Final Results

RNS Number : 2246Z

IDOX PLC

11 January 2011

 



11 January 2011

IDOX plc

EBITDA up 16%, dividend increased 125% and three acquisitions integrated

IDOX plc (AIM: IDOX, 'IDOX' or the 'Group'), a leading independent supplier of software and services to the UK public sector and other markets, announces its final results for the year ended 31 October 2010.

Highlights

·      Revenues £31.3m (2009: £32.2m) reflecting reduction in the low margin contract recruitment business and benefit of large, one-off project in 2009 financial year, offset by acquisitions

·      EBITDA increased by 16% to £8.7m (2009: £7.5m)

·      Normalised pre-tax profit* £8.0m up 21% (2009: £6.6m)

·      Normalised EPS* increased 16% to 1.75p (2009: 1.51p), Basic EPS 1.07p (2009: 1.01p)

·      Profit before tax £4.9m (2009: £4.5m) after a higher non-cash amortisation charge related to the acquisitions made during the year

·      Trebled final proposed dividend to 0.35p (2009: 0.12p), making total for year of 0.45p (2009: 0.20p), 125% increase

·      £2.0m cash at period end, £0.9m net debt (2009: £6.9m cash; £3.2m net cash) after funding £10.6m of acquisitions

·      Completed and fully integrated three earnings enhancing acquisitions, further boosting revenue visibility and market leading positions.

Martin Brooks, IDOX Chairman, said:

"2010 marked significant progression as we continued to improve profits and margins and added to our capabilities in local government shared and managed services.

"Following three key acquisitions in 2010, we have extended our market share and increased our recurring revenues further in local government, where some 90% of local authorities are now customers.

"With the Comprehensive Spending Review (CSR) behind us, the new financial year has started positively in our core local government market and the recent purchase of McLaren software in December extends our technical skills into new markets in the UK and internationally."

* Normalised pre-tax profit & EPS excludes amortisation, exceptional restructuring and corporate finance charges and share option costs

Enquiries:

IDOX plc	[phone]
Martin Brooks, Chairman
Richard Kellett-Clarke, Chief Executive
William Edmondson, Chief Financial Officer
Investec Investment Banking	[phone]
Andrew Pinder Patrick Robb
FinnCap	[phone]
Charles Cunningham (Corporate Finance)
Stephen Norcross (Corporate Broking)
College Hill	[phone]
Adrian Duffield/Kay Larsen

About IDOX plc

IDOX plc is a supplier of software solutions and services to the UK public sector and increasingly to the wider corporate sector. It is the leading applications provider to local government for core functions relating to land, people and property, such as its market leading planning systems and election management software. Over 90% of UK local authorities are now customers.

The Group provides public sector organisations with tools to manage information and knowledge, documents and content, business processes and workflow as well as connecting directly with the citizen via the web.

These capabilities have been recently extended via the acquisition of McLaren Software into the related area of engineering document management and control applications, serving many leading international companies in industries such as oil & gas, mining, utilities, pharmaceuticals and transportation.

IDOX also supplies decision support content and additional specialist services via the IDOX Information Solutions business, as well as transforming approaches to knowledge and content management via consultancy and training in the UK and internationally.

In addition, it provides these specialist skills to customers through its TFPL branded recruitment division.

For more information see www.idoxplc.com

Strategic overview

IDOX is a specialist high end provider of document management, case management, workflow systems, content and related web-based portals. These skills have been successfully applied to the local government domain and are increasingly being developed on a managed or shared service partnership basis with groups of councils to save costs and gain efficiency.  The Group is now positioned to apply these skills to wider market sectors.

By the end of 2010, the Group served more than 90% of UK local authorities, with 62% recurring revenues (2009: 55%) and the Group's land & property software solutions business comprises over 60% of installed UK local government planning solutions.

