Final Results

RNS Number : 3152T

System C Healthcare plc

27 September 2010

 



System C Healthcare plc

Preliminary Results for Year Ended 31 May 2010

System C Healthcare plc ("System C", the "Group" or the "Company"), a leading supplier of health and social care solutions, announces its results for the year ended 31 May 2010.

 

Financial highlights of the year

§ Revenues increased by 75% to £38.3m (2009: £21.9m).  Revenues excluding those from current year acquisitions increased by 44% to £31.5m (2009: £21.9m)

§ Profit before taxation up 32% to £5.4m (2009: £4.1m)

§ EPS up 9% at 4.07 pence (2009: 3.72p)

§ Strong cash generation with a net cash position as at 31 May 2010 of £18.6m (2009:
£14.7m)

§ Major investment in next-generation Medway products rewarded with key strategic contract wins

§ Acquisition of Liquidlogic Limited in July 2009 for a total consideration of £10.2m giving System C entry into the social care IT market

§ Acquisition of Conscia Enterprise Systems Limited in October 2009 for a total consideration of £0.8m, strengthening the Group's expertise in web-based technologies

§ Total dividend increased by 14% to 0.75p for the full year

Dr Ian Denley, Chief Executive of System C, commented:

"We are pleased to have turned in another strong performance across the Group over the period. 

"This is a time of great upheaval for the NHS, in both policy and economic terms, with changes underway that are generating both risks and opportunities.

"At System C, we are completing our 5-year strategic investment in our Medway software and bringing the products to market at a time when NHS Trusts have been newly freed from central purchasing obligations. We are now experiencing a surge in procurement activity, and have already achieved strategic contract wins, including The Royal Devon & Exeter NHS Foundation Trust.

"As stated in our recent trading update, services revenues are down but holding steady and the sales pipeline for Medway has never been stronger.  We are expecting PAS/EPR procurements to complete during the next calendar year and Medway revenues are already starting to come through." 

"We are very excited about these new product opportunities, and believe they will provide us with increased predictability of revenues and an excellent platform for growth next year and beyond ".

Operating highlights of the year

2009/10 was another good year across the System C Group.

§ Our major investment in next-generation Medway products is being rewarded. The Group now has a rich suite of health and social care products which is attracting significant customer interest and key strategic contract wins.  Group product revenues increased by 215% over the year to £20.6m, of which £13.9m was attributable to organic growth.  

§ Our reputation for deploying systems - both our own and systems from third parties - on time and to budget led to strong demand for our services work from existing and new clients.  Services revenues increased by 16% over the year to £17.8m, of which £17.6m was attributable to organic growth.  

§ The Group's reputation for advanced technology and for successful deployments was further enhanced when it was named world-wide winner of the prestigious 2010 Microsoft Partner of the Year award in the category 'Public Sector Health Partner'. System C won the award for its Clinical Dashboard products, developed and implemented over the course of the year in over a dozen NHS Trusts. 

§ In July 2009, System C acquired Liquidlogic Limited to create the UK's first major health and social services supplier. The two companies have started integrating products and have produced the UK's first health and social care link under the NHS Connecting for Health's new standards for systems integration. Since the year-end, the new Government has announced that it will be going out to consultation on how best to integrate health and social care. System C is uniquely placed to meet this national drive for high quality integrated care. 

For further information please contact:

System C Healthcare plc

Ian Denley, Chief Executive

Hedley Mayor, Group Finance Director                      Tel: [phone]

Charles Stanley Securities Nominated Adviser Russell Cook / Mark Taylor	Tel: [phone]
Maitland Financial PR Emma Burdett / Richard Farnsworth	Tel: [phone]

Chairman's report 

Introduction

System C has once again achieved strong financial growth in the context of a very difficult economic environment. Revenues increased by 75% to £38.3m, attributable to both organic growth and acquisition.   An operating profit margin of 13% was achieved, and the Group closed the year with £18.6m cash, an increase of £3.9m on 2008/9. This includes cash balances from the acquisitions of Liquidlogic Limited and Conscia Enterprise Systems Limited during the year.

This last year has been something of a milestone for the Company in its strategy of growing the product side of its business.  Our five-year investment in the next generation Medway product suite has begun to bear fruit, and at a time when the NHS IT market is opening up to a much broader range of suppliers.  The implementation of the Medway clinical information system at Aintree University Hospital NHS Foundation Trust has progressed well and according to expectations, providing an important reference site for our Electronic Patient Record system.  Equally important is the news that System C has been selected by The Royal Devon & Exeter NHS Foundation Trust to supply its Medway order communications and electronic-prescribing software. This represents a significant strategic win in one of the first major procurements outside the Government's National Programme for IT.

