Interim Results

RNS Number : 9959X

Allocate Software PLC

20 January 2014

 



20 January 2014

Allocate Software plc

("Allocate" or the "Company")

Interim results for the six months ended 30 November 2013

Strong strategic progress achieved and quality of earnings continues to improve

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, today announces its half-year results for the six months ended 30 November 2013. 

The results demonstrate further successful execution of Allocate's growth strategy, with double-digit recurring revenue and subscription revenue growth driven by continued strong sales progress within the healthcare business.

Financial Highlights

§ Total revenue increased by 7% to £17.3m (H1 2012: £16.1m)

-     Organic revenue increased by 7%

-     Healthcare revenue up by 13% to £14.4m (H1 2012: £12.7m)

-     Recurring revenue up by 11% to £9.1m (H1 2012: £8.2m) and to 53% of total revenue (H1 2012: 51%)

-     Subscription revenue up by 14% to £3.3m (H1 2012: £2.9m)

§ Adjusted EBITDA* up by 17% to £0.7m (H1 2012: £0.6m)

§ Diluted adjusted EPS** was 1.3p (H1 2012: 0.1p loss)

§ Net cash balance increased to £7.4m (H1 2012: £2.1m)

§ Total debt balance of £4.0m repaid in full

*   Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments and non-recurring costs.

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

Business Highlights

§ HealthRoster continues to lead our business. We are seeing an increasing demand for our core application, evidenced by a stronger than anticipated performance in the period. We secured four new customers, including three new NHS Trusts, taking the total to 154. These three wins included two competitive displacements. In addition, we renewed a further ten HealthRoster term licence customers, bringing the total to 43 and maintaining our 100% renewal rate.

§ Subscription revenues grew 14% driven by growth in Cloud and in our Medics solutions. We secured nine new Cloud customers and eight new Medics contracts.

§ Our new SafeCare application has received high levels of interest from our customer base due to the focus on safe staffing in the NHS. We secured eight new contracts for SafeCare during the period.

§ Patient Flow (PF) and Emergency Department (ED) applications generated considerable interest from potential customers.

§ The rollout program of HealthRoster V10 continues to meet expectations with 42 customers live on the new architecture at the end of the period.

Ian Bowles, Chief Executive Officer of Allocate, said:

"These results demonstrate that our strategy for growth is working and is delivering a real earnings benefit. Our success in transitioning to a model based increasingly on recurring revenues is clearly evidenced by the continued growth in subscription revenues and Cloud customers.

"Allocate now offers a portfolio of solutions that explicitly address the focus brought to safe staffing by the Secretary of State for Health, by NHS England and by The Care Quality Commission. Consequently, our pipelines for HealthRoster, Cloud and SafeCare have grown and are all at a higher level than last year.

"Our international businesses have performed well with Sweden again exceeding expectations.

"Our business remains weighted towards a seasonally busier second half of the year. Given the strength of our performance over the past six months and based on our strong pipeline, we believe we are on track to meet market expectations for the full year."

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]
FTI Consulting Matt Dixon, Chris Lane	Tel: [phone]

Interim results for the six months ended 30 November 2013

Business Review

Healthcare

The Healthcare sector is the primary growth driver for our business.  In the first six months of the current financial year, healthcare accounted for 81% of total revenue and continues to grow across all our principal markets: UK, Sweden and Australia.  Renewal rates for HealthRoster, which is our flagship solution, remain excellent and our newer offerings and solutions continue to be well received by existing and potential customers. A steadily increasing number of customers now use our Cloud service, which generates additional revenue for us, and SafeCare has won several new clients thanks to the NHS' focus on safe staffing.

During the course of the past six months, our Healthcare team has made the following progress:

§ The focus on safe staffing across the NHS as a result of the publication of the Francis report and subsequent Keogh reviews in 2013 has generated a significant increase in interest in our staffing and governance solutions. Specifically, the requirement for Trusts to ensure safe staffing levels has driven demand for our eRostering applications. SafeCare, which is targeted at aligning patient activity with workforce deployment, has witnessed a substantial increase in customer enquiries. In the Francis report, no less than 32 of the 62 recommendations are specifically addressed by our capabilities.