The Group was also bolstered through the acquisition and integration of Grantfinder, Strand Electoral Management Services and the Local Authority Modernisation Programme (LAMP) long-term managed services contracts with 11 local authorities. These acquisitions enabled the Group to expand into additional managed service agreements, election management software and further grants content.  The acquisition of Grantfinder brings the critical mass required to make the Solutions segment a significant profit generator in forthcoming periods.

The acquisition of J4b in 2009 had already added an international dimension to our business in Holland and in late 2010 IDOX won its first contract in Spain.

The post financial year-end acquisition of McLaren Software, a Glasgow-based company with a presence in Germany and Houston, Texas, marks a step in the Group's strategy to provide its document management services to broader public and private markets in the UK and internationally. The acquisition broadens the Group's footprint into McLaren's industrial markets in pharmaceuticals and oil & gas.

The acquisition will also build on the Group's document management systems, workflow and related technology and expertise to expand a development centre of excellence in Scotland and offer this expertise to other markets where IDOX can become a technology and market leader.

The Group will continue to identify opportunities to diversify into new geographies and new markets and aims through organic growth, acquisition and expansion outside the UK and public sector to grow its revenue and profits. The Board also continues to buy-back shares to fund share option incentives whilst pursuing its objective of promoting double-digit normalised EPS growth.

2010 highlights and markets

The publication of the government's CSR in October 2010 has brought clarity to both central and local government spending plans. As a result the Board is confident that there will be no major adverse impact on software & services expenditure at local government level where it supports efficiencies in areas like planning.

Local government has become increasingly outcomes driven, focused on return on investment and improvements in effectiveness and the maintenance of services to the community. Since the CSR was announced, independent market research company Kable has re-iterated its forecast of modest growth in the local government software & services market for the next three years.

In 2010 the Group passed a further milestone in its development as it diversified beyond its traditional local government client base into wider market sectors.

EBITDA rose 16% despite a 3% fall in revenues, which reflected in part the successful wind down of the large Scottish government planning portal project in the previous financial year.

Operating costs were reduced during the year, even after the acquisitions of LAMP, Strand Electoral Management Services and Grantfinder.  On a like-for-like basis, excluding acquisitions, overheads were £1.5m or 9% lower, as a result of tight cost controls and continued productivity and efficiency gains. 

In line with its previously announced policy of accelerating dividend increases, the Board proposes a significant rise in its final dividend to 0.35p per share.

Financial review

Group revenues were £31.3m (2009: £32.2m) reflecting the reduction in the low-margin contract recruitment business and the benefit in the prior year of the large Scottish Executive contract.

The Software segment, which accounts for 77% of Group revenues, delivered £24.1m (2009: £25.1m), of which around 62% were recurring (2009: 52%).  In 2009, Software revenue was boosted by £1.0m by the inclusion of both the second and third phases of the Scottish Government e-planning project.    

In common with the previous financial year, newly contracted business contained a higher proportion of maintenance and managed service contracts which, on a like-for-like basis, contributed to a 6% increase in software maintenance revenues and increases revenue visibility into 2011 and beyond.  

The acquisition of the 11 LAMP managed services contracts in March 2010 for £2.9m and Strand Electoral Management Services in July 2010 for £4.4m together contributed £1.1m to Software revenues. 

The Solutions segment increased revenue by 24% to £4.2m (2009: £3.4m) as a result of a six-month contribution from Grantfinder, acquired in May 2010, which provides content to local authorities and other public sector bodies.  The acquisition of Grantfinder for £3.3m has further augmented recurring revenues, which now make up 62% (2009: 53%) of Solutions turnover. 

The Recruitment segment reported revenues of £3.0m (2009: £3.8m), reflecting a £1.2m decline in the low margin contract recruitment business.  However, revenues in the high margin permanent recruitment business doubled to £0.6m as its core operating markets showed signs of recovery during the final quarter of the financial year.

Gross margins for the Group saw a marked improvement to 83% (2009: 77%), with increases in all three businesses.  Software margins of 87% (2009: 85%) improved due to the higher mix of recurring maintenance and managed service revenues and the absence of the additional costs incurred in 2009 in relation to the delivery of the Scottish Government Stream 2 project.  

