Record Final Results FYE 31 May 2012

RNS Number : 8631I

Allocate Software PLC

31 July 2012

 



31 July 2012

Allocate Software plc

("Allocate" or the "Company")

Record Final Results for the Year Ended 31 May 2012

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 2012.

Financial Highlights

§ Revenue increased by 22% to £36.6m (2011: £30.1m)

§ Recurring revenue increased by 36% to £15.6m or 42% of total revenue (2011: £11.5m or 38% of total revenue)

§ Organic revenue growth was 10% in 2012

§ Healthcare revenue was £26.2m (2011: £23.1m)

§ Investment in R&D increased by £2.2m to £6.8m

§ EBITDA* increased by 10% to £6.4m (2011: £5.8m)

§ Diluted adjusted EPS** increased by 16% to 7.4p (2011: 6.4p)

§ Operating cash flows were £5.4m (2011: £5.9m). Net cash balance at the year-end was £4.3m (2011: £10.3m), primarily as a result of acquisitions made during the year

§ Directors are proposing a dividend of 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

§ Total Healthcare customers worldwide now number 365, including 262 NHS Trusts and 95 customers overseas.

§ HealthRoster gained 20 new NHS Trust customers in 2012, making 141 Trusts (after taking account of NHS Trust mergers) withHealthRoster in total at the year-end which represents 47% of 301 Acute, Mental Health and Primary Care Trusts in the United Kingdom.

§ The Zircadian business acquired in August has made very good progress, with a significant number of cross sell contracts secured within the Allocate customer base and also the integration of the Zircadian applications with the Allocate HealthRoster application.

§ Time Care in Sweden had another good year meeting management's expectations and growing its customer base by 22 new customers, versus 16 in 2011.

§ In Australia, a major development has been the integration of RosterOn, acquired in July 2011. The principal component of the RosterOn product, the awards management engine, has now been integrated with HealthRoster.

§ The Defence business secured a multi-million pound contract for the Australian Defence Forces.

§ As separately announced today, the Company acquired RealTime Health Limited, a UK supplier of patient flow management software to the NHS for initial consideration of £1.2m.

Ian Bowles, Chief Executive Officer of Allocate, commented:

"2012 was our sixth consecutive year of record revenue and adjusted profits. This continuous improvement demonstrates a balance across markets and geographical territories, which supports our plans for significant growth in future years.  I am delighted with this year's performance and look forward to further success in the coming financial year."

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 2012 financial year was a strong year for Allocate. We made two further acquisitions, begun the rollout of a major product upgrade cycle that will open new markets for us and we exceeded City expectations.

The Company was successful in all of its major markets in 2012.  The UK Healthcare business prospered driven by strong execution and the continuing productivity demands resulting from the NHS re-structuring process. The business in Australia continued to progress with the acquisition of RosterOn.  Time Care in Sweden again had a good year and the Defence team had their best ever year also securing their largest ever licencing contract in Australia.

The Company achieved substantial revenue and profit growth for the sixth year in succession. Our Company's balance sheet continues to be secure with another year of high profit to cash conversion. The financing of our acquisitions to date remains comfortably within our balance sheet's funding capacity.

Since the end of the financial year, we have continued our strategy of complementing our strong organic growth with carefully selected acquisitions. On 30 July 2012, we acquired RealTime Health Limited, a UK supplier of patient flow management software to the NHS. This is a vitally important application area and we expect the integration of RealTime Health with our existing product portfolio to provide significant operating and cost savings benefits for our customers. It will open up major new growth opportunities for our next strategic period.

I would like once more to thank our customers for their business and their partnership with Allocate and our Alliance partners for their continuing support. 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 1.2 pence per share, payable on 28 November 2012 to shareholders on the register on 2 November 2012.

I would like to thank Mark Loveland, who is stepping down from the board, for his seven years of exceptional service to our board and the Company.  We wish him well for the future, and a speedy return to full health.

We remain confident of our prospects for the 2013 financial year, and of the fundamental strength of the business.

Terry Osborne

CHAIRMAN

30 July 2012

CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

The 2012 financial year was another successful period for Allocate and we remain very positive about the future of the business. This year we completed two further acquisitions, we started the rollout of HealthRoster V10, we launched HealthRoster in the Cloud and we made progress in all of our territories and vertical market sectors.