Over the course of the year we have also significantly enhanced our social care product offering through the acquisition of Liquidlogic. The acquisition of web specialist Conscia in October 2009 gave us a strategic stronghold in the portal market. 

Product revenues increased by 215% from last year (113% organic growth) and now account for 54% of total revenues (2009: 30%).

On the services side, the Company continues to deploy a wide range of third party systems for NHS Trusts across the UK.  We have remained heavily involved in deploying products from iSoft and Cerner under the National Programme for IT, with NHS Trusts, CfH and Local Service Providers as clients.  Our Healthcare Improvement team continues to deliver results with a number of contract wins at NHS Trusts in England and in Northern Ireland.

In the independent healthcare sector, contracts with leading providers such as Circle Health and Care UK continue to perform well.

Acquisitions

In July 2009 we acquired Liquidlogic Limited, an established provider of IT solutions to the social care market in the UK, for a final total consideration of £10.2m in cash. Through this acquisition we have created the first health and social care IT company of significant scale in the UK.  The Liquidlogic products are a good complement for Medway and have already been integrated with and sold alongside our existing product range. Since the year end, the Government has made clear in its White Paper for the NHS that it would be consulting widely on the seamless integration of health and social care, which it regards as 'essential for patient outcomes' .

In conjunction with the Liquidlogic acquisition, System C successfully raised £12.0m through a placing of ordinary shares in the Company in order to fund further expansion. The placing was undertaken at a small discount to the mid market price and we are very pleased to have received continued and enthusiastic support for our strategy from both our existing shareholder base and from a number of new institutional investors.

In October 2009 we acquired Conscia Enterprise Systems Limited for £0.8m in cash.  Conscia is a web solutions company based in Glasgow specialising in providing premium web applications, including e-commerce and mobile solutions, to both the private and public sectors. Clients include NHS24, NHS National Services Scotland, NHS Education for Scotland, the Scottish Government Health Department, and a number of regional health boards.

People and the Board

The Board would like to take this opportunity to thank System C's employees for the commitment and hard work that made the year such a success.  We are primarily a people business.  Our reputation as a first-rate delivery organisation is built on the dedication and professionalism of our employees.

We take our responsibilities to our staff extremely seriously and we are proud that System C has been named one of the top 100 companies to work for in the UK, winning a place in the 2010 Sunday Times Best 100 Companies to Work For survey (our 3rd such award). 

In January 2010 our Non-Executive Director Thomas Chambers stepped-in as Acting Finance Director following the departure of Andrew Coll.  On 12 July 2010 we welcomed Hedley Mayor as our new Finance Director. 

System C is committed to high standards of corporate governance.   As an AIM-listed Group, we are not bound by the UK Corporate Governance Code (formerly "the Combined Code (2008)"), but have voluntarily adopted many of its provisions.

Dividends

The Board is recommending a final dividend of 0.50p (2009: 0.44p), giving a total dividend of 0.75p (2009: 0.66p) for the year. This represents an increase of 14% on 2009 and reflects the strong financial performance and cash generation of the business.  If approved by the shareholders at the Annual General Meeting on 10 November 2010, the final dividend will be paid on 15 November 2010 to those shareholders on the register on 15 October 2010.

Current trading and outlook

The structural changes proposed for the NHS in the Government's White Paper, Equality and Excellence: Liberating the NHS, are extensive and likely to impact most areas of healthcare provision and associated services. Health Minister Simon Burns has since made clear that all acute Trusts will be free to manage their own IT projects on the principle of connected systems and interoperability with a plural system of suppliers. The details of the Government's strategy will become clearer again over the coming months.  

The market for IT products in the NHS is already opening up to a wider range of suppliers. The Company is currently experiencing a significant increase in interest for its hospital products and is active in a number of PAS/EPR procurements. As we made clear in our trading update in September, negotiation periods for these large scale contracts are inevitably protracted and revenues from sales of the new hospital-wide system are expected to come on stream in the second half of the current financial year and beyond. The opening up of IT procurements following changes in the National Programme for IT is a significant opportunity for the Group and we intend to take a long term view to maximise our position in such a market.

