Interim Results

RNS Number : 4664X

Focus Solutions Group PLC

07 December 2010

 



Press Release

7th December 2010

Focus Solutions Group plc

('Focus' or 'the Group')

Interim Results for the six months ended 30^th September 2010

Financial Highlights

●	Total revenues £5.43 million (H1 2009: £4.30 million)
●	Gross margins increased to 68% (H1 2009: 47%)
●	Operating profit before exceptional items £1.14 million (H1 2009: £0.27 million)
●	EBITDA before exceptional costs £1.59 million (H1 2009: £0.55 million)
●	Operating profit £1.12 million (H1 2009: £0.04 million)
●	Profit before tax £1.12 million (H1 2009: £0.15 million)
●	Basic earnings per share 3.02 pence (H1 2009: 1.30 pence)
●	Cash outflow from operating activities of £0.72 million (H1 2009: outflow of £0.31 million)
●	Cash balances £1.05 million (H1 2009: £2.51 million) and debt free

Operational Highlights

·      Largest contract win in the company's history with a major global bank worth at least £10 million over a two year period ·      Other significant contract wins during the half year included: o    contract win with third UK retail bank o    contract extension with HSBC worth £1 million o    two contract wins for focus:progress worth £0.5 million ·      Growing interest from organisations outside the UK and Ireland for focus:360°, including South Africa, Hong Kong and Israel ·      Appointment of individuals to key roles in the business, including Peter Cobb to Product Director

Since Period End

●	Contract extension with Bank of Ireland Life to extend focus:360° to their mass market channel in addition to their mass affluent channel
●	Launch of focus:360° for iPhone and Android smartphones to further extend the product's multi-channel capabilities

Commenting on the results, Richard Stevenson, Chief Executive said: "It has been an excellent half year for the Group, which has seen the organisation continue its transformation into a market leading software specialist, delivering strategic multi-channel distribution solutions to leading financial services firms.

Our target markets both in the UK and overseas are continuing to be driven by an increasing focus on compliance and regulation and the need for financial services organisations to deliver excellent customer service. With focus:360° and our supporting services, we are ideally placed to address the requirements of these organisations and continue to deliver high margin, licence revenues for the Group in the coming months and years."

Alastair Taylor, Chairman, added: "The Group has successfully transitioned from a largely professional services business to a focused software business. As a result, the Group now enjoys higher margins, a strong order book and a well diversified customer base.

On behalf of the board, I would like to thank the Group's management and staff for the hard work and commitment required to make this possible."

For further information:

Focus Solutions Group plc
Richard Stevenson, Chief Executive	Tel: [phone]
Martin Clements, Finance Director	www.focus-solutions.co.uk
FinnCap Ltd
Simon Starr	Tel: [phone]
[e-mail]	www.finncapitalmarkets.com

Media enquiries:

Abchurch
Heather Salmond / Joanne Shears / Mark Dixon	Tel: [phone]
[e-mail]	www.abchurch-group.com

Important notice

Certain statements in this interim report are forward looking. Although the group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. By their nature, these statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements.  The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Accordingly, undue reliance should not be placed on forward looking statements.

CHAIRMAN'S STATEMENT

Business Review

I am delighted to report on an excellent performance by the Group for the first half of the year, including securing the largest ever contract win in the company's history, worth a minimum of £10 million over the next two years and up to £20 million over a five year period. Our new business sales have been particularly strong and clearly evidence the company's evolution from a bespoke systems developer to software product provider, enabling us to derive a significant proportion of our revenues from higher margin licence fees across a range of clients.

Our recent contract wins now see the Group working with three out of the four largest UK retail banks, including HSBC, who continue to view Focus as a strategic supplier to their organisation, evidenced by the £1 million contract extension in the first half of the year. Our track record of working with the UK's largest retail banks and delivering on scale is assisting the Group in attracting business outside the UK and Ireland. We have seen growing interest for our solutions in new regions, including South Africa, Hong Kong and Israel, as well as North America through our partnership with Mastek.

Within this period we also saw focus:progress, our employee development product, secure its largest contract wins to date, generating £0.5 million of licence sales for the Group. The product, which was added to the Group's portfolio following the acquisition of The Coaching Platform in December 2008, generates greater client reach, increasing the Group's product and customer diversity.

Since the period end, we have also secured a contract extension with Bank of Ireland Life, which is expected to be worth £300,000 in licence fees over five years, plus an additional £375,000 in professional services. The bank will be extending focus:360° to support their mass market advisers in addition to the mass affluent channel that went live last year and this clearly demonstrates the benefits of implementing a single platform solution for a multi-channel strategy.

The Group has added to its highly skilled and motivated workforce by appointing a number of individuals into key roles across the business, including Peter Cobb, who took on the role of Product Director at the start of October.

Finally, we have continued to invest in development of the focus:360° product and in November launched a new smartphone application for the product which runs on both iPhone and Android smartphones. The new application enables clients to access their latest investment portfolio and understand the current status of their financial objectives through their mobile phone and represents a key channel for focus:360°.