Allocate has grown revenue and EBITDA by a CAGR of 35% and 41% respectively over the past five years. For a number of years, our growth was led predominantly by revenues earned from new NHS contracts, but over recent years we have driven a change in our business model and growth in recurring revenues is now a key driver.

As recently as 2009 for example, new licence revenue from NHS HealthRoster agreements represented approximately 43% of total revenue of £15.8m with recurring revenues being 21% of total revenue. In 2012 however, the new licence revenue from NHS customers is no more than 10% of total revenue of £36.6m, but with recurring revenues now representing 42% of total revenue.

This increase in recurring revenues, which is driven by cross sell from new products, both organically developed as well as acquired, has significantly improved the predictability of our revenue streams and the visibility of our profits and cash flows.

Business drivers and sources of growth

Overall, our value proposition to customers remains consistent. We offer customers superior applications and services that bring clear returns on investment (ROI) from operational efficiencies and reduced costs. In challenging economic times, demand for applications such as ours is stronger than at any other time in an economic cycle. Allocate solutions offer exactly what customers and prospective customers in our target markets need.

1.   Customer Satisfaction:

Is the number one priority for Allocate. We have invested considerably in people and infrastructure to support customer satisfaction over the past two years. We run regular surveys of CSAT, the results of which tell us that we are continuing to improve our service levels and that we have satisfied customers. Our renewal rates for support remain at or close to 100%.

2.   New Customers:

We will continue to seek and secure agreements with new customers in all sectors and all geographical territories believing there are significant opportunities for continued growth. In the UK, our success rate remains high, winning circa 80% of all bids that we enter.  In the UK almost one third of all NHS Trusts has yet to purchase an e-rostering system. Based on our prior performance and growing reputation, we are confident of securing a large number of these Trusts as new customers.

3.    New Products:

We continue to invest heavily in research and development (R&D) and have announced a raft of new application modules and services which broaden our applications portfolio in Healthcare beyond e-rostering. The new applications include Clinical Activity Management (CAM), HealthRoster in the Cloud and a National Benchmarking capability. We have also released the next generation of HealthRoster V10. This version of HealthRoster is of great importance to Allocate because it brings many new and important areas of functionality and enhanced performance that will open up new markets and opportunities, both in the UK and also overseas. Our business in Europe has already developed well through Time Care and now the launch of V10 will enable us to accelerate our entry into new territories. The Zircadian products, e-job plan and the Consultants portal are being integrated with the Allocate Medics application and we are now taking this unique solution to market.

4.   Business model:

Allocate continues to drive change in its business model towards one based upon recurring revenues. All new products developed or acquired will be offered on licencing models that are flexible and recurring to support the model. In addition, the NHS HealthRoster term licence renewal cycle has now begun. We have so far renewed 100% of the HealthRoster licences that have come up for renewal. We are confident that we will continue to secure a very high proportion of the future renewals.

5.   Acquisitions:

Acquisitions remain part of the growth strategy. We will continue to seek appropriately priced assets that will bring growth to the solution set that we offer to our customers. We now have a very significant customer base and cross sell opportunities are an important element of our growth. By way of example, we have now cross sold either an Allocate or a Zircadian product between 27 of the customers in the ten months since Zircadian were acquired.  RealTime Health, our most recent acquisition, once integrated into our applications portfolio, has the potential to drive revenues of a similar scale to e-rostering, with significant ROI for customers.

Healthcare - UK

2012 was a year of continued success in the Healthcare market led by further growth within the UK NHS, with the acquisition of Zircadian continuing the expansion of our Healthcare product portfolio into the medical staffing arena. The release of HealthRoster V10, our completely web based rostering product which enables Cloud based delivery and multi-lingual support, will enable us to target further growth opportunities.

We continued to grow our core NHS rostering market where the Company's success rate in competitive tenders of rostering solutions was very significant.  The strong position we now hold within the NHS means that we provide at least one software product to over 85% of NHS Trusts.  Ensuring that we continue to deliver proven benefits to our Healthcare customer base creates a significant on-going opportunity to deliver further products and secure additional revenue within the Healthcare market.  At our most recent User Group there were over 275 attendees from 100 NHS Trusts, as well as the independent sector, discussing the benefits they have achieved and sharing best practice.

