Final Results

RNS Number : 6495Z

System C Healthcare plc

25 September 2009

 



System C Healthcare plc

Preliminary Results for Year Ended 31 May 2009

System C Healthcare plc ("System C"), a leading supplier of health and social care products and services, announces its results for the year ended 31 May 2009.

Financial Highlights of the Year 

• Revenues increased by 21% to £21.9m (2008: £18.1m)

• Profit before taxation up 24% to £4.1m (2008: £3.3m) 

• EPS up 45% at 3.72 pence (2008: 2.56p)

• Strong cash generation with a net cash position as at 31 May 2009 of £14.7m (2008: £12.4m)

• Acquisition of Bluestar for an initial consideration of £0.4m, plus up to an additional £2.6m based on demanding performance criteria

• Acquisition of Liquidlogic in July 2009, for an initial consideration of £10.2m (based on a Net Asset Value of £2.4m) with a deferred consideration of up to £4m. System C's entry into the social care IT market

• Total dividend increased by 22% to 0.66p for the full year

Dr Ian Denley, Chief Executive commented:

"We have turned in a strong performance across the Group over the period. We achieved good organic growth in a difficult economic environment, improved profitability, made two strategic acquisitions and have recently completed a successful equity placing to raise £12.0m. We are currently delivering a number of important programmes on behalf of Connecting for Health, as well as implementing our Medway Sigma range of products at an increasing number of NHS Trusts. Our reputation for delivery remains strong and we will continue to focus on providing products and solutions to meet the increasingly varied and complex needs of our customers. 

"Our revenues are increasingly diversified across the public, private, healthcare and socialcare sectors. We have had an encouraging start to trading and we are on target to achieve another good performance in 2009/10"  

Operational Highlights of the Year

2008/09 was another good year across the System C Group.  

• Strong demand from existing and new clients meant that services revenues increased by 25% over the year to £15.4m. The delivery team continued to perform well within the government's healthcare IT programme, working with NHS Connecting for Health and Local Service Provider clients. At the same time, the Group saw substantially increased demand for deployment and post go-live services provided directly to NHS trusts. The services team has continued to widen the range of third party products which it can support. System C has now deployed over 30 different departmental and trust-wide third party solutions across the primary, secondary and social care sectors. Service team members also have direct deployment experience of a further 25 systems. This wealth of expertise and experience has cemented the company's position as a flexible one-stop shop for all healthcare IT services.  

• 2008/09 saw a considerable expansion in the Group's product range. The major investment in developing next generation products bore fruit with the successful launch of the new Medway Sigma product suite. We have had over a dozen successful deployments of Medway Sigma this year including patient management, maternity, and business intelligence systems, and the sales pipeline continues to grow. Successful implementations of Medway Sigma included Nottingham NHS Treatment Centre, Heatherwood and Wexham Park Hospitals NHS Foundation Trust and NHS Ayrshire and Arran. 

• The acquisition of Bluestar in May 2009 brought new and complementary products into the Medway suite including IGFlow, a new product allowing trusts to control flows of sensitive information. This is already being implemented in NHS trusts across Kent. Bluestar has also brought RFID (Radio Frequency Identification) to System C, a key technological addition to the System C product suite. 

• System C also announced a major contract with NHS Connecting for Health to design and implement pilot Clinical Intelligence Systems in over a dozen NHS trusts across all ten English Strategic Health Authorities.

• Since the year end, System C has taken the key step in creating the UK's first major health and social services supplier with the £14.2m acquisition of Liquidlogic, a provider of software and related services to the social care sector. System C is now uniquely placed to meet the national drive for high quality integrated care against a backdrop of reduced public spending, an ageing population and improving but costly treatments.

For further information please contact:

System C Healthcare plc
Ian Denley, Chief Executive
Andrew Coll, Group Finance Director	Tel: [phone]
Maitland
Emma Burdett
Richard Farnsworth	Tel: [phone]
Charles Stanley Securities
Russell Cook
Mark Taylor
Jen Boorer	Tel: [phone]

Chairman's Report

Introduction 

This has been another good year for System C. We have achieved strong financial growth in a difficult economic environment. Revenues increased by 21% to £21.9m, an operating profit margin of 16% was achieved, and the Group closed the year with £14.7m cash, an increase of £2.3m on 2007/8. 

We have continued investing in our product range both through internal development and through strategic acquisition of complementary products and technologies. The acquisitions of Care Records and IQ Systems in the previous financial year, have been fully integrated and their products are now incorporated into the Medway suite. During the last year we successfully deployed over a dozen Medway systems smoothly, on time and within budget. 

On the services side, the delivery team continued to perform well within the government's healthcare IT programme for both NHS Connecting for Health and Local Service Provider clients. At the same time, the Group saw substantially increased demand for deployment and post go-live services provided directly to NHS trusts.

During the course of the year, System C also continued its strategic expansion beyond NHS trusts. We successfully completed the implementation of our Medway Sigma Electronic Patient Record and Management system at the Nottingham NHS Treatment Centre, the largest independent sector treatment centre in Europe, for example. We signed a five-year EPR/PAS contract with a Wiltshire-based consortium of GPs which is pioneering government plans to provide selected acute services in a community setting. We launched our flagship Medway product suite into the Middle East healthcare market.  

