Interim Results
IDOX PLC
19 June 2006
IDOX plc
INTERIM RESULTS
FOR IMMEDIATE RELEASE 19 June 2006
--------------------------------------------------------------------------------
IDOX plc ('IDOX' or the 'Company'), the information and knowledge management
company, today announced its interim results for the six months ended 30 April
2006 which are in line with its trading statement on 5 May 2006.
Financial and Operational Highlights
• Revenue £6.91m (2005: £7.02m)
• Breakeven position before tax (2005: £0.21m)
• Strong cash generation up 45% to £5.38m (2005: £3.72m)
• (Loss)/earnings per share (0.07p) (2005: 0.12p)
• Strong cash generation and working capital discipline during a challenging
first half
• Major contract wins in a competitive market
Martin Brooks, Chairman and Interim Chief Executive of IDOX, said:
'Although revenues during the first half were at the level of the previous year,
IDOX secured a number of significant large contracts in an increasingly
competitive market and continued to deliver strong cash generation. The Board is
taking steps to review the focus of the Group and to address key operational
issues. Trading for the full year is now expected to be close to the level of
last year, after which the effects of the operational focus should become
apparent. We are confident that the changes we are making will enable us to
deliver shareholder value.'
For further information please contact:
Martin Brooks, Chairman & Interim Chief Executive 0870 333 7101
Richard Kellett-Clarke, CFO 0870 333 7101
Nadja Vetter / Emma Consett, Cardew Group 020 7930 0777
Notes to editors
IDOX plc is a company specializing in software, solutions and recruitment for
information management.
IDOX Software is one of the leading players in the Local Government market for
managing paper and electronic records. IDOX Software has several modules
designed to capture, manage, store, preserve and, deliver information for use
within an organisation and, for access externally by the public or other
partners. The Group has a leading position in putting the Local Government
Planning process online (its flagship Managed Services solution) and has
developed the first true end-to-end e-Planning solution for Local Authorities
and their citizens - UK Planning.
Information Solutions develops and implements enterprise content management
strategies that deliver improved business performance and services to customers.
The team maintains a comprehensive database of bibliographic abstracts,
supported by the largest collection of information in the UK, on all aspects of
best practice and governance in the public sector.
The Recruitment Division specialises in placing knowledge, information and
records management specialists in permanent, interim contract and project
positions.
IDOX plc
Chairman's and Chief Executive's Statement
For the half year ended 30 April 2006
As announced in our trading statement on 5 May 2006, revenues for the first six
months to 30 April 2006 are at the level of the corresponding period of 2005.
This is due to a combination of factors: competitive trading conditions in the
Software market, a change in sales mix of Recruitment revenues, a flat
performance in the evolving Information Solutions business, and the loss of key
sales staff at the beginning of the period. Some appropriate restructuring
together with the appointment of new market facing personnel have given us the
capability to win and deliver more projects in the coming months.
In spite of these factors, we have closed a number of sizeable contracts
demonstrating IDOX's ability to attract larger assignments. These large
contracts are more complex and take longer to complete. We have continued to
secure contracts in our traditional planning business, and in addition we have
also extended into other Council departments, such as revenues & benefits, as we
become increasingly recognised as a corporate-wide solutions provider.
Financial Review
Revenue for the six months ended 30 April 2006 were flat at £6.91m (2005:
£7.02m). Profit before tax was breakeven (2005: £0.21m). The Group has remained
strongly cash positive with cash rising by £1.66m to £5.38m at the half year
(2005: £3.72m) which translates into 2.7p per share.
The Local Authority market remained the Group's key focus, representing 44% of
the Group's revenue. The wider public sector, is now 29%, and the private sector
27% of Group revenue.
The Group's recurring revenue is £3.2m representing 9.6% growth on 2005. The
Software division's first half performance has resulted in its largest ever
order backlog being carried into the second half.
Revenues in the Group's Information Solutions division remained flat during the
first six months, due to staff shortages and recurring revenues have remained
constant at approximately £0.9m. The situation has since been remedied and the
outlook is improving. The division made a first half loss and steps have been
taken to rectify this.