The acquisition of Zircadian is a significant event in the development of our Healthcare solutions.  Firstly, we now have medical staff as part of the team; this greatly expands our product portfolio and experience in the management of the medical workforce.  Secondly, it broadens our solutions into the area of clinical and medical activity planning.  The integration of medical workforce planning managed within the Zircadian product set and operational rostering within HealthRoster offers enormous opportunities and benefits for our customers. This natural alignment of solutions has already led to additional sales within the customer base which would not have been realised otherwise. The significant benefit to customers, that being of increased ROI due to integration of the solutions, will also help drive further cross sell opportunities in the future.

Allocate also published the first in a series of thought leadership pieces aimed at NHS executive and specialist teams. The first paper titled "Junior Doctor Rota Review" has helped position Allocate as a thought leader and specialists in medical workforce management. It demonstrates that we are working with a number of Trusts to identify large scale savings by helping the reconfiguration of the medical workforce.

This year the integration of HealthRoster, Zircadian planning products and HealthAssure has created a Healthcare suite of products that moves Allocate into all areas of a Trust's operations spanning activity planning, workforce management, financial control and clinical governance/patient outcomes.  This aligns the Company to the current focus within Healthcare to deliver higher quality care within an increasingly constrained financial regime.

Allocate also initiated an Executive Advisory Council that will meet three to four times a year to collaborate with and advise Allocate on market changes and healthcare challenges. The Advisory Council is made up of a broad range of executives from the NHS and will provide a forum to test ideas and explore value and innovation of future strategy and market engagement. The forum will keep Allocate aligned to the issues affecting executives and their organisations. The forum will also be publishing white papers based on agreed topic areas affecting the healthcare market place.

The successful release of our flagship rostering product HealthRoster V10 within a completely re-architected framework was also achieved.  V10 is simpler, faster and more accessible than all of its predecessors.  HealthRoster V10 is web based, offering the ability to deliver via the Cloud, reducing the time to deploy and allowing ease of purchase for our customers.   In addition, the ability of V10 to support multiple languages will accelerate our sales into non-English speaking countries. 

Healthcare - Overseas

Overseas, we achieved significant success in a number of areas:  

RosterOn, our acquisition in Australia has had a challenging year post acquisition. However, we have already integrated their awards engine technology with the Allocate HealthRoster product and this integrated solution is already being favourably received by the market.

Time Care had another successful year. The political situation in Sweden is changing and many Swedish municipalities now have to offer their employees the right to full time employment. This we believe will lead to an on-going demand for our consultancy services in that field. The localisation of HealthRoster V10 is most important and it will be given high priority. The response has been very positive from the clients who have been introduced to the software. We have great expectations from the Swedish private sector and there is a strong trend among customers and prospects to improve their workforce management.

Time Care has also signed an important agreement with Aditro, the leading Scandinavian based provider of solutions for human resources management. This partnership will provide us with the opportunity to access their customer base containing some 12,000 customers in Sweden, Norway, Finland and Denmark, in both public and private sectors. The partnership with Aditro includes not only sales and marketing elements but also development of an interface between their products and ours.

The Company's achievement in securing the country wide HealthRoster contract in Brunei further reinforces our presence in overseas markets.  The securing of this contract has led to several partner opportunities arising which alongside V10 position the Company to expand into other territories.

Allocate currently work with over 350 healthcare organisations in 11 countries.  Our strong presence within the Healthcare market offers the opportunity to build upon our significant position, expanding our revenue via new customers and cross sales of new solutions to deliver continued growth.  Our strategy is to position Allocate as a solution provider to healthcare organisations that is integral to their operations from activity planning, operational management through to the measurement of patient outcomes.

Defence

The Defence sector had a record year, delivering revenues of £7.6m (2011: £4.1m).

The principal accomplishments include:

§ Securing a multi-million pound licence contract with the Australian Defence Forces extending the use of Defence Suite across Army, Navy and civilians under military control;

§ Substantial additional services contract extension wins with the Royal Australian Navy, as part of their New Generation Navy programme;

§ Two new services contract wins in NATO within their Force Operations Group and Special Forces HQ; and

§ The extension of the UK Army contract to 2014.

Research & Development

Our continued investment in R&D has resulted in the release of HealthRoster V10, our Cloud Offering as well as enhanced versions of HealthAssure and the integration of core applications with the acquired applications from both Zircadian and RosterOn.

Over the next period we will see further integration of applications and the delivery of new modules such as Clinical Activity Management and further enhancements to our Cloud based applications portfolio.