The continuing shift within the Recruitment segment toward permanent placements resulted in gross margins of 39% (2009: 31%).  The increased scale and recurring content subscription revenues within the Solutions business generated margins of 92% (2009: 72%).

Operating costs were further reduced to £17.3m (2009: £17.4m) even after the three acquisitions in the last financial year.  On a like-for-like basis, excluding acquisitions, overheads were £1.5m, or 9%, lower as a result of tight cost controls and continued productivity and efficiency gains. 

EBITDA increased by 16% to £8.7m (2009: £7.5m) reflecting the progress made in managing revenues in a challenging environment, increasing gross margins and managing operating costs in addition to the maiden contribution from acquisitions.  As a result EBITDA margins increased to 28% (2009: 23%)

Normalised pre-tax profit, excluding amortisation, share options costs and exceptional charges increased by 21% to £8.0m (2009: £6.6m). Pre-tax profit was £4.9m (2009: £4.5m) after the non cash amortisation charge following the acquisitions made in the year, non cash share option charge and exceptional restructuring and corporate finance charges of £0.6m (2009: £0.4m).

Normalised earnings per share were up 16% to 1.75p (2009: 1.51p). Basic earnings per share were 1.07p (2009: 1.01p).

The Board proposes a final dividend of 0.35p to give a full year dividend of 0.45p (2009: 0.20p). The 125% increase in dividend reflects the Board's continuing confidence in the long-term strength of the business, its revenue visibility and its healthy operating cash generation.

IDOX ended the year with £2.0m cash (2009: £6.9m) and net debt of £0.9m (2009: £3.2m net cash) after funding the three acquisitions, totalling £10.6m, a dividend payment of £0.8m and share buy backs of £0.3m.

Operational review

2010 was a challenging year which IDOX successfully navigated. The customer base started the year already well advanced in their thinking on the need to cut costs, but uncertain as to the level of savings they would be required to achieve. Despite the uncertainty around the election in May, which distorted first half trading and delivery schedules, as well as the mini budget in July and the CSR in October, the outturn was broadly in line with most authorities' expectations.

Going forward into 2011, IDOX's market is already well advanced in its execution and is now making final adjustments. Therefore the Group expects the market for application solutions that deliver a tangible return on investment will grow now from a flat base in 2009/10.

The Software segment managed this change in the market well, ending the year with a strong sales performance. The year closed with a different mix from originally forecast as some major projects were stopped and investment in dashboard productivity solutions was surprisingly weak, but this was offset by strong performance in public access web solutions.

The Software segment had some notable successes in partnering with authorities to build shared service solutions. This approach, plus a more comprehensive offering in managed technical services and outsourcing, delivered tangible improvements in services, cost efficiencies and speed of implementation. 

Internally IDOX continued to place a strong emphasis on quality and customer care with further improvements in product performance, delivery and data migration. In 2011 the Group will further improve customer support and enhance client customer communication and strategic partnering.

The acquisition of the LAMP managed services contracts and Strand Electoral Management Services added to the Group's market penetration, provided further synergies and expanded and improved the premium managed services offering.

When CAPS Solutions was acquired in 2007, the Group inherited a large embryonic contract to provide a planning system for Northern Ireland. This year not only saw the successful completion and roll out of this system across Northern Ireland but also the completion of the Scottish government contracts with a faultless post completion audit.  

Project sales within the Solutions segment were affected by Government cutbacks.  However, IDOX enters 2011 with a strong pipeline. The Solutions segment gained critical mass through the acquisition of Grantfinder, which has enabled it to deliver improved grants information and policy web solutions to the UK and now Europe utilising a common infrastructure. The same model is now being extended in both Holland and Spain, building on the division's EU grants information coverage.

