concluded. Two of these agreements were with major Trusts that contracted for a HealthRoster term licence with annual support and maintenance, initial configuration services, and a multiyear Cloud commitment. These contracts were two of the largest that Allocate has secured with NHS Trusts.

§ The Allocate RealTime Patient Flow application forms the most recent component of our integrated solutions strategy. A principal attribute of patient flow software is the ability to offer bed management capability. The principal benefit that will accrue to our customers will be for them to gain the improvements in efficiencies and patient outcomes that result from a single view of patient numbers and levels of staff.  Prior to acquisition, [the Allocate Patient Flow application] has already been implemented in eight NHS trusts. During H1, the principle priority has been to integrate the products and to align the two companies' sales and marketing teams and positioning.

Further HealthRoster agreements were secured in the period, with both new customers and also with those renewing their original agreements. The total number of UK customers with HealthRoster now stands at 147. This includes 22 competitive displacements since 2006 and 17 since 2010. The cumulative number of renewal agreements secured now stands at 20, representing a 100% success rate.

The Allocate Clinical Staff Planning business is progressing well and meeting expectations with a high success rate of cross sell of products into the HealthRoster installed base. Since acquisition in August 2011, 23 HealthRoster customers have purchased an Allocate Clinical Staff Planning product.

In Europe, our Swedish based business continues to trade well, meeting expectations. In one month of this period, they enjoyed their best ever month of trading. The newly signed partnership with largest payroll provider in the Nordic region continues to progress well, with many joint Allocate focussed activities now being developed.

Defence and Maritime

§ Defence met expectations with their services and support business with NATO, the Australian Defence Force and the British Army.

§ Follow on licence agreements were secured with a number of existing Maritime customers and in addition, services and support work progressed satisfactorily.

Development

The principal activity in the period has been the rollout of HealthRoster V10. HealthRoster V10 is the most important release of the product for many years and will be a cornerstone of Allocate's growth in the future. V10 is web enabled, brings multi tenanted hosting capability and in addition offers with the ability to be localized into foreign languages, thus supporting our goal of accelerated, broader international expansion.

V10 is already live with 10 customers, including our major healthcare customer in Australia.

Investment in Development continues to be a key priority for the Company. R&D expenses in the period were £3.8m (2011 £3.4m).

This investment will deliver an integrated suite of applications that achieve a significant ROI for our customers, whilst providing Allocate with the opportunity to move into segments of the Healthcare market that we have not previously addressed.  

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation set out in Note 2 of the Interim Report.

Outlook

The outlook for Allocate remains positive. We continue to enjoy very significant customer engagement, our pipeline of opportunities continues to build and the Cloud business has started very successfully, providing a platform to deliver new applications and services of significant value to our customers. We remain confident that our customers will continue to embrace our solutions.

As always we would like to thank all of our team and welcome new members of the team from RealTime.  Everyone has contributed significant efforts to our achievements across the business. In addition we gratefully acknowledge the continuing support of our customers and partners, who work with us in such close cooperation. 

Ian Bowles

Chief Executive Officer

Terry Osborne

Chairman

Condensed Consolidated Income Statement

		6 months to	6 months to	Year to
		30 November	30 November	31 May
		2012	2011	2012
		£'000 (unaudited)	£'000 (unaudited)	£'000
	Note
Support revenue		5,283	4,879	10,121
Subscription revenue		2,933	2,489	5,436
Total recurring revenue		8,216	7,368	15,557
Licence revenue		3,492	3,127	10,413
Service revenue		4,324	5,501	10,620
Other revenue		47	22	59
Total revenue		16,079	16,018	36,649
Costs of goods sold		(5,237)	(5,643)	(11,069)
Research and development		(3,766)	(3,405)	(6,789)
Sales, general and administration		(6,514)	(5,396)	(12,394)
Total costs before interest, tax, depreciation, amortisation, share based payments and acquisition costs		(15,517)	(14,444)	(30,252)
EBITDA before share based payments, impairment and acquisition costs		562	1,574	6,397
Acquisition costs		(493)	(1,329)	(1,754)
Share based payments		(200)	(285)	(477)
Depreciation		(207)	(197)	(395)
Amortisation		(2,152)	(2,456)	(4,538)
Impairment		-	(3,935)	(3,935)
Total costs		(18,569)	(22,646)	(41,351)
Operating (loss)		(2,490)	(6,628)	(4,702)
Finance income		42	60	108
Foreign exchange gains / (losses)		43	55	231
Other finance expenses		(60)	(59)	(123)
Net finance income		25	56	216
(Loss) for the period before taxation		(2,465)	(6,572)	(4,486)
Tax credit		251	1,207	1,089
(Loss) for the period		(2,214)	(5,365)	(3,397)
(Loss) per share	3
Basic (pence per share)		(3.48p)	(8.49p)	(5.35p)
Diluted (pence per share)		(3.48p)	(8.49p)	(5.35p)