All of our software and services offerings are designed and developed in close cooperation with our customers to ensure they meet current and future needs.

Organisation

The continued success of Allocate depends on our people; their ideas, commitment and energy drive our continuing success.

We have now grown to over 300 employees from 103 four years ago. We also have over 20% of our employees located overseas in Sweden, Australia, America and Malaysia.

We are embarking upon a number of programmes to help our employees grow with Allocate, to maintain their focus and to support the realisation of the Company's objectives through their individual achievements.

We run an annual employee survey, which this year showed very positive employee satisfaction ratings. We are increasing our investment in employee training, both functional and management, we are improving our benefits packages with the help of a newly appointed supplier.  We are increasing the number of promotion/rotational opportunities available to employees, both in the UK and overseas.

Financial report

Revenue in the financial year was £36.6m (2011: £30.1m), an increase over the prior year of 22%. EBITDA was £6.4m (2011: £5.8m), an increase over the prior year of 10%. The resulting trading profit margin was 17.5% (2011: 19.3%), a slight contraction over the previous year due to increased levels of investment in the business, particularly R&D.  Diluted adjusted EPS (excluding amortisation of intangibles, impairment, share-based payments, acquisition costs and the deferred tax adjustment) increased by 16% to 7.4p (2011: 6.4p).

Recurring revenues grew by 36% to £15.6m or 42% of total revenue (2011: £11.5m or 38% of total revenue).

Organic revenue (excluding the acquisitions of RosterOn and Zircadian which were both acquired part way through 2012) grew by 10% to £33.0m (2011: £30.1m) during the year.

Licence and subscription revenue grew by 16% to £15.4m (2011: £13.3m).

By sector, Healthcare revenue in the period increased by 13% to £26.2m (2011: £23.1m), reflecting the impact of acquisitions as well as the growth of recurring revenues.  Defence revenues rose by 85% to £7.6m (2011: £4.1m), principally due to the large order from the Australian Defence Force secured in the second half of 2012.  Maritime and all other revenue remained flat at £2.9m (2011: £2.9m).

EBITDA margins were 17.5% (2011: 19.3%) as a result of an increase in investments made during the year. The principal area for increase in investment has been in R&D, which in 2012 was £6.8m or 19% of revenue (2011: £4.6m or 15% of revenue). The main areas for the increase in spending were into V10 HealthRoster and also spend supporting the move towards more Cloud based solutions, both organic and acquired. Spend in R&D is expected to increase in the future, although not at the level seen recently.

As previously stated, the performance of the Dynamic Change business has continued to be below management's expectations in this period.  This is due to the negative impact of the restructuring of PCTs, proposed and begun by the government in the summer of 2011.  A significant proportion of Dynamic Change's customers were commissioning PCTs, some 37%, many of whom cannot renew their subscriptions because they no longer exist as organisations and their replacements have yet to be established.  However, over the last 12 months, the Company has seen some improvement in the number of new customers being contracted, but not sufficient to offset those not renewing.  As a result, management have revised downwards their forecasts for both revenue and profits from Dynamic Change and, in accordance with the provisions of IAS36, they have impaired the assets of the business. As reported in the interim financial report, this has resulted in a write down of intangible assets and goodwill through an impairment charge of £3.9m to the Income Statement.

As previously stated, we propose to pay a dividend in respect of the full financial year of 1.2 pence per share, payable on 28 November 2012 to shareholders on the register on 2 November 2012.

Cash generated from operations was £5.4m in 2012, (2011: £5.9m). This is a conversion rate of 84% of EBITDA, a strong performance although slightly lower than in 2011, but only as a result of the late payment of a material sum from a single customer that arrived during the first week following the year end.

Net cash on the Balance Sheet was £4.3m, consisting of gross cash of £8.3m and debt of £4.0m. Net cash, gross cash and debt at the end of 2011 were, respectively, £8.4m, £10.4m and £2.0m.

Outlook

The outlook for Allocate Software is positive and I am confident our growth will continue.

By working in close cooperation with our customers we will continue to anticipate demand for new solutions that will support their objectives and deliver superior ROI. Our solutions are perfectly suited to the economic challenges currently faced by our customers. Our products have shown on numerous occasions that they bring significant cost reductions and improvements in workforce efficiency.