Revenue in the Recruitment division was broadly unchanged. Although revenue from
permanent recruitment increased by 63% on the previous year, revenues from
contract recruitment were down as a result of a number of contracts converting
to permanent placements and direct billing. This resulted in unchanged revenue a
t £2.54m (2005 £2.56m) but with an increase in profitability. We expect the
contract run rate to be built back up over the summer to historic levels.
Operational Review
Software
The Local Authority market remains the primary market for our Software business.
The first half has seen a number of significant contract wins with new and
existing customers. New contracts at Leeds City Council, Glasgow City Council,
Aylesbury Vale District Council and the New Forest Park Authority amount to more
than £0.8m of new business alone. The Group is also extending its contracts into
other Council departments and is increasingly being recognised as a
corporate-wide solutions provider, securing contracts with Kings Lynn & West
Norfolk Borough Council, Oadby & Wigston Borough Council, as well as an
important contract extension for its new Records Management System with
Colchester Borough Council. The initial implementations here total more than
£0.4m.
However, the performance in the first half of the financial year has been below
expectations and steps are being taken to regain the initiative and focus the
business on the bottom line performance.
Information Solutions
Despite flat revenues during the first half, IDOX's recognised expertise in
knowledge and information management, combined with its technical capability,
provides a solid platform from which to extend its innovative information
solutions. This allows us to open up opportunities in the wider Public,
Government and Private sectors.
Recruitment
The permanent recruitment business has grown strongly as has the Recruitment
division's gross margin, as the roles being filled have become more specialised.
The department has a focus on business development, recruitment of new staff and
improvements in systems and processes.
Recent developments
Since the period end, Andrew Fraser has resigned as Chief Executive and Director
of IDOX after seven years with the Group. I have assumed the additional role of
Chief Executive for an interim period. The Board would like to thank Andrew for
his considerable contribution to the growth of the Group and wish him every
success in the future.
Outlook
The Board is in the process of refining the focus of each division and
addressing key operational issues. These actions are not expected to have any
impact on the current financial year. Trading for the full year is now expected
to be close to the level of the previous year. New sales staff appointments have
been made and while trading conditions will remain challenging, the outlook for
the Group is encouraging.
The Board has confidence in the business going forward and anticipates the
declaration of a dividend.
Martin Brooks
Chairman and Chief Executive Officer
16 June 2006
This announcement was approved by the Board of Directors on 16 June 2006
Consolidated Profit and Loss Account
For the six months ended 30 April 2006
Note 6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover (2) 6,912 7,024 14,155
External charges (2,604) (2,613) (5,048)
------- ------- -------
4,308 4,411 9,107
Staff costs (2,902) (2,874) (5,665)
Other operating
charges (1,471) (1,371) (2,685)
------- ------- -------
Operating
(loss)/profit (65) 166 757
Net interest 66 48 119
------- ------- -------
Profit on ordinary
activities
before taxation 1 214 876
Tax on profit on
ordinary activities (3) (130) - 700
------- ------- -------
------- ------- -------
(Loss)/profit for the
period transferred
(from)/to reserves (129) 214 1,576
------- ------- -------
(Loss)/earnings per share
Basic and diluted (4) -0.07p 0.12p 0.85p
Consolidated Balance Sheet
At 30 April 2006
Note At At At
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Intangible fixed
assets 4,313 4,976 4,602
Tangible assets 511 246 325
--------- -------- --------
4,824 5,222 4,927
Current assets
Stock 4 - -
Debtors 3,859 3,804 4,132
Cash at bank
and in hand 5,384 3,724 4,722
--------- -------- --------
9,247 7,528 8,854
Creditors: amounts
falling due within
one year (4,790) (4,182) (3,960)
--------- -------- --------
Net current assets 4,457 3,346 4,894
Total assets less
current liabilities 9,281 8,568 9,821
Creditors: amounts
falling due after
more than one year (10) (20) (10)
--------- -------- --------
Net assets 9,271 8,548 9,811
--------- -------- --------
Capital and reserves
Called up
share capital (5) 1,953 1,873 1,873
Capital redemption
reserve (6) 1,112 1,112 1,112
Share premium
account (6) 8,982 8,162 8,162
Shares to be
issued (6) - 1,400 1,300
Other reserves (6) 1,294 1,294 1,294
ESOP trust (6) (90) (79) (79)