§ In the half year we have secured eight new SafeCare customers within our HealthRoster installed base of 154 and we have a strong pipeline moving forward. The alignment of safe staffing to our assurance solutions to provide board level information has also seen a rise in interest. In the second half and beyond, we are focused on expanding the depth and breadth of our safe staffing solutions to meet this critical requirement of the NHS and other health providers in the UK and elsewhere.

§ HealthRoster renewals continue to close at a 100% rate on commercial terms broadly consistent with the original terms which further underlines customers' confidence in the value of our staffing solutions. The pipeline for HealthRoster renewals for the second half is strong.

§ Both the Cloud pipeline and contracts closed continue to grow in number and at an annual contract value higher than last year. The demand for our Cloud solution continues to be driven by the efficiency improvements it brings to customers; its security and ease of use for nursing staff. We now have 33 customers contracted and we remain confident of doubling our Cloud bookings and revenues this year over the prior year.

§ The rollout of HealthRoster V10 is a key route to securing new solution sales in this financial year. The programme remains in line with expectations with 42 customers now live on V10. Of these 42, 33 have chosen to utilise our Cloud. We expect to have close to 50% of the HealthRoster installed base live on V10 by the end of the second half.

§ The Medics solutions revenue grew by 15% over the prior year driven by strong renewals and with eight new contracts secured at an average annual contract value that exceeded expectations.

§ The UK Healthcare User Group meeting that we hosted in 2013 was our most successful event ever with over 290 attendees from 132 Trusts. Considerable customer interest was in evidence throughout, but particularly in the areas of SafeCare, Allocate Cloud and Clinical Activity Management.

§ The NHS Confederation Annual Conference was attended by The Secretary of State for Health, Jeremy Hunt. Allocate was delighted to share joint lead sponsorship of the Conference with BT. Mr Hunt spent time on the Allocate stand and spoke with Chief Executive Ian Bowles about NHS safe staffing issues and Allocate's success to date in helping Trusts.

§ We have received a high level of interest from Trusts for our Allocate RealTime PF and particularly ED applications.  Despite decision making cycles being longer than originally anticipated, we remain confident in the prospects for these applications over the longer term.

§ Our Swedish business has again performed ahead of management's expectations. The drivers of the good performance were repeat sales to existing Swedish Healthcare customers, supported by growth in Swedish non healthcare customers, and also by growing interest in Finland.

§ The Australian Healthcare business has exceeded expectations in the period, driven principally by services engagements that were both HealthRoster related as well as associated with solutions from the acquisition of RosterOn.

Defence and Maritime

We maintain a strong position in the Defence and Maritime sector, with long-term key customers in the UK and Australia utilising our solutions.  Licence revenues in this sector are harder to predict, but our referenceability and solution capabilities here remain strong.  New business in the period was subdued, as expected, but the outlook for the full year remains in line with our original expectations.

Financial Overview

In the first six months of the current financial year, Allocate has continued to build on the solid foundations laid in 2013.  The increase in revenues has been driven by a strong performance in the healthcare division, both in the UK and internationally.  The Company has made significant progress towards the transition to a recurring revenue model.  

Revenue in the period was £17.3m (H1 2012: £16.1m), an increase over the prior year of 7%. The key drivers of revenue were:

§ Healthcare revenue in the period increased by 13% to £14.4m (H1 2012: £12.7m), driven by an increase in revenue across all major territories and revenue types. UK, Sweden and Australia revenues have grown, as have worldwide licence, subscriptions, support and services revenue. Revenue growth was not limited to a single solution or territory.

§ Within the broad range above, the most significant revenue increases by value over prior year were Australia licence, Australia services, UK Cloud subscriptions and UK Medics subscriptions. It should also be noted that UK Healthcare subscription bookings exceeded revenue by £800k in the period, which will further drive the transition to recurring revenue.