The breadth and depth of our applications portfolio which now includes a Cloud offering for all of the core applications in healthcare, as well as our ability to localise HealthRoster into any language will create new and exciting opportunities, for the Company and our customers.

RealTime Health, our most recent acquisition, will enable our Healthcare customers to drive further efficiencies as we combine Clinical Activity Management, Staff Deployment and patient flow capabilities into an integrated, holistic solution.

Our track record of the past six years vindicates our belief that we are uniquely equipped to help our current and prospective customers achieve their objectives.  We offer proven products that deliver significant improvements in efficiency and demonstrable ROI.

Allocate is now a substantial enterprise with an enviable track record of customer acquisition, market development and new product realisation.

I would like to add my own thanks to our team, partners and especially our customers for their on-going support.

Ian Bowles

CHIEF EXECUTIVE OFFICER

30 July 2012

ALLOCATE SOFTWARE PLC

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MAY 2012

				2012	2011
				£'000	£'000
Licence revenue				10,413	10,177
Subscription revenue				4,993	3,169
				15,406	13,346
Support revenue				10,121	8,067
Service revenue				10,620	8,387
Other revenue				502	313
Total revenue				36,649	30,113
Costs of goods sold				(11,069)	(9,180)
Research and development				(6,789)	(4,558)
Sales, general and administration				(12,394)	(10,537)
Total costs before interest, tax, depreciation, amortisation, share based payments and acquisition costs				(30,252)	(24,275)
EBITDA before share based payments and acquisition costs				6,397	5,838
Acquisition costs				(1,754)	(64)
Share based payments				(477)	(150)
Depreciation				(395)	(331)
Amortisation				(4,538)	(4,427)
Impairment				(3,935)	-
Total costs				(41,351)	(29,247)
Operating (loss)/profit				(4,702)	866
Finance income				108	49
Foreign exchange gains/(losses)				231	(140)
Finance charges				(123)	(28)
Net finance income/(expense)				216	(119)
(Loss)/profit for the year before taxation				(4,486)	747
Tax on (loss)/profit for the year				1,089	50
(Loss)/profit for the year				(3,397)	797
(Loss)/earnings per share
Basic (pence per share)				(5.35p)	1.28p
Diluted (pence per share)				(5.35p)	1.24p

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2012

							2012				2011
							£'000				£'000
(Loss)/profit per the income statement									(3,397)				797
Exchange differences on translation of foreign operations								(951)				1,165
Total comprehensive (loss) / income attributable to the owners of the company									(4,348)				1,962

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2012

			2012	2011
			£'000	£'000
Non-current assets
Property, plant and equipment			908	763
Goodwill			6,939	2,935
Intangible assets			9,661	12,960
Other financial assets			60	66
Deferred tax asset			561	1,030
Total non-current assets			18,129	17,754
Current assets
Corporation tax receivable			120	52
Trade and other receivables			14,838	10,632
Cash and cash equivalents			8,338	10,398
Total current assets			23,296	21,082
Total assets			41,425	38,836
Equity and liabilities
Equity
Share capital			3,192	3,154
Share premium account			7,908	7,752
Share-based payment reserve			1,035	694
Foreign exchange reserve			367	1,318
Retained earnings			3,258	6,655
Total equity			15,760	19,573
Non-current liabilities
Borrowings			4,000	-
Deferred tax liability			2,129	3,012
Total non-current liabilities			6,129	3,012
Current liabilities
Trade and other payables			18,895	14,062
Borrowings			-	2,000
Corporation tax			641	189
Total current liabilities			19,536	16,251
Total liabilities			25,665	19,263
Total equity and liabilities			41,425	38,836

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 May 2012

	Share capital	Share premium	Share-based payment  reserve	Foreign exchange reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 June 2010	3,060	7,380	408	153	5,858	16,859
Equity settled share options	94	372	150	-	-	616
Deferred tax on share options	-	-	136	-	-	136
Total transactions with owners	94	372	286	-	-	752
Profit for the year	-	-	-	-	797	797
Other comprehensive income	-	-	-	1,165	-	1,165
Total comprehensive income	-	-	-	1,165	797	1,962
At 31 May 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)/income	-	-	-	(951)	-	(951)
Total comprehensive (loss)/income	-	-	-	(951)	(3,397)	(4,348)
At 31 May 2012	3,192	7,908	1,035	367	3,258	15,760