The Recruitment segment had its most difficult year yet with public sector contractor revenues falling materially in the middle of the year and permanent recruitment revenues growing only slowly as it tracked the hesitant private sector recovery. Despite this, the business managed to deliver a positive contribution in the year. The last quarter saw a marked improvement in sentiment in both contract and permanent activity, giving the Board confidence for the current trading year.

In 2010 IDOX continued to invest in software application development and has coordinated a number of initiatives internally to provide better solutions for customers. The Group has continued to manage its cost base meticulously and integrated three acquisitions without increasing overheads.  As part of the integration process, the Group has also revised its corporate branding.

Outlook

The Group has started the current financial year in a strong position, with greater predictability than has been the case for the past two years and a strong pipeline in all its businesses.  Although total public sector spending is under intense pressure, IDOX products and services enhance local government efficiencies and the Group expects the market for solutions that deliver a tangible return on investment to grow.  

The Group also has a wider range of capabilities, larger market share and broader reach in its markets.  There are encouraging signs of increased activity in a number of areas and IDOX is well positioned to take advantage of new opportunities emerging in both 2011 and beyond.

Consolidated Statement of Comprehensive Income for the year ended 31 October 2010
		Note	2010		2009
			£000		£000
Revenue		2	31,268		32,164
Cost of sales			(5,290)		(7,283)
Gross margin			25,978		24,881
Staff costs			(14,170)		(14,026)
Other operating charges			(3,091)		(3,376)
Earnings before goodwill impairment, amortisation, depreciation, restructuring, corporate finance and share option costs			8,717		7,479
Depreciation			(403)		(372)
Amortisation			(2,260)		(1,112)
Goodwill impairment charge			-		(533)
Restructuring costs			(187)		(427)
Corporate finance costs			(438)		-
Share option costs			(185)		(99)
Operating profit			5,244		4,936
Finance income			15		125
Finance costs			(316)		(582)
Profit before taxation			4,943		4,479
Income tax expense		3	(1,305)		(1,020)
Profit for the year			3,638		3,459
Other comprehensive income for the year  Available-for-sale financial assets -          current year gain			35		-
Other comprehensive income for the year, net of tax			35		-
Total comprehensive income for the year attributable to owners of the parent			3,673		3,459
Earnings per share
Basic		4	1.07p		1.01p
Diluted		4	1.05p		1.00p

Consolidated Balance Sheet

At 31 October 2010

			2010		2009
			£000		£000
ASSETS
Non-current assets
Property, plant and equipment			504		757
Intangible assets			44,629		32,608
Other long-term financial assets			855		-
Deferred tax assets			283		315
Total non-current assets			46,271		33,680
Current assets
Trade and other receivables			5,915		6,462
Cash and cash equivalents			2,004		6,947
Total current assets			7,919		13,409
Total assets			54,190		47,089
LIABILITIES
Current liabilities
Trade and other payables			2,784		3,171
Other liabilities			11,794		8,138
Provisions			133		138
Current tax			1,052		187
Borrowings			1,000		1,000
Total current liabilities			16,763		12,634
Non-current liabilities
Deferred tax liabilities			4,549		3,501
Borrowings			1,866		2,781
Total non-current liabilities			6,415		6,282
Total liabilities			23,178		18,916
Net assets			31,012		28,173
EQUITY
Called up share capital			3,442		3,442
Capital redemption reserve			1,112		1,112
Share premium account			9,903		9,903
Treasury reserve			(455)		(212)
Share options reserve			630		454
Merger reserve			1,294		1,294
ESOP trust			(93)		(88)
Retained earnings			15,179		12,268
Total equity			31,012		28,173