The Directors recognise that in the short term, Government spending cuts present a risk to revenues, particularly services revenues.  The timing of NHS procurements and deployments will have a significant impact on the Company's performance during the current year as System C continues its transition into a product-led company. During this period the Company will be focused in particular on cost management to ensure that costs remain in line with the revenue streams.  As at 31 May 2010 the Company had net cash balances of approximately £18.6 million.

The Board considers there to be significant product opportunities in the medium term, which will lead to greater prominence of product revenues, improved margins and increased predictability in services utilisation. 

Chief executive officer's review 

I was very pleased with the performance of the Group across the board this year as we made significant progress in all areas.  This is very much a time of transition for System C as we adjust to the slowdown in National Programme deployment activity and the corresponding rise in large system procurements by individual NHS Trusts.  There is no doubt that the next 18 months will be a key time in the Group's development.

As I have explained in previous annual reports, the Group has been investing heavily in product development over the last five years.  We have been working to a detailed strategy to broaden the capability of the Group through a long-term investment programme aimed at delivering sustained profitable growth.  At the core of this strategy was the need to drive organic growth through the development of new products, enhanced by our services capability and capacity and supported by an on-going programme of acquisitions.  I am excited to see our next generation Medway product suite come to the market and secure early contract wins at a time when the market is opening up. 

Products - new technologies for changing markets

The product division has performed very well in the year. With revenues of £20.6m (2009: £6.5m), it now accounts for approximately 54% of total Group revenues (2009: 30%).  We are pleased with this progress and expect to see an increasing percentage of our revenues coming from our own products in the coming years.

We are delighted with the market response to our next-generation Medway software.  Demonstrations of the software have been well-received and we achieved a significant strategic win with the Royal Devon & Exeter NHS Foundation Trust to supply our Medway order communications and electronic-prescribing software, a first step in the implementation of a complete EPR system.   

One of Medway's key selling points is that it is very advanced technically and this was recognised by Microsoft in July when System C was named world-wide winner of the prestigious 2010 Microsoft Partner of the Year award in the category 'Public sector health partner'. The award recognises outstanding innovation and solutions which deliver real benefits to a customer's business, and System C was chosen from nearly 3,000 entries drawn from all around the world. The entire Medway product range - which also includes PAS, EPR and numerous departmental systems including A&E and maternity - is based on the latest Microsoft technologies.

The year also marked our 17th year of partnership with Aintree University Hospitals NHS Foundation Trust, building a fully-integrated PAS/EPR solution across one of the country's largest acute Trusts. The partnership has already delivered many millions of pounds of benefits to Aintree, and the Trust is now looking to realise a further £5m over the lifetime of the next generation of Medway software.  The close working relationship with Aintree has enabled System C to engage in continuous development and enhancement of its Medway PAS/EPR products to meet the NHS's evolving needs and to capitalise on opportunities offered by new technology. 

Over the course of the year we celebrated our 50th Medway deployment when Mid Cheshire Hospitals NHS Foundation Trust went live with a Medway maternity information system.

Other recent product installations have included multiple deployments of the Company's clinical dashboard, web portal, maternity, accident and emergency, and other departmental modules. The latter stages of the deployment of a wide range of health and social care systems on behalf of the Isle of Man Government have also gone to plan, and it is expected that the final elements of this large-scale programme will be completed successfully by the end of calendar year 2010.

Liquidlogic has begun integrating its product and marketing efforts with System C's healthcare ranges and has made its first sale of a Medway dashboard to a social care client.  System C and Liquidlogic have also produced the UK's first health and social care link under NHS Connecting for Health's new standards for systems integration. Spending constraints present a challenge in the social care market, but the procurement pipeline for social care systems is strong.

Conscia, acquired in October last year, successfully developed a new health portal for NHS Scotland which offers health and social care professionals on-line access to a vast knowledgebase of clinical guidelines, evidence materials, training and professional development resources. Launched by Nicola Sturgeon, Scottish Cabinet Secretary for Health and Wellbeing, the portal is also aimed at patients and members of the public, giving them the latest information about a condition, for example, symptoms and treatment. In addition to providing access to over 12 million resources, the portal offers a range of collaborative features such as social bookmarking, shared interests, and tag clouds. 