ALLOCATE SOFTWARE PLC

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 May 2012

			2012	2011
			£'000	£'000
Cash flow from operating activities
(Loss)/profit for the year			(3,397)	797
Adjustments for:
Net finance charge/(income)			15	(21)
Foreign exchange			(231)	140
Income tax			(1,089)	(50)
Loss/(profit) on disposal of intangible assets			12	(11)
Depreciation			395	331
Acquisition and related costs			1,754	64
Amortisation			4,538	4,427
Impairment of intangibles and goodwill			3,935	-
Share-based payment			477	150
Increase in trade and other receivables			(2,628)	(1,625)
Increase in trade and other payables			1,604	1,713
Net cash generated from operations before acquisition and related costs			5,385	5,915
Acquisition and related costs			(1,544)	(64)
Net cash generated from operations after acquisition and related costs			3,841	5,851
Interest expense			(123)	(28)
Income tax			(301)	(14)
Net cash generated by operating activities			3,417	5,809
Cash flows from investing activities
Interest received			108	49
Deferred consideration on prior acquisitions			-	(250)
Investment to acquire subsidiaries			(8,664)	-
Cash acquired with subsidiaries			1,843	-
Proceeds from disposal of intangible assets			50	181
Payments to acquire intangible assets			(268)	(368)
Payments for property, plant and equipment			(485)	(324)
Net cash used in investing activities			(7,416)	(712)
Cash flows from financing activities
Repayment of borrowings			-	(172)
Proceeds from loan			2,000	-
Proceeds from the issue of equity shares			194	466
Net cash generated by financing activities			2,194	294
Net (decrease)/increase in cash and cash equivalents			(1,805)	5,391
Foreign exchange differences			(255)	(35)
Cash and cash equivalents at the start of the year			10,398	5,042
Cash and cash equivalents at the end of the year			8,338	10,398

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 2012 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 2012 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 2011, 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.

2012	Licence	Subscriptions	Support	Services	Hosting / Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	10,413	4,993	10,121	10,620	502	36,649
Costs of goods sold	(827)	(910)	(2,049)	(6,915)	(368)	(11,069)
Sub-total	9,586	4,083	8,072	3,705	134	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)

2011	Licence	Subscriptions	Support	Services	Hosting / Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	10,177	3,169	8,067	8,387	313	30,113
Costs of goods sold	(480)	(476)	(1,644)	(6,246)	(334)	(9,180)
Sub-total	9,697	2,693	6,423	2,141	(21)	20,933
Research and development costs						(4,558)
Sales, general and administration (*)						(15,509)
Operating profit						866
Finance income						49
Foreign exchange losses						(140)
Finance charges						(28)
Profit before tax						747

(*)  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 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:

	2012	2011
	£'000	£'000
UK	17,978	15,064
Europe	7,829	7,345
USA	1,149	1,174
Australia	9,284	6,187
Rest of World	409	343
	36,649	30,113

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

	2011	2011
	£'000	£'000
Healthcare	26,162	23,101
Defence	7,615	4,112
Maritime	2,111	1,681
Other	761	1,219
	36,649	30,113

There was 1 customer (2011: 1) who contributed in excess of 10% of total revenues. Their aggregate contribution to revenue amounted to 15% (2011:14%) 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
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
Deferred tax assets	561	-	-	-	-	561
Total non-current assets	10,918	5,520	10	1,679	2	18,129

Non-current assets by location	UK	Europe	USA	Australia	R o W	Total
2011	£'000	£'000	£'000	£'000	£'000	£'000
Intangible assets	6,919	6,041	-	-	-	12,960
Goodwill	540	2,395	-	-	-	2,935
Financial assets	-	66	-	-	-	66
Property, plant and equipment	639	112	4	4	4	763
Deferred tax assets	1,030	-	-	-	-	1,030
Total non-current assets	9,128	8,614	4	4	4	17,754

4.         Income Tax (Credit) / Expense

	2012	2011
	£'000	£'000
Current tax:
Corporation tax on (loss)/profit for the year	-	-
Prior period adjustments	(184)	(132)
Overseas tax	813	487
Total current tax	629	355
Deferred tax:
Origination and reversal of temporary differences :
Current period	(1,716)	(340)
Prior period adjustments	97	124
Rate change adjustment	(99)	(189)
Total deferred tax	(1,718)	(405)
Tax on (loss)/profit for the year	(1,089)	(50)

The rate change adjustment in the year arises due to a reduction in the UK rate of corporation tax from 26% to 24%.