Consolidated Cash Flow Statement

For the year ended 31 October 2010

			2010		2009
			£000		£000
Cash flows from operating activities
Profit for the period before taxation			4,943		4,479
Adjustments for:
Depreciation			403		372
Amortisation			2,260		1,112
Goodwill impairment			-		533
Loss on disposal of property, plant and equipment			160		-
Finance income			(15)		(125)
Finance costs			189		497
Debt issue costs amortisation			85		85
Share option costs			185		99
Exchange losses			8		27
Movement in receivables			1,055		1,955
Movement in payables			(563)		(1,541)
Cash generated by operations			8,710		7,493
Tax on profit paid			(1,009)		(2,152)
Net cash from operating activities			7,701		5,341
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired			(5,543)		(795)
Purchase of listed investment			(820)		-
Purchase of property, plant and equipment			(613)		(595)
Purchase of intangible assets			(3,470)		(464)
Finance Income			15		125
Net cash used in investing activities			(10,431)		(1,729)
Cash flows from financing activities
Proceeds from issue of share capital			-		20
Interest paid			(189)		(353)
Other loan related costs			-		(144)
Loan repayments			(1,000)		(3,000)
Equity dividends paid			(757)		(672)
Purchase of own shares			(267)		(204)
Net cash flows from financing activities			(2,213)		(4,353)
Net movement on cash and cash equivalents			(4,943)		(741)
Cash and cash equivalents at the beginning of the period			6,947		7,688
Cash and cash equivalents at the end of the period			2,004		6,947

Consolidated Statement of Changes in Equity

At 31 October 2010

	Called up share capital £000		Capital redemption reserve £000	Share Premium £000	Treasury reserve  £000	Share options reserve £000	Merger reserve £000	ESOP Trust £000	Retained earnings £000	Total £000
Balance at 1 November 2008		3,442	1,112	9,883	-	364	1,294	(96)	9,447	25,446
Deferred tax on share based payments		-	-	-	-	-	-	-	25	25
Issue of share capital		-	-	20	3	-	-	-	-	23
Transfer on exercise of share options		-	-	-	-	(9)	-	-	9	-
Purchase of treasury shares		-	-	-	(207)	-	-	-	-	(207)
Share options granted		-	-	-	-	59	-	-	-	59
Share repurchase		-	-	-	(8)	-	-	-	-	(8)
Share option reserve		-	-	-	-	40	-	-	-	40
Equity dividends paid		-	-	-	-	-	-	-	(672)	(672)
ESOP trust		-	-	-	-	-	-	8	-	8
Transactions with owners		-	-	20	(212)	90	-	8	(638)	(732)
Profit for the period		-	-	-	-	-	-	-	3,459	3,459
Total comprehensive income for the period		-	-	-	-	-	-	-	3,459	3,459
Balance at 31 October 2009		3,442	1,112	9,903	(212)	454	1,294	(88)	12,268	28,173
Deferred tax on share based payments		-	-	-	-	-	-	-	-	-
Transfer on exercise of share options		-	-	-	-	(9)	-	-	(5)	(14)
Purchase of treasury shares		-	-	-	(249)	-	-	-	-	(249)
Share options granted		-	-	-	-	185	-	-	-	185
Share repurchase		-	-	-	6	-	-	-	-	6
Equity dividends paid		-	-	-	-	-	-	-	(757)	(757)
ESOP trust		-	-	-	-	-	-	(5)	-	(5)
Transactions with owners		-	-	-	(243)	176	-	(5)	(762)	(834)
Profit for the period		-	-	-	-	-	-	-	3,638	3,638
Other comprehensive income Available-for-sale financial assets  - current year gain		-	-	-	-	-	-	-	35	35
Total comprehensive income for the period		-	-	-	-	-	-	-	3,673	3,673
At 31 October 2010		3,442	1,112	9,903	(455)	630	1,294	(93)	15,179	31,012

Notes to the announcement

For the year ended 31 October 2010

1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS. 

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities, being available for sale investments.

The financial information set out in the announcement does not constitute the group's statutory accounts for the year ended 31 October 2010 within the meaning of section 434 of the Companies Act 2006.  The financial information for the year ended 31 October 2009 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for the year ended 31 October 2010 are expected to be finalised on the basis of the financial information presented by the directors in this preliminary announcement.