§ Allocate's recurring revenues of £9.1m represented 53% of total revenues for the period (H1 2012: 51%). The principal components of recurring revenue are subscription revenues of £3.3m and support and maintenance revenues of £5.8m. Subscription revenues have risen 14% from £2.9m in the prior year, driven principally by the Allocate Cloud and Medics solutions, with respect to both new customers and customers renewing. HealthAssure has not met our expectations in the period. However, a number of new customers have been secured and we have observed increasing interest in the solution which is being driven by the need to align safe staffing with assurance.

§ During the first half of the current financial year, Defence and Maritime revenues have both fallen slightly over the prior year.   

Adjusted EBITDA, EPS, Cash and Deferred Income

Adjusted EBITDA for the period increased by 17% to £0.7m (H1 2012: £0.6m).

Total operating costs increased during the period to £16.6m (H1 2012: £15.5m), an increase of £1.1m. The increase is driven principally by higher staffing, variable costs of bonus/commissions and services delivery. In addition, we incurred one-time costs of over £0.4m associated principally with the Head Office relocation, which has been accomplished without disruption. One-time costs in H2 are expected to be lower than in H1.        

Diluted adjusted EPS (excluding impairment charges, acquisition and related costs, amortisation of intangibles and share-based payments) was 1.3p (H1 2012: 0.1p, loss).

The closing net cash balance was £7.4m (H1 2012: £2.1m).

In the period the company paid off its total debt of £4.0m plus it received £1.4m of proceeds from the exercise of stock options.

Operating cash used in the period was £1.5m (H1 2012: operating cash generated of £0.9m). The usage of cash was driven by deferred income which is lower due to the seasonal impact of lower billings in this half; cash was also impacted by the payment in this period of a large VAT liability which was the result of high billings towards the end of the prior financial year, and the payment of commissions and bonus which were accrued at the end of the prior year.

H1 remains the seasonally quieter period of the year for our business and, as such, it remains more meaningful to measure cash generation over a 12 month period.  We remain comfortable with our full year cash generation targets, based on the significantly higher level of billings we anticipate in the second half, driven principally by renewals of subscriptions, support and maintenance.

Deferred income at the end of the period was £12.0m (H1 2012: £11.8m).

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 IFRS 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 one of great promise. We have a solution set that matches customer needs at a time when there is great urgency to address the safe staffing focus, particularly in the NHS.

Allocate is the trusted partner that is best placed to help our customers address these needs. We have long term and deep relationships with many Trusts and we are actively engaged with an increasing number of Trusts to deploy Cloud, SafeCare and other complementary solutions. Deployments of additional solutions will further secure our long term relationships.

Our business overseas continues to grow financially and with respect to customer reach and market penetration.

The business model continues to evolve successfully to one with high levels of revenue predictability and customer retention, thereby providing a stable platform for further growth.

Our business remains weighted towards a seasonally busier second half of the year. Given the strength of our performance over the past six months and based on our strong pipeline, we believe we are on track to meet market expectations for the full year.

As always, we would like to pass on our thanks to all of our employees, customers and partners who have provided us with their support, without which our success would not be possible.

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
		2013	2012	2013
		£'000 (unaudited)	£'000 (unaudited)	£'000
	Note
Support revenue		5,798	5,283	11,274
Subscription revenue		3,278	2,933	6,304
Total recurring revenue		9,076	8,216	17,578
Licence revenue		3,613	3,492	9,707
Service revenue		4,587	4,324	9,676
Other revenue		-	47	111
Total revenue		17,276	16,079	37,072
Costs of goods sold		(5,810)	(5,237)	(11,005)
Research and development		(4,129)	(3,766)	(7,482)
Sales, general and administration		(6,643)	(6,514)	(13,747)
Total costs before non-recurring, acquisition, share based payments, depreciation, amortisation, impairment, finance and tax costs		(16,582)	(15,517)	(32,234)
EBITDA before non-recurring, acquisition, share based payments, depreciation, amortisation, impairment, finance and tax costs		694	562	4,838
Non-recurring costs		(431)	-	-
Acquisition costs		-	(493)	(524)
Share based payments		(141)	(200)	(417)
Depreciation		(192)	(207)	(431)
Amortisation		(1,737)	(2,152)	(4,439)
Impairment		-	-	(1,277)
Total costs		(19,083)	(18,569)	(39,322)
Operating loss		(1,807)	(2,490)	(2,250)
Finance income		19	42	49
Foreign exchange (losses)/gains		(145)	43	(69)
Other finance expenses		(20)	(60)	(115)
Net finance (costs) / income		(146)	25	(135)
Loss for the period before taxation		(1,953)	(2,465)	(2,385)
Tax credit		994	251	952
Loss for the period / year		(959)	(2,214)	(1,433)
Loss per share	3
Basic (pence per share)		(1.49p)	(3.48p)	(2.26p)
Diluted (pence per share)		(1.49p)	(3.48p)	(2.26p)