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:

	2012	2010
	£'000	£'000
Net deferred tax - (credited)/charged to equity	(136)	136
	(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:

	2012	2011
	£'000	£'000
(Loss)/profit for the year before tax	(4,486)	747
(Loss)/profit for year multiplied by the respective standard rate of corporation tax applicable in each domain 25.67% (2011: 27.66%).	(1,152)	207
Effects of:
Tax rate change adjustment	(99)	(280)
Adjustment to tax in respect of prior periods	(87)	(9)
Difference in overseas tax rates	11	(25)
Movement on deferred tax not recognised	(36)	65
Research and development enhanced relief	(511)	(242)
Share based payments	-	(212)
Other timing differences	(20)	388
Uncertain tax positions	189	-
Expenses not deductible for tax purposes
-       Acquisition costs	429	-
-       Impairment of goodwill	139	-
-       Other	48	58
Tax on (loss)/profit for the year	(1,089)	(50)

5.         Earnings per share

	31 May	31 May
	2012	2011
	£'000	£'000
(Loss)/profit for the year attributable to shareholders	(3,397)	797
(Loss)/earnings per share
Basic (pence per share)	(5.35p)	1.28p
Diluted (pence per share)	(5.35p)	1.24p
Weighted average number of shares	Number of shares	Number of shares
Shares in issue at opening	63,074,353	61,195,314
Shares issued during the year	766,900	1,879,039
Shares in issue at closing	63,841,253	63,074,353
Weighted average shares for basic earnings per share	63,409,261	62,364,597
Effect of dilutive potential ordinary shares	1,671,842	2,088,799
Weighted average shares for diluted earnings per share	65,081,103	64,453,396

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 payment, 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 adjusted profit per share is set out below:

	2012	2011
	£'000	£'000
(Loss)/profit for the year attributable to shareholders	(3,397)	797
Amortisation of intangibles	4,538	4,427
Impairment charge	3,935	-
Share-based payments	477	150
Acquisition costs	1,754	64
Tax on amortisation, share-based payment and acquisition costs	(2,480)	(1,283)
Adjusted profit for the year attributable to shareholders	4,827	4,155
Basic adjusted earnings per share	7.60p	6.66p
Diluted adjusted earnings per share	7.42p	6.44p

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 2012 and their fair values:

RosterOn Pty Ltd

On 4 July 2011 the Group acquired 100% of the share capital of RosterOn Pty Ltd, an Australian based provider of workforce management software with a focus on the Australian healthcare market. The consideration for the acquisition was £2,209,000 (A$3,358,000) which was paid in cash during the year including a payment for the net asset value of the company of £496,000 (A$758,000). The net assets acquired included cash of £586,000 (A$890,000).

The net assets acquired and the resultant fair value adjustments are shown below:

			Book value		Provisional fair value adjustment		Fair value
			£'000		£'000		£'000
Cash			586		-		586
Intangibles			-		1,054		1,054
Property, plant and equipment			21		-		21
Receivables			588		-		588
Trade payables and other payables			(607)		-		(607)
Deferred tax liability			(32)		(264)		(296)
Net assets			556		790		1,346
Goodwill arising on acquisition			-		863		863
Total purchase consideration							2,209
Purchase consideration:
Cash							2,209
Analysis of cash flows on acquisition:
Purchase consideration							2,209
Net cash acquired with the subsidiary (included in cash flows from investing activities)							(586)
Net cash flow on acquisition							1,623
Transaction costs of the acquisition (included in cash flows from operating activities)							292

In addition to the £2,209,000 purchase consideration, a further £264,000 (A$400,000) is payable 18 months after the acquisition contingent on key staff retentions.  For accounting purposes, IFRS 3 'Business Combinations' requires this to be treated as remuneration and not consideration. Consequently this does not form part of the cost of acquisition and instead will be expensed to the Income Statement on a straight line basis over the 18 month period between the date of acquisition and the payment date.  This charge is included within the 'Acquisition & related costs' line of the Income Statement.

The goodwill of £863,000 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 RosterOn cash generating unit. None of the goodwill is expected to be deductible for income tax purposes.