2 Segmental Analysis

As at 31 October 2010, the Group is primarily organised into three main business segments, which are detailed below.

Financial information is reported to the Board on a business unit basis with revenue and operating profits split by business unit.  Each business unit is deemed a reportable segment as each offer different products and services.

·      Software - delivers software and service solutions to mainly local government customers across a broad range of departments

·      Solutions - delivering both an information service and consultancy services to a diverse range of customers across both private and public sectors

·      Recruitment - providing personnel with information, knowledge, records and content management expertise to a diverse range of customers

Segment revenue comprises of sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the board represents the profit earned by each segment before the allocation of tax, interest payments and share option charges.  The assets and liabilities of the Group are not reviewed by the chief executive decision-maker on a segment basis.

The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.

The segment revenues by geographic location for the year ended 31 October 2010 are as follows:

		United Kingdom		Rest of World		Total
		£000		£000		£000
Revenues from external customers		30,724		544		31,268

The segment revenues by geographic location for the year ended 31 October 2009 are as follows:

		United Kingdom		Rest of World		Total
		£000		£000		£000
Revenues from external customers		31,856		308		32,164

The segment results by business unit for the year ended 31 October 2010 are as follows:	Software		Solutions		Recruitment		Total
	£000		£000		£000		£000
Revenues from external customers	24,140		4,165		2,963		31,268
Cost of sales	(3,125)		(348)		(1,817)		(5,290)
Gross profit	21,015		3,817		1,146		25,978
Operating costs	(12,749)		(3,530)		(982)		(17,261)
Profit  before interest, tax, depreciation, amortisation and redundancy costs	8,266		287		164		8,717
Depreciation	(311)		(90)		(2)		(403)
Amortisation	(1,822)		(429)		(9)		(2,260)
Share option costs	(185)		-		-		(185)
Redundancy	(113)		(49)		(25)		(187)
Profit before interest and taxation	5,835		(281)		128		5,682
Interest receivable	8		-		-		8
Segment profit (see reconciliation below)	5,843		(281)		128		5,690

The segment results by business unit for the year ended 31 October 2009 are as follows:	Software		Solutions		Recruitment		Total
	£000		£000		£000		£000
Revenues from external customers	25,053		3,352		3,759		32,164
Cost of sales	(3,766)		(934)		(2,583)		(7,283)
Gross profit	21,287		2,418		1,176		24,881
Operating costs	(14,120)		(2,071)		(1,211)		(17,402)
Profit before interest, tax, depreciation, amortisation, impairment and redundancy costs	7,167		347		(35)		7,479
Depreciation	(291)		(79)		(2)		(372)
Amortisation	(1,039)		(73)		-		(1,112)
Share option costs	(99)		-		-		(99)
Goodwill impairment charge	-		(533)		-		(533)
Redundancy	(351)		(76)		-		(427)
Profit before interest and taxation	5,387		(414)		(37)		4,936
Interest receivable	22		3		4		29
Segment profit (see reconciliation below)	5,409		(411)		(33)		4,965

Reconciliations of reportable profit

			2010		2009
			£000		£000
Profit:
Total profit for reportable segments			5,690		4,965
Corporate finance costs			(438)		-
Net financial costs			(309)		(486)
Profit before taxation			4,943		4,479

Other financial costs relate to loan interest, exchange differences, bank loan fee facility amortisation and interest receivable which have not been included in reportable segments.

 3 Taxation

The tax charge is made up as follows:

		2010	2009
		£000	£000
Current tax
Corporation tax on profits for the period		1,909	1,637
Over provision in respect of prior periods		(37)	(384)
Total current tax		1,872	1,253
Deferred tax
Origination and reversal of temporary differences		(373)	(321)
Amortisation of intangibles difference in tax rate		(198)	-
Adjustments in respect of prior periods		4	88
Total deferred tax		(567)	(233)
Total tax charge		1,305	1,020

Unrelieved trading losses of £116,000 (2009: £116,000) which, when calculated at the standard rate of corporation tax in the United Kingdom of 28% (2009: 28%), amount to £32,000 (2009: £32,000). These remain available to offset against future taxable trading profits.