Condensed Consolidated Statement of Comprehensive Income

		6 months to	6 months to	Year to
		30 November	30 November	31 May
		2013	2012	2013
		£'000 (unaudited)	£'000 (unaudited)	£'000
Loss per the income statement		(959)	(2,214)	(1,433)
Other comprehensive income: Exchange differences on translation of foreign operations		(446)	393	678
Total comprehensive loss attributable to the owners of the company		(1,405)	(1,821)	(755)

Condensed Consolidated Statement of Financial Position

			30 November 2013	30 November 2012	31 May 2013
Non-current assets			£'000 (unaudited)	£'000 (unaudited)	£'000
Property, plant and equipment			1,649	946	868
Intangible assets			4,166	9,342	5,949
Goodwill			7,021	7,157	7,280
Deferred tax asset			1,671	602	861
Trade and other receivables			845	217	615
	Total non-current assets		15,352	18,264	15,573
Current assets
Corporation tax receivable			93	-	93
Trade and other receivables			10,739	12,572	12,887
Cash and cash equivalents			7,449	6,089	13,134
Total current assets			18,281	18,661	26,114
Total assets			33,633	36,925	41,687
Equity and liabilities
Equity
Share capital			3,354	3,202	3,210
Share premium account			9,319	8,005	8,030
Treasury shares			(600)	(400)	(600)
Share-based payment reserve			1,593	1,235	1,452
Foreign exchange reserve			599	760	1,045
Retained earnings			103	281	1,062
Total equity			14,368	13,083	14,199
Non-current liabilities
Trade and other payables			2,262	1,528	2,817
Borrowings			-	4,000	-
Deferred tax liability			958	1,998	1,449
Total non-current liabilities			3,220	7,526	4,266
Current liabilities
Trade and other payables			15,695	15,980	18,832
Borrowings			-	-	4,000
Corporation tax			350	336	390
Total current liabilities			16,045	16,316	23,222
Total liabilities			19,265	23,842	27,488
Total equity and liabilities			33,633	36,925	41,687

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 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
Equity settled share options	8	25	-	217	-	-	250
Purchase of shares by Employee Benefit Trust	-	-	(200)	-	-	-	(200)
Total transactions with owners	8	25	(200)	217	-	-	50
Comprehensive income:
Profit for the period	-	-	-	-	-	781	781
Other comprehensive income	-	-	-	-	285	-	285
Total comprehensive income	-	-	-	-	285	781	1,066
At 31 May 2013	3,210	8,030	(600)	1,452	1,045	1,062	14,199
Equity settled share options	144	1,289	-	141	-	-	1,574
Total transactions with owners	144	1,289	-	141	-	-	1,574
Comprehensive income:
Loss for the period	-	-	-	-	-	(959)	(959)
Other comprehensive income	-	-	-	-	(446)	-	(446)
Total comprehensive income	-	-	-	-	(446)	(959)	(1,405)
At 30 November 2013	3,354	9,319	(600)	1,593	599	103	14,368