Financial Review

Group revenues in the first half of the year were up 26% over the same period last year at £5.43 million (H1 2009: £4.30 million). Operating profit before exceptional costs totalled £1.14 million for the period. Gross margins increased from 47% in the first half of last year to 68% in the first half of this year, due to an increase in licence revenues.

Cash balances at the end of the period were £1.1 million (H1 2009: £2.51 million; 31 March 2010: £2.4 million). Cash outflow from operating activities in the first half amounted to £0.72 million (H1 2009: £0.31 million used in operating activities). Overdraft facilities totalling £0.75 million (H1 2009: £0.75 million) are available to us from our bankers, HSBC plc. The business is expected to be cash generative in the second half.

Earnings per share were 3.02 pence per share compared to 1.30 pence per share in the same period last year.

The Directors are not recommending the payment of an interim dividend at this time (H1 2009: £nil). 

Outlook

The outlook for the Group is positive as we enter the second half of FY2011 with our strongest ever order book and a strong pipeline.

We have successfully transitioned the business from a bespoke systems developer to software product provider and thereby increased high margin, licence revenues and improved visibility of ongoing revenues.  

Although we will continue to maintain our focus on the UK and Ireland, we expect further growth to be generated from an expansion overseas, particularly from the Asia Pacific region. This is an exciting development for the Group and we are confident that there is a significant opportunity for growth in this market due to the increasing requirement for compliant financial planning software to service a growing middle class.

We will continue to invest in our software assets, evidenced by our recent product developments to focus:360° to support iPhone and Android smart phones. This is to ensure that we keep abreast of the latest technologies being utilised by consumers to engage with financial services organisations, and also to preserve focus:360°'s position as the leading multi-channel distribution platform in the market.

Regulation and compliance will remain the key issues for all financial service organisations globally and we will continue to see demand for our software to assist with compliance in this area. In the UK, the fast approaching deadline for the Retail Distribution Review will be forcing organisations to consider their software requirements in order to transition their businesses to compliant models. We are well positioned with focus:360°, focus:progress and our training services to maximise the opportunity to the Group that this presents.

With over 80% of the current year's forecast covered by order book and a market leading product supported by unrivalled domain knowledge and delivery expertise, the Group is confident in delivering on its defined strategies and achieving our forecasted results for the full year.

The Group has successfully transitioned from a largely professional services business to a focused software business. As a result, the Group now enjoys higher margins, a strong order book and a well diversified customer base. On behalf of the board, I would like to thank the Group's management and staff for the hard work and commitment required to make this possible.

Alastair M Taylor

Chairman

Focus Solutions Group plc

Consolidated Income Statement

For the six months ended 30 September 2010

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Revenue	5,425		4,295		9,849
Cost of sales	(1,756)		(2,288)		(3,694)
Gross profit	3,669		2,007		6,155
Overheads:
Distribution costs	(571)		(618)		(1,370)
Administrative expenses	(1,979)		(1,348)		(2,868)
Operating profit	1,119		41		1,917
Operating profit before	1,141		265		2,265
exceptional costs
Exceptional costs	(22)		(224)		(348)
Operating profit after exceptional items	1,119		41		1,917
Finance income	2		110		119
Profit before income tax	1,121		151		2,036
Income tax	(223)		235		(471)
Profit for the period	898		386		1,565
Attributable to equity holders of the company	898		386		1,565
Earnings per ordinary share	Pence per share		Pence per share		Pence per share
Basic	3.02		1.30		5.29
Diluted	2.72		1.17		4.75

All the above figures relate to the Group's continuing operations.

Focus Solutions Group plc

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2010

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Profit for the period	898		386		1,565
Total comprehensive income for the period	898		386		1,565
Attributable to:
Equity shareholders	898		386		1,565

Focus Solutions Group plc

Consolidated Statement of Changes in Equity

For the six months ended 30 September 2010

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Profit for the period	898		386		1,565
Share capital issued	50		33		32
Reserve for employee share option scheme	22		36		22
Tax credit relating to share option scheme	-		-		93
Opening shareholders' equity	9,684		7,972		7,972
Closing shareholders' equity	10,654		8,427		9,684

Focus Solutions Group plc

Consolidated Balance Sheet

As at 30 September 2010

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Non-current assets
Intangible assets	3,225		3,041		3,087
Property, plant and equipment	182		178		145
Trade and other receivables	2,780		689		2,551
Deferred income tax assets	458		1,208		594
	6,645		5,116		6,377
Current assets
Trade and other receivables	6,652		3,314		3,955
Cash and cash equivalents	1,054		2,508		2,401
	7,706		5,822		6,356
Total assets	14,351		10,938		12,733
Current liabilities
Trade and other payables	2,684		2,032		2,338
Current tax liabilities	1,013		479		711
Total liabilities	3,697		2,511		3,049
Net assets	10,654		8,427		9,684
Capital and reserves attributable to equity holders of the company
Called up share capital	2,975		2,963		2,963
Share premium	1,489		1,451		1,451
Merger reserve	220		220		220
Share option reserve	299		292		277
Special reserve	8,465		8,465		8,465
Retained earnings	(2,794)		(4,964)		(3,692)
Total shareholders' equity	10,654		8,427		9,684