Factors affecting the tax charge in the period:

		2010	2009
		£000	£000
Profit before taxation		4,943	4,479
Profit on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 28% (2009: 28%)		1,384	1,254
Effects of:
Expenses not deductible for tax purposes		156	49
Marginal relief		(4)	-
Share based payments		-	(62)
Prior year deferred tax		4	-
Difference in deferred tax rate		(198)	(2)
Adjustments to tax charge in respect of prior year		(37)	(296)
Net movement on deferred tax on intangibles		-	77
		1,305	1,020

4 Earnings per Share

The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:

			2010	2009
			£000	£000
Profit for the year			3,638	3,459
Basic earnings per share
Weighted average number of shares in issue			341,003,888	342,706,522
Basic earnings per share			1.07p	1.01p
Weighted average number of shares in issue			341,003,888	342,706,522
Add back:
Treasury shares			2,525,500	928,069
ESOP shares			628,978	523,775
Allotted, called up and fully paid share capital			344,158,366	344,158,366
Diluted earnings per share
Weighted average number of shares in issue used in basic earnings per share calculation			341,003,888	342,706,522
Dilutive share options			5,841,718	3,890,563
Weighted average number of shares in issue used in dilutive earnings per share calculation			346,845,606	346,597,085
Diluted earnings per share			1.05p	1.00p
Normalised earnings per share
Add back:
Amortisation			2,260	1,112
Impairment			-	533
Share option costs			185	99
Corporate finance costs			438	-
Restructuring costs			187	427
Tax effect			(737)	(459)
Normalised profit for year			5,971	5,171
Weighted average number of shares in issue			341,003,888	342,706,522
Normalised earnings per share			1.75p	1.51p
Normalised diluted earnings per share			1.72p	1.49p

5 Acquisitions

Grantfinder

On 4 May 2010, the Group acquired the entire share capital of Grantfinder Limited for a consideration of £3.3m, which was satisfied as detailed below.

Grantfinder is an important provider of value-added databases for government and EU funding information to a wide range of UK public and private customers. The acquisition will extend the capabilities of the IDOX Group with additional value-added content and boost its subscription-based recurring revenue stream. Grantfinder will be easily integrated into the enlarged IDOX Information Solutions Business which includes J4B, acquired in 2009, and the longstanding planning content business. This will deliver a market leading position in the provision of grant related information in the UK.

 Goodwill arising on the acquisition of Grantfinder Limited has been capitalised and consists largely of the workforce valuation, synergies and economies of scale expected from combining the operations of Grantfinder with Idox Information Solutions Limited.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Grantfinder Limited has been accounted for using the acquisition method of accounting.

	Book value £000	Fair value adjustments £000	Fair value £000
Intangible assets	59	2,929	2,988
Property, plant and equipment	7	-	7
Trade receivables	299	-	299
Other receivables	108	-	108
Cash at bank	51	-	51
TOTAL ASSETS	524	2,929	3,453
Trade payables	(13)	-	(13)
Deferred revenue	-	(1,627)	(1,627)
Social security and other taxes	(161)	-	(161)
Accruals	(24)	(15)	(39)
Deferred tax liability	-	(806)	(806)
TOTAL LIABILITIES	(198)	(2,448)	(2,646)
NET ASSETS	326	481	807
Purchased goodwill capitalised			2,494
			3,301
Satisfied by:
Cash to vendor			2,793
Director's loan account			108
Deferred consideration			400
Total consideration			3,301

The fair values stated above are provisional. The fair value adjustment for the intangible assets relates to trade names, customer relationships, database and order backlog.  A related deferred tax liability has also been recorded as a fair value adjustment.  Other adjustments were made to the revenue recognition policy for subscription income in order to bring it in line with group policy.