Profit and
loss account (6) (3,980) (5,214) (3,851)
--------- -------- --------
Shareholders'
funds 9,271 8,548 9,811
--------- -------- --------
Consolidated Cash Flow Statement
For the six months ended 30 April 2006
Note 6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow from
operating activities (7) 926 1,000 2,126
Returns on investments and
servicing of finance
Interest received 66 48 119
-------- -------- --------
Net cash inflow from
returns on investments
and servicing of finance 66 48 119
Taxation - - -
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (319) (121) (320)
Purchase of investment
(ESOP trust) (11) - -
-------- -------- --------
Net cash outflow from
capital expenditure and
financial investment (330) (121) (320)
Acquisitions and disposals - - -
Financing - - -
-------- -------- --------
Increase in cash (8) 662 927 1,925
-------- -------- --------
Notes on the Interim Report
For the six months to 30 April 2006
1 BASIS OF PREPARATION
The interim financial information has been prepared in accordance with
applicable United Kingdom accounting standards and under the historical cost
convention. The principal accounting policies of the Group are set out in the
Group's 2005 annual report and financial statements. The policies remain as
stated in the annual report for the year ended 31 October 2005. Recent
accounting standards issued in the United Kingdom do not have a material impact
on the Group. The financial information set out in this report does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The figures for the year ended 31 October 2005 have been extracted from
the statutory accounts, which have been filed with the Registrar of Companies.
The auditors' report on those financial statements was unqualified and did not
contain a statement under section 237(2) of the Companies Act 1985. The interim
financial statements have been reviewed by the Company's auditors. A copy of the
auditors' review report is attached to the Interim Report.
2 SEGMENTAL ANALYSIS
Turnover, operating (loss)/profit and net assets by class of business are
set out below:
6 months to 6 months to 12 months to
30 April 2006 30 April 2005* 31 October 2005*
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Turnover
Software 2,661 2,784 5,748
Information Solutions 1,711 1,680 3,322
Recruitment 2,540 2,560 5,085
-------- ------- --------
6,912 7,024 14,155
-------- ------- --------
Operating (loss)/profit
Software 411 393 1,243
Information Solutions (278) 29 (37)
Recruitment 91 33 114
-------- ------- --------
224 455 1,320
Goodwill amortisation (289) (289) (563)
-------- ------- --------
(65) 166 757
-------- ------- --------
Net assets
Software 5,433 3,848 5,121
Information Solutions (624) (514) (288)
Recruitment 149 238 376
-------- ------- --------
4,958 3,572 5,209
Goodwill 4,313 4,976 4,602
-------- ------- --------
9,271 8,548 9,811
-------- ------- --------
* The segmental analysis has been expanded to provide more detailed information
of the divisional performance.
3 TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge/(credit) is made up as follows:
6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Current tax
UK corporation tax - - 2
Adjustment in respect of
prior periods 41 - -
-------- -------- --------
Total current tax 41 - 2
Deferred tax - origination
and reversal of timing
differences 89 - (702)
-------- -------- --------
Tax on profit on ordinary
activities 130 - (700)
-------- -------- --------
Unrelieved trading losses of £1,683,000 (2005: £1,974,000) which, when
calculated at the standard rate of corporation tax in the United Kingdom of 30%,
amounts to £505,000 (2005: £592,000). These remain available to offset against
future taxable trading profits. During the year ended 31 October 2004,
£1,514,000 of tax losses relating to prior periods (years ended 31 October 2001
and 31 October 2002) were surrendered in exchange for the research and
development tax credit. The tax credits in relation to the year ended 31 October
2002 may be subject to claw back by the Inland Revenue but if this occurred 2/3
of the tax losses surrendered in respect of that year would be reinstated.
4 (LOSS)/EARNINGS PER SHARE
The (loss)/earnings per share is calculated by reference to the (loss)/earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during each period, as follows:
6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
(Loss)/profit for the
period (£000) (129) 214 1,576
Weighted average number of
shares in issue 190,479,843 182,949,266 185,229,865
Dilutive effect of share
options - - 357,474
-------- -------- --------
Total 190,479,843 182,949,266 185,587,339
-------- -------- --------
Basic and diluted (loss)/
earnings per share (0.07)p 0.12p 0.85p
The share options are anti dilutive under FRS 14 in respect of the six months
ended 30 April 2006 and 30 April 2005.