Another landmark was the collaboration with GP software supplier EMIS, which has resulted in University Hospital Aintree in Merseyside being able to seamlessly link patient information from 100 GP practices, representing 450,000 patients, to clinicians working across all of its urgent care services. The project - the first in the UK to link two different primary and secondary care IT systems on this scale - is designed to improve patient care and deliver significant efficiencies by providing vital patient information at the point of need.

In 2008, we were successful in our bid to be awarded framework contracts in 16 categories in the UK Government's Additional Services Capability and Capacity (ASCC) procurement.  This was an important win for the Company because only companies included in the framework contract catalogue are eligible to bid in ASCC procurements. 

System C has won a number of high value ASCC contracts since that time, most notably last year's dashboard contract for NHS Connecting for Health.  ASCC procurements, particularly for Trusts looking to replace PAS, EPR and clinical systems in a streamlined procurement process, have been slower off the ground than anticipated. However, in recent months the pace has picked up considerably.  NHS Connecting for Health is now running its own ASCC procurement for community, ambulance and acute systems on behalf of a large number of Trusts in the South of England. In addition, many individual Trusts are running or planning  ASCC procurements.

Services - world-class delivery capability and capacity

Services revenue at £17.8m is 16% higher than last year (2009: £15.4m).We continue to have a well-earned reputation for providing successful deployments both on time and on budget across our own products and across a range of third party systems.  System C staff have been involved with many of the major acute system go-lives during the year including Lorenzo and Cerner Millennium deployments.  This breadth makes us unique in our market.

In recent months we have seen a slowing down of new services enquiries and of ongoing work from existing clients as public sector budgets come under further review. We have taken steps to control our cost base in the short term while keeping the ability to expand our services capability as the economy recovers.  However, our services capacity and capability is also a key selling advantage for our product sales team and we are expecting substantial increases in Medway-related services activity with the first wave of procurements. 

Future strategy

Our medium-term strategy remains an ongoing transition from a services-led to a product-based company in order to continue improving the quality of our earnings and ensure profitable growth over the coming years. Since the year end, the Government has published its White Paper for the NHS, Equality and Excellence: Liberating the NHS.

We are currently waiting for the promised consultation exercises and primary legislation, but we believe the White Paper points to significant opportunities for System C, both in product and service terms. It makes clear its commitment to giving NHS trusts greater freedom and autonomy, and to encouraging all NHS Trusts to benefit from the greater power and independence conferred by foundation status. 

§ On the service side, we envisage opportunities for System C's healthcare improvement services.  The White Paper is clear that over the next five years the NHS 'will only be able to increase quality through implementing best practice and increasing productivity.'

§ On products, it talks about an information revolution.  We anticipate a substantial requirement for new IT systems: to deliver information to patients about hospital and clinical team performance, and about conditions and treatment; to provide clinical teams with the means to measure their promised new outcome targets; to assist GPs in their proposed new role as commissioners of services. 

§ We also welcome the very clear commitment to integrating health and social care.  The White Paper states: "It is essential for patient outcomes that health and social care are better integrated at all levels of the system". It was our belief in the truth of this statement that drove our acquisition of Liquidlogic last year.  We intend to play a full part in the forthcoming consultation process on achieving this. 

§ Finally, we welcome the commitment to plurality of systems, which we expect will ensure that the current increase in procurement levels continues.

Health and social care budgets in the public and private sectors are inevitably under intense review.  In addition, the infrastructure changes proposed in the White Paper are extremely wide reaching and will lead to extensive change.   

However, we remain confident of the significant opportunities for the Company in the medium term and beyond.  Specifically, we have seen a big increase in the number of individual hospital trusts looking to purchase PAS, EPR and clinical systems.   The surge in activity has been created by a combination of factors:  many acute trusts are using systems that are 20 years old or more; in many cases the new systems are critical to generating the efficiency benefits that the NHS now has to deliver; and many Trusts had been released from their central obligations to deploy systems from the National Programme for IT.  Since the year end, the Government has made it clear that all acute Trusts will be free to make their own IT purchasing decisions.  

Our product sales pipeline has never been healthier. Uncertainty surrounding the timing of these opportunities means that we need to remain flexible and adaptable, and to continue delivering innovative and creative solutions to clients. 

System C's products have been designed in order to help manage change and introduce efficiency in health and social care provision. We believe that the drive towards high quality services within tightening budgets offers both product and consulting opportunities for the Group. 