The revenue included in the consolidated statement of comprehensive income since 4 May 2010 contributed by Grantfinder Limited was £775k.  Grantfinder Limited also contributed profit of £106k over the same period.  Had Grantfinder Limited been consolidated from 1 November 2009, the beginning of the Group's financial year, the consolidated statement of comprehensive income would have included revenue of £1,769k and profit of £320k.

Strand

On 29 July 2010, the Group acquired the entire share capital of Strand Electoral Management Services Limited for a consideration of £4.4m, which was satisfied in cash. 

Strand Electoral Management Services Limited is one of the UK's leading providers of electoral management software and services, supplying 116 local authorities that cover a voting population of 13 million people.

The acquisition of Strand Electoral Management Services Limited is an important strategic addition for IDOX, enabling it to enter another very active local government market with a strong suite of products and good opportunities for growth through cross selling.

Goodwill arising on the acquisition of Strand Electoral Management Services Limited has been capitalised and consists largely of the workforce valuation, synergies and economies of scale expected from combining the operations of Strand Electoral Management Services Limited with Idox Software Limited.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Strand Electoral Management Services Limited has been accounted for using the acquisition method of accounting.

	Book value £000	Fair value adjustments £000	Fair value £000
Intangible assets	159	2,961	3,120
Property, plant and equipment	2	-	2
Trade receivables	3	-	3
Other receivables	99	-	99
Cash at bank	1,207	-	1,207
TOTAL ASSETS	1,470	2,961	4,431
Trade payables	(167)	-	(167)
Deferred revenue	(887)	-	(887)
Accruals	(33)	-	(33)
Deferred tax liability	-	(843)	(843)
TOTAL LIABILITIES	(1,087)	(843)	(1,930)
NET ASSETS	383	2,118	2,501
Purchased goodwill capitalised			1,899
			4,400
Satisfied by:
Cash to vendor			3,900
Deferred consideration			500
Total consideration			4,400

The fair values stated above are provisional. The fair value adjustment for the intangible assets relates to trade names, software and customer relationships.  A related deferred tax liability has also been recorded as a fair value adjustment.

The revenue included in the consolidated statement of comprehensive income since 29 July 2010 contributed by Strand Electoral Management Services Limited was £344k.  Strand Electoral Management Services Limited also contributed profit of £102k over the same period.

Had Strand Electoral Management Services Limited been consolidated from 1 November 2009, the beginning of the Group's financial year, the consolidated statement of comprehensive income would have included revenue of £1,565k and profit of £139k.

6 Post Balance Sheet Events

The Group signed a short term working capital banking facility of £6m on 10 December 2010.

On 13 December 2010, the Group announced the acquisition of McLaren Software Group Limited for £1.0m in cash.  McLaren is a leading supplier of engineering document management and control applications serving many leading international companies in industries including oil & gas, mining, utilities, pharmaceuticals and transportation. 

McLaren had revenues of £6.4m for the year ended 31 December 2009, with an operating profit of £0.4m and a loss before taxation of £1m resulting from the pre-acquisition capital structure.  Net liabilities at completion are expected to be £1.3m.

The acquisition of McLaren extends IDOX's core skills in planning and building documents management into the related area of engineering drawings. This will provide IDOX with the opportunity of broadening its activities into complementary UK and international markets in both the private and public sector, particularly where the management of complex engineering systems interacts with regulatory oversight.

Full IFRS 3(R) disclosure has not been included in the financial statements due to the timing of the acquisition.

7 Further Copies

Copies of this announcement and, on finalisation, the full annual report and accounts will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker Investec Bank plc, 2 Gresham Street, London Ec2V 7QP, Tel: [phone] or from IDOX plc, 2nd floor, 160 Queen Victoria Street, London, EC4V 4BF, Tel: [phone].  Copies of the full financial statements will be made available to shareholders in due course.

 

END

 

 

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