In the period since acquisition, RosterOn Pty Ltd contributed revenues of £1,291,000 and a profit after tax of £46,000 to the group for the period from 5 July 2011 to 31 May 2012.  If the acquisition had occurred on 1 June 2011, the Group's annualised consolidated revenue and loss after tax for the year ended 30 June 2012  would have been £36,766,000 and £3,440,000 respectively.  This includes not only an estimate of the full year contribution of RosterOn but also the impact of a full year of amortisation charge (after tax) of the intangible assets which arose on the acquisition.

Zircadian Holdings Limited

On 12 August 2011 the group acquired 100% of the share capital of Zircadian Holdings Limited, a UK based Software-as-a-Service ("SaaS") provider of software used to plan rotas of junior doctors and consultants in the NHS. The consideration for the acquisition was £6,455,000, all payable in cash. £6,455,000 was paid during the year, including a deferred consideration payment of up £1,000,000 paid in April 2012 which had been contingent on financial targets being met. This acquisition was funded in part through a renewal of the Group's revolving facility for a further two years and an increase in this by £2,000,000 to £4,000,000.  The net assets acquired included cash of £1,257,000.

The net assets acquired and the resultant fair value adjustments are shown below:

			Book value	Provisional fair value adjustment		Fair value
			£'000	£'000		£'000
Cash			1,257	-		1,257
Intangibles - acquired			27	-		27
Intangibles - identified at acquisition			-	3,941		3,941
Property, plant and equipment			39	-		39
Receivables			620	-		620
Trade payables and other payables			(368)	-		(368)
Deferred income			(2,013)	-		(2,013)
Deferred tax liability			(9)	(985)		(994)
Net (liabilities)/assets			(447)	2,956		2,509
Goodwill arising on acquisition			-	3,946		3,946
Total purchase consideration						6,455
Purchase consideration:
Cash paid on completion						5,455
Contingent consideration						1,000
Total consideration						6,455
Payments treated as remuneration						500
Acquisition costs						725
Total cost of investment						7,680
Analysis of cash flows on acquisition:
Purchase consideration						6,455
Net cash acquired with the subsidiary (included in cash flows from investing activities)						(1,257)
Net cash flow on acquisition						5,198
Transaction costs of the acquisition (included in cash flows from operating activities)						1,225

In addition to the purchase consideration of £6,455,000, a further £500,000 payment was made during the year in respect of key staff retentions for a period of six months post acquisition.  As for the RosterOn acquisition, IFRS 3 requires this amount to be treated as remuneration and not consideration. Consequently this does not form part of the cost of acquisition and was instead expensed to the Income Statement over the six month period between the date of acquisition and the payment date. This charge is included within the 'Acquisition & related costs' line of the Income Statement.

The goodwill of £3,946,000 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 Zircadian cash generating unit. None of the goodwill is expected to be deductible for income tax purposes.

In the period since acquisition, Zircadian Holdings Limited contributed revenues of £2,330,000 and a profit after tax of £167,000 to the group for the period from 11 August 2011 to 31 May 2012.  If the acquisition had occurred on 1 June 2011, the Group's annualised revenue and loss after tax would have been £37,262,000 and £3,478,000 respectively.  This includes not only an estimate of the full year contribution of Zircadian but also the impact of a full year of amortisation charge (after tax) of the intangible assets which arose on acquisition. 

7.         Directors' Remuneration

Group	2012	2011
	£'000	£'000
Short term employee benefits	1,179	1,141
Post-employment benefits	58	28
Remuneration benefits	3	3
Share-based payments	193	111
	1,433	1,283

8.         Events after the Statement of Financial Position Date

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 total consideration, based on zero net assets, of up to £7,200,000 is structured as an initial payment of £1,200,000 and an earn-out of up to £6,000,000 in tranches. The initial consideration comprises a cash payment of £1,200,000 paid 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, during the 24 months following acquisition.  Included within acquisition costs in the Income Statement is £76,000 incurred prior to 31 May in relation to the acquisition of RealTime Health.

As at the date of approval of the financial statements, the initial accounting has not been completed for this business combination.  Consequently it has not been possible to disclose the following information required by IFRS 'Business Combinations': a description of the goodwill arising; the fair values of assets and liabilities acquired; details of contingent liabilities (if any); total goodwill deductible for tax purposes; and transactions recognised separately from the acquisition of assets and assumption of liabilities in the business combination.

 

END

 

 

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