Condensed Consolidated Statement of Comprehensive Income

		6 months to	6 months to	Year to
		30 November	30 November	31 May
		2012	2011	2012
		£'000 (unaudited)	£'000 (unaudited)	£'000
(Loss) per the income statement		(2,214)	(5,365)	(3,397)
Other comprehensive income: Exchange differences on translation of foreign operations		393	(604)	(951)
Total comprehensive (loss) attributable to the owners of the company		(1,821)	(5,969)	(4,348)

Condensed Consolidated Statement of Financial Position

		Note	30 November 2012	30 November 2011	31 May 2012
Non-current assets			£'000 (unaudited)	£'000 (unaudited)	£'000
Intangible assets		4	9,342	11,881	9,661
Goodwill		4	7,157	7,066	6,939
Other financial assets			-	62	60
Property, plant and equipment			946	885	908
Deferred tax asset			602	1,288	561
	Total non-current assets		18,047	21,182	18,129
Current assets
Trade and other receivables			12,789	10,944	14,958
Cash and cash equivalents			6,089	4,027	8,338
Total current assets			18,878	14,971	23,296
Total assets			36,925	36,153	41,425
Equity and liabilities
Equity
Share capital			3,202	3,178	3,192
Share premium account			8,005	7,877	7,908
Treasury shares			(400)	-	-
Share-based payment reserve			1,235	914	1,035
Foreign exchange reserve			760	714	367
Retained earnings			281	1,290	3,258
Total equity			13,083	13,973	15,760
Non-current liabilities
Borrowings			4,000	4,000	4,000
Trade and other payables			-	49	-
Deferred tax liability			1,998	2,928	2,129
Total non-current liabilities			5,998	6,977	6,129
Current liabilities
Trade and other payables			17,508	14,825	18,895
Corporation tax			336	378	641
Total current liabilities			17,844	15,203	19,536
Total liabilities			23,842	22,180	25,665
Total equity and liabilities			36,925	36,153	41,425

Condensed Consolidated Statement of Changes in Equity

	Share capital	Share premium	Treasury shares	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	24	125	-	285	-	-	434
Deferred tax on share options	-	-	-	(65)	-	-	(65)
Total transactions with owners	24	125	-	220	-	-	369
Comprehensive income:
Profit for the period	-	-	-	-	-	(5,365)	(5,365)
Other comprehensive income	-	-	-	-	(604)	-	(604)
Total comprehensive income	-	-	-	-	(604)	(5,365)	(5,969)
At 30 November 2011	3,178	7,877	-	914	714	1,290	13,973
Equity settled share options	14	31	-	192	-	-	237
Deferred tax on share options	-	-	-	(71)	-	-	(71)
Total transactions with owners	14	31	-	121	-	-	166
Comprehensive income:
Profit for the period	-	-	-	-	-	1,968	1,968
Other comprehensive income	-	-	-	-	(347)	-	(347)
Total comprehensive income	-	-	-	-	(347)	1,968	1,621
At 31 May 2012	3,192	7,908	-	1,035	367	3,258	15,760
Equity settled share options	5	21	-	200	-	-	226
Purchase of shares by Employee Benefit Trust	-	-	(400)	-	-	-	(400)
Dividend	5	76	-	-	-	(763)	(682)
Total transactions with owners	10	97	(400)	200	-	(763)	(856)
Comprehensive income:
Loss for the period	-	-	-	-	-	(2,214)	(2,214)
Other comprehensive income	-	-	-	-	393	-	393
Total comprehensive income	-	-	-	-	393	(2,214)	(1,821)
At 30 November 2012	3,202	8,005	(400)	1,235	760	281	13,083