5 SHARE CAPITAL
6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
-------- -------- --------
Authorised:
297,000,000 ordinary shares of 1p
each 2,970 2,970 2,970
-------- -------- --------
Allotted, called up and fully paid
195,260,900 ordinary shares of 1p
each (2005: 187,243,083) 1,953 1,873 1,873
-------- -------- --------
Movement in Issued Share Capital in the Period
On 30 January 2006, a total of 8,017,817 new ordinary 1p shares (New Ordinary
Shares) were issued to the Vendors of TFPL Limited, at a price of 11.225p. This
share issue was part of the earnout for the acquisition of TFPL Limited. The
difference between the total consideration of £900,000 and the total nominal
value of £80,000, amounting to £820,000, has been credited to the share premium
account. The New Ordinary Shares rank pari passu with the existing ordinary
shares of the Company and represented 4.11 per cent of the enlarged issued share
capital of the Company at that time. The new shares started trading on the 30
January 2006 on the AIM Market of the London Stock Exchange.
6 SHARE PREMIUM ACCOUNT AND RESERVES
Issued Capital Share Shares Other ESOP Profit Total
share redemption premium to be reserves trust and loss
capital reserve issued account
£000 £000 £000 £000 £000 £000 £000 £000
At 1 November
2005 1,873 1,112 8,162 1,300 1,294 (79) (3,851) 9,811
New shares
issued 80 - 820 (900) - - - -
Adjustment - - - (400) - (11) - (411)
Loss for the
period - - - - - - (129) (129)
------- -------- ------- ------- ------- ------- ------- -------
At 30 April
2006 1,953 1,112 8,982 - 1,294 (90) (3,980) 9,271
------- -------- ------- ------- ------- ------- ------- -------
The adjustment in the shares to be issued represents a renegotiation of the
earnout payable to the Vendors of TFPL Limited, with the final two tranches of
£200,000 now payable in cash. This has therefore been reclassified as a
liability, shown within creditors due within one year. The Group established a
new HM Revenue & Customs approved, share investment plan for the benefit of
employees during the period. This allows staff to purchase up to £1,500 of
shares each year which will be matched by the Group. The matching shares are
held in the ESOP Trust until a three year qualifying period has elapsed. At 30
April 2006, the value of matching shares held was £11,000 (2005: £Nil).
7 NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Operating (loss)/ profit (65) 166 757
Depreciation 133 122 242
Goodwill amortisation 289 289 563
Increase in stock (4) - -
Decrease /(increase) in
debtors 143 (492) (118)
Increase in creditors 430 915 682
-------- -------- --------
Net cash inflow from
operating activities 926 1,000 2,126
-------- -------- --------
8 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
6 months to 6 months to 12 months to
30 April 2006 30 April 2005 31 October 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Increase in cash in the
period, being movement in
net funds in the period 662 927 1,925
Net funds at 1 November 2005 4,722 2,797 2,797
Net funds at 30 April 2006 5,384 3,724 4,722
9 POST BALANCE SHEET EVENTS
On 31 May 2006, the Group purchased 30,748 shares in the Company at a price of
8.75p and sold 495 shares at a price of 8.00p as part of the IDOX share
investment plan. Of the shares purchased, half relates to the matching shares
purchased by the Group. On 31 May 2006, the Group paid £200,000 in cash to the
Vendors of TFPL Limited in satisfaction of the penultimate tranche of the
earnout.
INDEPENDENT REVIEW REPORT IDOX PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 April 2006 which comprises the consolidated profit and
loss account, consolidated balance sheet, consolidated cash flow statement and
the related notes 1 to 9. We have read the other information contained in the
interim report which comprises only the Chairman's and Chief Executive's
statement and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information. Our responsibilities do
not extend to any other information.
This report is made solely to the company's members, as a body, in accordance
with guidance contained in APB Bulletin 1999/4 'Review of Interim Financial
Information'. Our review work has been undertaken so that we might state to the
company's members those matters we are required to state to them in a review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the
company's members as a body, for our review work, for this report, or for the
conclusion we have formed.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. They are
responsible for preparing the interim report and ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists primarily of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data and based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 April 2006.
GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS
LONDON 16 June 2006
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