Condensed Consolidated Statement of Cash Flows

		6 months to	6 months to	Year to
		30 November	30 November	31 May
		2013	2012	2013
		£'000	£'000	£'000
		(unaudited)	(unaudited)
Cash flow from operating activities
Loss for the period		(959)	(2,214)	(1,433)
Adjustments for:
Net finance charges		1	18	66
Foreign exchange		145	(43)	69
Income tax (credit)		(994)	(251)	(952)
Loss on disposal of intangible assets		-	-	9
Acquisition & related costs		-	493	431
Depreciation		192	207	524
Amortisation		1,737	2,152	4,439
Impairment charge		-	-	1,277
Share-based payment		141	200	417
Decrease in trade and other receivables		2,152	2,235	1,618
(Decrease) / increase in trade and other payables		(3,932)	(1,915)	2,278
Net cash generated (used by) / from operations before acquisition & related costs		(1,517)	882	8,743
Acquisition & related costs		-	(420)	(703)
Net cash (used by) / generated from operations after acquisition & related costs		(1,517)	462	8,040
Interest paid		(20)	(60)	(115)
Income tax paid		(289)	(425)	(721)
Net cash (used in) / generated from operating activities		(1,826)	(23)	7,204
Cash flows from investing activities
Interest received		19	42	49
Investments to acquire subsidiaries		-	(1,163)	(1,162)
Cash acquired with subsidiaries		-	85	85
Proceeds from disposal of intangible assets		50	50	92
Payments to acquire intangible assets		(35)	(106)	(178)
Payments for property, plant and equipment		(950)	(230)	(353)
Net cash used in investing activities		(916)	(1,322)	(1,467)
Cash flows from financing activities
Purchase of own shares by Employee Benefit Trust		-	(400)	(600)
Repayment of bank loan		(4,000)	-	-
Dividend		-	(682)	(682)
Proceeds from the issue of equity shares		1,434	26	59
Net cash used in financing activities		(2,566)	(1,056)	(1,223)
Net (decrease) / increase in cash and cash equivalents		(5,308)	(2,401)	4,514
Foreign exchange differences		(377)	152	282
Cash and cash equivalents at the start of the period / year		13,134	8,338	8,338
Cash and cash equivalents at the end of the period / year		7,449	6,089	13,134

Notes to the Condensed Consolidated 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 1 Church Road, Richmond, TW9 2QE.

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 2013.  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 2013, 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 2013 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 2013 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

	6 months to 30 November	6 months to 30 November	Year to 31 May
	2013	2012	2013
	£'000	£'000	£'000
Loss for the period / year	(959)	(2,214)	(1,433)
Loss per share
Basic (pence per share)	(1.49p)	(3.48p)	(2.26p)
Diluted (pence per share)*	(1.49p)	(3.48p)	(2.26p)
* 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	64,205,528	63,841,253	63,841,253
Shares issued during the period / year	2,890,500	199,275	364,275
Shares at closing	67,096,028	64,040,528	64,205,528
Weighted average shares for basic earnings per share *	64,428,022	63,682,391	63,559,952
Effect of dilutive potential ordinary shares	877,979	1,270,294	1,311,580
Weighted average shares for diluted earnings per share	65,306,001	64,952,685	64,871,532
* 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, amortisation of intangibles and non-recurring costs.  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:

	6 months to 30 November	6 months to 30 November	Year to 31 May
	2013	2012	2013
	£'000	£'000	£'000
Loss for the period / year attributable to shareholders	(959)	(2,214)	(1,433)
Amortisation of intangibles	1,737	2,152	4,439
Impairment	-	-	1,277
Non-recurring costs	431	-	-
Share-based payment	141	200	417
Acquisition & related costs	-	493	524
Tax on amortisation, share based payments and acquisition & related costs	(531)	(694)	(1,586)
Adjusted profit / (loss) for the period / year attributable to shareholders	819	(63)	3,638
Basic adjusted earnings / (loss) per share	1.27p	(0.10p)	5.72p
Diluted adjusted earnings / (loss) per share	1.25p	(0.10p)	5.60p

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

 

END

 

 

IR QKODDOBKDPDD