Condensed Consolidated Statement of Cash Flows

		6 months to	6 months to	Year to
		30 November	30 November	31 May
		2012	2011	2012
		£'000	£'000	£'000
		(unaudited)	(unaudited)
Cash flow from operating activities
(Loss) for the period		(2,214)	(5,365)	(3,397)
Adjustments for:
Net finance charges		18	(1)	15
Foreign exchange		(43)	(55)	(231)
Income tax (credit)		(251)	(1,207)	(1,089)
Loss on disposal of intangible assets		-	71	12
Acquisition & related costs		493	1,329	1,754
Depreciation		207	197	395
Amortisation		2,152	2,456	4,538
Impairment charge		-	3,935	3,935
Share-based payment		200	285	477
Decrease / (increase) in trade and other receivables		2,235	1,155	(2,628)
(Decrease) / increase in trade and other payables		(1,915)	(3,368)	1,604
Net cash generated from / (used by) operations before acquisition & related costs		882	(568)	5,385
Acquisition & related costs		(420)	(1,402)	(1,544)
Net cash (absorbed by) / generated from operations after acquisition & related costs		462	(1,970)	3,841
Interest paid		(60)	(59)	(123)
Income tax paid		(425)	(241)	(301)
Net cash (used in) / generated from operating activities		(23)	(2,270)	3,417
Cash flows from investing activities
Interest received		42	60	108
Investments to acquire subsidiaries		(1,163)	(7,650)	(8,664)
Cash acquired with subsidiaries		85	1,842	1,843
Proceeds from disposal of intangible assets		50	-	50
Payments to acquire intangible assets		(106)	(127)	(268)
Payments for property, plant and equipment		(230)	(259)	(485)
Net cash used in investing activities		(1,322)	(6,134)	(7,416)
Cash flows from financing activities
Proceeds from loan		-	2,000	2,000
Dividend		(682)	-	-
Purchase of own shares by Employee Benefit Trust		(400)	-	-
Proceeds from the issue of equity shares		26	149	194
Net cash generated by financing activities		(1,056)	2,149	2,194
Net (decrease) in cash and cash equivalents		(2,401)	(6,255)	(1,805)
Foreign exchange differences		152	(116)	(255)
Cash and cash equivalents at the start of the period		8,338	10,398	10,398
Cash and cash equivalents at the end of the period		6,089	4,027	8,338

Notes to the Interim Financial Information

1.    Legal status and activities

The principal activities of the group are the sale and support of workforce optimisation solutions, and the provision of related IT services to major government, industrial and commercial customers.

The company is a public limited liability company, incorporated and domiciled in England and Wales.  The address of its registered office is 180 Piccadilly, London, W1J 9ER.

The company has its listing on the Alternative Investment Market ("AIM") of the London Stock Exchange.

2.    Basis of preparation

These unaudited interim condensed consolidated financial statements are for the six month period ended 30 November 2012.  They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 May 2012, which were prepared under IFRS as adopted by the European Union (EU).

The accounting policies adopted in this report are consistent with those of the annual financial statements for the year ended 31 May 2012 as described in those financial statements.

The interim financial statements have not been audited, nor have they been reviewed under ISRE 2410 of the Auditing Practices Board.  The financial information presented does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.  The group's statutory accounts for the year ended 31 May 2012 have been filed with the Registrar of Companies.  The auditors, Grant Thornton UK LLP reported on these accounts and their report was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

3.     Earnings per share

	30 November	30 November	31 May
	2012	2011	2012
	£'000	£'000	£'000
(Loss) for the period	(2,214)	(5,365)	(3,397)
(Loss) per share
Basic (pence per share)	(3.48p)	(8.49p)	(5.35p)
Diluted (pence per share)*	(3.48p)	(8.49p)	(5.35p)
* In accordance with IAS 33 'Earnings per share' potentially dilutive shares have not been included in calculating the diluted earnings per share as this would have reduced the diluted loss per share reported.
Weighted average number of shares	Number of shares	Number of shares	Number of shares
Shares in issue at opening	63,841,253	63,074,353	63,074,353
Shares issued during the period	199,275	488,800	766,900
Shares at closing	64,040,528	63,563,153	63,841,253
Weighted average shares for basic earnings per share *	63,682,391	63,177,059	63,409,261
Effect of dilutive potential ordinary shares	1,270,294	1,519,002	1,671,842
Weighted average shares for diluted earnings per share	64,952,685	64,696,061	65,081,103
* Excluding treasury shares

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 and amortisation of intangibles.  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 adjusted profit per share is set out below:

	30 November	30 November	31 May
	2012	2011	2012
	£'000	£'000	£'000
(Loss) for the year attributable to shareholders	(2,214)	(5,365)	(3,397)
Amortisation of intangibles	2,152	2,456	4,538
Impairment	-	3,935	3,935
Share-based payment	200	285	477
Acquisition & related costs	493	1,329	1,754
Tax on amortisation, share based payments and acquisition & related costs	(694)	(1,471)	(2,480)
Adjusted (loss) / profit for the year attributable to shareholders	(63)	1,169	4,827
Basic adjusted (loss) / earnings per share	(0.10p)	1.86p	7.60p
Diluted adjusted (loss) / earnings per share	(0.10p)	1.81p	7.42p

        The weighted average number of shares is the same as above.

4.    Acquisition of RealTime Health Limited

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 maximum consideration, of up to £7,163,000 was structured as an initial payment of £1,163,000 and an earn-out of up to £6,000,000 in tranches.  The initial consideration of £1,163,000 was paid in cash during the period from existing cash resources.  Deferred consideration of up to £6,000,000 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.

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 once 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 initial 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.

 

END

 

 

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