Financial Review

System C Group has achieved another strong year of growth, particularly in its product division, where we have seen the impact of acquisitions and the initial deployments of the new Medway Sigma product suite.  Group revenue was up by 75% to £38.3m (2009: £21.9m). Profit from operations rose by 50% to £5.1m (2009: £3.4m) and earnings per share grew by 0.35p to 4.07p per share (2009: 3.72p).

Revenue

The Group revenues of £38.3m increased by £16.4m year on year. This was driven by organic growth principally from the product division and from the recent product acquisitions (Liquidlogic and Conscia).  Product revenue now accounts for 54% of total revenues compared with 30% of total Group revenues last year. Future growth is likely to be focused on product revenues as we deploy the next generation of the Medway product suite:

Year ended 31 May               2010                2009

System C products	£20.6m	£6.5m
System C services	£17.8m	£15.4m
Total Group revenue	£38.3m	£21.9m
Gross profit	£22.0m	£12.2m
Profit from operations	£5.1m	£3.4m
Net financial income	£0.3m	£0.7m
Profit before tax	£5.4m	£4.1m
Tax	(£1.1m)	(£0.9m)
Profit after tax	£4.3m	£3.2m
Basic EPS	4.07p	3.72p

We continued to focus on expansion of our client base within the public and private sectors. During the year we delivered core phases of the Aintree contract, completed deployments under the Isle of Man contract, and delivered key development work for the NHS under the portal and dashboard initiatives. The services division has continued to deliver directly to NHS Trusts as well as working for the Department of Health and Local Service Providers under the National Programme for IT.

Gross margin

Gross margin was circa 57%, broadly in line with the prior year of 56%.

Profit from operations

Profit from operations was £5.1m, a 50% increase on 2009 (£3.4m). The increase in revenues and gross margins, combined with an increase in operating costs led to a decrease in the margin on profit from operations to 13% from 16% in 2009.

The growth in overall research and development expenses, which includes £1.6m (2009: £1.2m) of capitalised costs and £3.9m (2009: £1.9m) of expenses, reflects the acceleration in investment in the Medway product range.

Amortisation of acquired intangible assets has increased by £0.7m during the year as a result of the acquisitions of Bluestar UK Group Limited and Liquidlogic Limited.

The growth in overall administrative expenses includes £0.3m in respect of amortisation of intangibles, as well as the impact of the acquisition of Bluestar UK Group Limited, Liquidlogic Limited and Conscia Enterprise Systems Limited. The Group continues to focus on ensuring that the core cost base is maintained at an appropriate level, particularly in the current economic environment. To this end the Group conducted a cost rationalisation programme in July 2010 which will reduce annual operating costs by £1.2m. Costs will continue to be closely monitored.

Net financial income

Interest receivable on customer contracts relates to our long term contracts where an element of the charge includes a recovery for finance costs. Interest receivable also includes interest generated on our cash balances.

Despite year-end cash balances of £18.6m, interest receivable on cash balances continued to be low in the year due to low interest rates on deposits.

Taxation

The taxation charge for 2009/10 was £1.1m, equating to 20% of PBT continuing to reflect the benefit of research and development tax credits.

Earnings per share

Basic earnings per share increased to 4.07p (2009: 3.72p). The weighted average number of shares during the period used for the EPS calculation was 105,294,484 (2009: 87,289,846) including the placing of shares in August 2009.

Dividends

An interim dividend of 0.25p (2009: 0.22p) was declared and paid during the year. The Board proposes a final dividend of 0.50p (2009: 0.44p) per share bringing the total for the year to 0.75p per share (2009: 0.66p).

Cash and treasury

Year ended 31 May                                          2010                      2009                              

Net cash generated from operations	£6.3m	£3.8m
Net financial income	£0.3m	£0.8m
Acquisition of subsidiaries	£(9.9)m	£(0.5)m
Capital expenditure	£(2.0)m	£(1.3)m
Net cash inflow before financing activities	£(5.3)m	£2.8m
Financing activities	£9.2m	£(0.5)m
Net cash inflow	£3.9m	£2.3m

The Group continued to generate strong cashflow with net cash generated from operating activities of £6.3m (2009: £3.8m).

On 15 July 2009 the Group acquired Liquidlogic Limited for an initial cash consideration of £10.2m. The acquired net asset fair value of £4.7m included £1.9m of cash. No further deferred consideration is payable for the period ended 30 June 2010 as specific performance criteria have not been met.

On 7 October 2009 the Group acquired Conscia Enterprise Systems Limited for a total cash consideration of £0.8m.  The acquired net asset fair value of £98k included £38k of cash. There was no deferred consideration on this acquisition. 