Focus Solutions Group plc

Consolidated Cash Flow Statement

As at 30 September 2010

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Cash (absorbed)/ generated from operations	(721)		(418)		126
Net finance income	2		110		3
Net cash from operating activities	(719)		(308)		129
Investing activities
Purchases of intangible assets	(591)		(1,209)		(1,725)
Purchases of property, plant and equipment	(87)		(12)		(40)
Disposal of property, plant and equipment	-		-		1
Net cash used in investing activities	(678)		(1,221)		(1,764)
Financing activities
Issue of ordinary shares	50		33		32
Net cash from financing activities	50		33		32
Net (decrease)/ increase in cash and cash equivalents	(1,347)		(1,496)		(1,603)
Cash and cash equivalents at start of the period	2,401		4,004		4,004
Cash and cash equivalents at end of the period	1,054		2,508		2,401

1.    Basis of preparation

The financial information set out in this interim financial statement for the six months to 30 September 2010 has been prepared under accounting standards adopted for use in the European Union (International Financial Reporting standards (IFRS)), and on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 31 March 2010.  The report is not prepared in accordance with IAS34, "Interim financial reporting" which is currently not mandatory for AIM listed companies.  The interim statement has not been audited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. 

The financial information should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2010, which have been prepared in accordance with IFRS, as adopted for use in the European Union.  Statutory accounts for Focus Solutions Group plc for the year ended 31 March 2010, on which the auditors gave an unqualified opinion, have been delivered to the Registrar of Companies.

2.    Segment Information

Focus Solutions Group is a provider of software and consultancy services.  The Board of Focus Solutions Group plc predominately manages the operations of the Group on an overall basis as one segment.  Following the adoption of the principles set out in IFRS 8 'Operating Segments', the Group has concluded that it has one operating segment.  This conclusion is consistent with the nature of the information that is presented to the Board of Directors of the parent company, which is considered to be the Chief Operating Decision Maker (CODM) for the purposes of IFRS 8. 

The Group's principal operations are in the United Kingdom.  Its revenue from external customers in the United Kingdom for the period was £5.28 million (H1 2009: £4.08 million).  The total revenue from external customers in other countries was £0.15 million (H1 2009: £0.21 million), being wholly derived from Ireland.

Revenues of £3.18 million (H1 2009: £0.11 million) and £0.85 million (FY2009: £2.39 million) are derived from two external customers.  These are the only customers that represent individually over 10% of the Group's revenues.

3.    Exceptional items

As stated in the Group's accounting policies, the Directors regard certain material items as exceptional.

The analysis of exceptional items, classified as administrative expenses, is as follows.

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£0		£0		£0
Re-organisation costs	-		92		169
Onerous contracts	-		96		157
Cost of employee share option schemes	22		36		22
	22		224		348

4.    Income tax

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30 September		30 September		31 March
	2010		2009		2010
	£000		£000		£000
Current tax (charge) / credit	(86)		-		-
Deferred tax (charge) / credit	(137)		235		(471)
	(223)		235		(471)

The Directors are confident that the group will achieve future profitability in line with the current business plan, and therefore a deferred tax asset has been recognised in the balance sheet at 30 September 2010 (31 March 2010: £594,000).

5.    Earnings per ordinary share

Basic earnings per ordinary share is based on the profit for the period and on 29,698,120 (September 2009: 29,548,747; March 2010: 29,591,083) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

Diluted basic earnings per ordinary share is based on the profit for the period and on 33,051,776 (September 2009: 32,866,602; March 2010: 32,929,482) ordinary shares, being the weighted average number of ordinary shares which would have been issued if the outstanding options to acquire shares in the Group had been exercised at the average price during the period.

Adjusted basic earnings per ordinary share of 3.09 pence (September 2009: 2.05 pence; March 2010: 6.45 pence) is based on the profit for the period, excluding exceptional costs, and on 29,698,120 (September 2009: 29,548,747; March 2010: 29,591,083) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

6.    Principal risks and uncertainties

Focus Solutions is exposed to a number of risks and uncertainties although these are not considered to be any more severe than for comparable quoted companies adopting similar strategies. The Group has instituted a formal risk assessment review which is controlled at board level. The key risks have been categorised as business risks, financial risks, compliance risks or operational risks. The executive directors report to the board on the likelihood of an event identified as a key risk happening, the impact on the business if the event occurred, what actions have been taken to mitigate the risk of the event happening, the current status and which executive is responsible for managing that risk.

7.    Directors responsibilities

The directors confirm that this condensed consolidated interim financial information has been prepared under accounting standards adopted for use in the European Union (International Financial Reporting standards (IFRS)), and on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 31 March 2010 and that the interim management report includes a fair review of the information required under the Disclosure and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely: 

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

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