In conjunction with the Liquidlogic acquisition, the Group undertook a placing in which £12m was raised through the issue of a further 25 million ordinary shares in System C Healthcare PLC at 48p.  A loan of £1.53m from the placing proceeds was used to fund the purchase of 3.1m ordinary 1p shares by the System C Healthcare PLC Employee Benefit Trust.  Placing costs of £0.7m resulted in a net cash inflow of £9.7m. This was approved by shareholders on Monday 3 August 2009, and the formal admission to the AIM market took place on 5 August 2009. A further £235,000 was raised as a result of share options exercised in the year.

Cash flow forecasts are regularly prepared and reviewed by management to ensure liabilities can be met as they fall due.

Group Statement of Comprehensive Income

 

		Year Ended	Year Ended
		31 May	31 May
		2010	2009
	Note	£'000	£'000
Revenue	2	38,307	21,887
Cost of sales		(16,311)	(9,657)
Gross profit		21,996	12,230
Research and development costs		(3,912)	(1,880)
Amortisation of acquired intangible assets		(945)	(259)
Share based payments		(228)	(105)
Administrative expenses		(11,813)	(6,565)
Profit from operations before the amortisation
of acquired intangibles
and share based payments		6,271	3,785
Profit from operations		5,098	3,421
Finance income	3	267	692
Finance costs	3	(4)	(11)
Profit before taxation	4	5,361	4,102
Taxation	5	(1,072)	(857)
Profit for the year		4,289	3,245

 

Total comprehensive income is equal to the 'Profit for the year' as there is no other comprehensive income for the year.

Earnings per ordinary share
- Basic	6	4.07	3.72
- Diluted	6	3.96	3.66

 

Group Balance Sheet

		At 31 May	At 31 May
		2010	2009
		£'000	£'000
Assets
Non-current assets
Goodwill		8,436	2,306
Intangible assets		6,117	3,020
Property, plant and equipment		665	380
Deferred tax assets		432	373
Trade and other receivables		176	213
		15,826	6,292
Current assets
Trade and other receivables		11,234	7,435
Cash and cash equivalents		18,596	14,703
		29,830	22,138
Total Assets		45,656	28,430
Liabilities
Current liabilities
Trade and other payables		8,742	4,872
Deferred consideration		-	326
Current tax liability		476	792
		9,218	5,990
Non-current liabilities
Deferred consideration		-	598
Deferred tax liability		1,674	818
Provisions		140	141
		1,814	1,557
Total Liabilities		11,032	7,547
Net Assets		34,624	20,883
Shareholders' Equity
Share capital		1,161	898
Share premium account		21,151	9,804
Capital redemption reserve		3,127	3,127
Own shares held in trust		(2,768)	(1,235)
Retained earnings		11,953	8,289
Total Equity		34,624	20,883

Group Statement of Changes in Shareholders' Equity

	Attributable to equity holders of the company
	Share capital	Share premium account	Capital redemption reserve	Own shares held in trust	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
As at 31 May 2008	895	9,766	3,127	(1,235)	5,323	17,876
Profit for the year	-	-	-	-	3,245	3,245
Share based payments charge	-	-	-	-	105	105
Deferred tax	-	-	-	-	122	122
Issue of new shares	3	38	-	-	-	41
Dividends	-	-	-	-	(506)	(506)
As at 31 May 2009	898	9,804	3,127	(1,235)	8,289	20,883
Profit for the year		-	-	-	4,289	4,289
Share based payments charge	-	-	-	-	228	228
Deferred tax	-	-	-	-	(59)	(59)
Issue of new shares	263	11,347	-	(1,533)	-	10,077
Dividends	-	-	-	-	(794)	(794)
As at 31 May 2010	1,161	21,151	3,127	(2,768)	11,953	34,624

Group Cash Flow Statement

	Year ended	Year ended
	31 May	31 May
	2010	2009
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	7,598	3,816
Finance costs paid	(4)	(1)
Income tax paid	(1,250)	(52)
Net cash generated by operating activities	6,344	3,763
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired	(9,874)	(458)
Purchases of property, plant and equipment	(457)	(225)
Purchase of intangible assets	-	(10)
Capitalised development costs	(1,570)	(1,174)
Finance income	268	845
Net cash used in investing activities	(11,633)	(1,022)
Cash flows from financing activities
Issue of share capital	9,976	41
Dividends paid	(794)	(506)
Net cash generated/(used) in financing activities	9,182	(465)
Net increase in cash and cash equivalents	3,893	2,276
Cash and cash equivalents at beginning of year	14,703	12,427
Cash and cash equivalents at end of year	18,596	14,703

Notes to the cash flow statement: Cash flows from operating activities

	Year ended	Year ended
	31 May	31 May
	2010	2009
	£'000	£'000
Profit for the financial year	4,289	3,245
Taxation	1,072	857
Finance income	(267)	(692)
Finance costs	4	11
Profit from operations	5,098	3,421
Increase in trade and other receivables	(1,431)	(208)
Increase/(decrease) in trade and other payables	1,711	(537)
Net movement on provisions	(1)	37
Share based payments charge	228	105
Depreciation of property, plant and equipment	299	282
Amortisation of intangible assets	1,694	716
Cash generated from operations	7,598	3,816

1.   Basis of preparation

The financial information set out above is abridged and does not constitute the Company's statutory financial statements for the year ended 31 May 2010 or 31 May 2009. The financial information has been extracted from the financial statements for the year ended 31 May 2010, which were approved by the Board on 24 September 2010 and on which the auditors have reported without qualification. Statutory financial statements for the year ended 31 May 2009 have been reported on by the Company's auditors and delivered to the Registrar of Companies.

The statutory financial statements for the year ended 31 May 2010 will be posted no later than 15 October 2010 to shareholders and once approved will be delivered to the Registrar of Companies following the Annual General Meeting on 10 November 2010. The report for the year ended 31 May 2009 was unqualified.

Copies of the Annual Report and Financial Statements for the year ended 31 May 2010 will be available on the Company's website www.systemc.com and from the Company Secretary, System C Healthcare plc, Brenchley House, Week Street, Maidstone, ME14 1RF.

2.   Segmental information

Management has determined the operating segments based on the reports reviewed by the Board (chief operating decision-maker) that are used to make strategic decisions.

The Group's sole activity is the design, development and implementation of computer hardware and software.  All operations are undertaken in the UK.

The directors consider it appropriate to analyse the results and financial position of the Group in three distinct segments as this reflects how the business is managed:

§ The Products segment relates to the business where the Group contracts directly with local NHS Trusts and other clinical organisations;

§ The Services segment relates to the business where the Group is subcontracted to perform work on behalf of other organisations where the end customer is also either the NHS or other clinical organisations;

§ Development and Shared Services relates to the Group's central research and development activities and support services provided to the Products and Services segments.

The profit/(loss) before taxation of each segment includes any external revenue and expenses directly attributable to or able to be allocated to each such segment on a reasonable basis.

Year ended 31 May 2010
	Products	Services	Development and Shared Services	Total
	£'000	£'000	£'000	£'000
Revenue	20,551	17,756	-	38,307
Profit/(loss) from operations	8,011	8,375	(11,288)	5,098
Finance income	211	-	56	267
Finance expense	-	-	(4)	(4)
Profit/(loss) before taxation	8,222	8,375	(11,236)	5,361
Taxation (charge)/credit	(2,302)	(2,345)	3,575	(1,072)
Profit/loss for the year	5,920	6,030	(7,661)	4,289
Total assets	6,264	4,937	34,025	45,226
Total liabilities	(4,519)	(888)	(3,475)	(8,882)
Other segmental disclosures
Capital expenditure - PPE	80	-	377	457
Capital expenditure - Intangible assets	-	-	1,570	1,570
Depreciation of tangible assets	92	-	207	299
Amortisation of intangible assets	1,363	72	259	1,694
Share based payment charge	-	-	228	228

Segment assets and liabilities are those assets and liabilities directly attributable or which can be allocated to each of the aforementioned segments.

					Year ended 31 May 2009
	Products		Services		Development and Shared Services	Total
	£'000		£'000		£'000	£'000
Revenue	6,531		15,356		-	21,887
Profit/(loss) from operations	3,135		7,002		(6,716)	3,421
Finance income	264		-		428	692
Finance expense	-		-		(11)	(11)
Profit/(loss) before taxation	3,399		7,002		(6,299)	4,102
Taxation (charge)/credit	(952)		(1,961)		2,056	(857)
Profit/loss for the year	2,447		5,041		(4,243)	3,245
Total assets	3,267		4,222		20,568	28,057
Total liabilities	(1,328)		(833)		(3,776)	(5,937)
Other segmental disclosures
Capital expenditure - PPE	85		-		140	225
Capital expenditure - Intangible assets	-		-		1,184	1,184
Depreciation of tangible assets	173		-		109	282
Amortisation of intangible assets	445		-		271	716
Share-based payment charge	-		-		105	105
Reportable assets are reconciled to total assets as follows:
	2010	2009
	£'000	£'000
Segmental assets for reportable segments	45,226	28,057
Unallocated
Deferred tax assets	430	373
Total assets per balance sheet	45,656	28,430
Reportable liabilities are reconciled to total liabilities as follows:
	2010	2009
	£'000	£'000
Segmental liabilities  for reportable segments	8,882	5,937
Unallocated
Current tax liabilities	476	792
Deferred tax liabilities	1,674	818
Total liabilities per balance sheet	11,032	7,547

Information about Major Customers

The following information relates to single external customers whose transactions during the period amount to 10% or more of the Group's revenues.

Revenues of one customer of the Product segment represents approximately £6,296,000 (16.44%) in 2009/10 of the Group's total revenue.

Revenues of one customer of the Service segment represents approximately £10,249,000 (26.75%) in 2009/10 of the Group's total revenue.

3.   Finance income and costs

	Year ended	Year ended
	31 May	31 May
	2010	2009
	£'000	£'000
Interest receivable on bank and short term deposits	56	428
Other interest	211	264
Finance income	267	692
Interest payable on bank loans and overdrafts	(4)	(1)
Unwinding of discount on deferred consideration	-	(10)
		-
Finance costs	(4)	(11)
Net Finance Income	263	681

 

4.   Profit before taxation

The following items have been included in arriving at profit before taxation:

	Year ended	Year ended
	31 May	31 May
	2010	2009
	£'000	£'000
Staff costs excluding share-based payments	20,033	12,112
Share-based payments charge	228	105
Research and development expenditure	3,912	1,880
Depreciation of property, plant and equipment:
- Contract assets	92	173
- Other assets	207	109
Amortisation of intangible assets	1,694	733
Operating lease rentals:
- Land and buildings	461	221
- Motor vehicles and other leases	60	50

5.  Taxation

				Year ended	Year ended
				31 May	31 May
				2010	2009
(a) Analysis of tax charge in the year				£'000	£'000
CURRENT TAX
UK corporation tax on profits for the year at 28%				1,056	790
Adjustments in respect of prior years				(188)	(25)
				868	765
DEFERRED TAX
Origination and reversal of temporary differences				196	245
Adjustments in respect of prior years				8	(153)
				204	92
Total tax charge in the statement of comprehensive income				1,072	857
Tax on items credited/(charged) to equity:
Deferred tax on share-based payment				59	(122)
(b)  Factors affecting the tax charge for the year
The total tax charge for the year differs from the standard rate of UK Corporation Tax of 28% (2009: 28%) as explained below:
				Year ended	Year ended
				31 May	31 May
				2010	2009
				£'000	£'000
Profit before taxation				5,361	4,102
Profit before taxation multiplied by the standard  rate of				1,502	1,149
Corporation tax in the UK of 28% (2009: 28%)
Permanent differences				70	64
Tax relief for share option exercises				(19)	(22)
Adjustments in respect of prior years - current tax				(188)	(25)
Adjustments in respect of prior years - deferred tax				8	(153)
Rate differences on current tax				(3)	(2)
Total tax charge per accounts				1,072	857

6.  Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those that are held in the employee share trust, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares that have satisfied the appropriate criteria as at 31 May 2010.

A reconciliation between the weighted average number of shares used in the calculations of basic and diluted earnings per share is set out below:

	Year ended 31 May 2010			Year ended 31 May 2009
	Earnings	Weighted average number of shares	Per share amount	Earnings	Weighted average number of shares	Per share amount
	£'000	Number	Pence	£'000	Number	Pence
Basic EPS
Total number of  shares		110,682,225			89,577,587
Less: shares in Employee Benefit Trust		(5,387,741)			(2,287,741)
Earnings attributable to ordinary shareholders	4,289	105,294,484	4.07	3,245	87,289,846	3.72
Effect of dilutive shares		3,104,035	(0.11)		1,395,956	(0.06)
Diluted EPS	4,289	108,398,519	3.96	3,245	88,685,802	3.66

 

END

 

 

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