Acquisitions

In May we acquired Bluestar UK Group Ltd, a specialist developer and supplier of innovative healthcare IT solutions, for a maximum consideration of £3 million. Bluestar's products include a Radio Frequency Identification (RFID) system for tracking patients and equipment, an infection control system, and the IGFlow information governance product which helps healthcare providers manage confidential patient data. The products are a good complement for Medway Sigma and have already been integrated with and sold alongside our existing product range.  

Since the year-end System C has completed the acquisition of Liquidlogic, an established provider of IT solutions to the social care market in the UK, for a total consideration of up to £14.2m in cash and shares. Through this acquisition we have created the first health and social care IT company of significant scale in the UK.  

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. 

Liquidlogic is the fourth acquisition System C has completed in the last three years. Each of these has brought to the Group complementary products and technology, clients with a need for the wider Group's products and services, and people who share our passion for health and social care and our drive for efficient delivery. We see scope for further acquisitions ahead provided they meet our investment criteria and offer the promise of good returns to our shareholders.

People and the board

We are primarily a people business. Our employees are dedicated, professional and passionate about health and social care. It is these qualities which have enabled us to build and maintain our reputation as a first-rate delivery organisation. The Board would like to take this opportunity to thank everyone for the commitment and hard work that made the year such a success.

We were pleased to have achieved "Best Company" status category under the Sunday Times "Best Companies" criteria again this year. We take our responsibilities to our staff extremely seriously and we are delighted to see our efforts recognised again this year.

System C is also committed to high standards of corporate governance. As an AIM-listed Group, we are not bound by the Combined Code on Corporate Governance, but have voluntarily adopted many of the provisions of the code.

Dividends

The Board is recommending a final dividend of 0.44p, giving a total dividend of 0.66p for the year. This represents an increase of 22% on 2008 and reflects the strong financial performance and cash generation of the business. If approved by the shareholders at the Annual General Meeting on 3 November 2009, the final dividend will be paid on 9 November 2009, to those shareholders on the register on 9 October 2009.

Current trading and outlook

This is a time of considerable political and economic upheaval and there is no doubt that leaner times are ahead for the NHS. However, the Government's drive towards the provision of high quality services within tightening budgets offers further opportunities to the Group across the board. System C's products and services have been designed in order to help manage change and introduce efficiency in healthcare provision. This includes our traditional patient management and clinical systems as well as the healthcare improvement business that we have been growing over the last year.  

At the same time, the National Programme for IT is introducing secondary care systems of choice for the three southern Strategic Health Authorities, allowing trusts to choose from a wider range of centrally funded computer systems. This is an interesting development which is expected to speed up the deployment of acute, community and mental health systems in the South and is expected to generate substantial opportunities both for System C's products and for its deployment services.

Finally, at a time when the government is exhorting health and social care services to work much more closely together, System C has by acquisition become the UK's first major health and social services supplier. This reflects our strategy of acquiring businesses that provide strategic advantage in new markets, provide the System C Group with new products and services, and also provide a platform for continued organic growth. We continue to evaluate acquisition opportunities that we believe will add value to the Group.

In summary, we believe that System C is in a good strategic position to help the NHS with its changing priorities. We have had a good start to the new financial year and we are on target to achieve another good performance in 2009/10.  

Chief executive officer's review

In 2006, we put in place a detailed strategy to broaden the capability of the System C Group through a long-term investment programme aimed at delivering sustained profitable growth. At its core is the need to drive organic growth through the development of new products and services, and to support that organic growth with an on-going programme of acquisitions.  

It is a strategy which delivered for us again in 2008/9. We have been successful in anticipating the direction of travel of the healthcare IT sector, and in developing innovative products and services to meet the increasingly complex requirements of our customers. 

Services - world-class delivery capability and capacity

Our investment programme for our services division has focused on the continued development of high calibre and adaptable delivery teams capable of working in a range of care settings, and with a wide range of products. 

In 2008/9 we consolidated our position as the deployment partner of choice. The services team continued to widen the number of third party products which it can support and to establish System C as a flexible one-stop shop for all healthcare IT services. We have now successfully deployed over 30 different departmental and trust-wide third party solutions, and service team members have direct deployment experience of a further 25 systems. This breadth makes us unique in our market. 

Services growth has come from new and existing clients, including private sector healthcare providers, individual NHS trusts, NHS Connecting for Health and Local Service Providers working under the government's healthcare IT programme. We witnessed particularly high demand for our specialist clinical delivery teams. Our clinical content team, for example, has worked with hundreds of clinicians in complex clinical settings. Strong demand helped the services team grow significantly over the year, and the workforce is continuing to grow further in 2009/10. 

Our healthcare improvement team, previously operating as Perigon Consulting, also had a good year. It successfully completed a number of high-profile clinical and service change programmes covering areas such as patient access, commissioning and contracting. A typical project involved redesigning outpatient services for a major London acute trust. In addition to eliminating breaches of the 18-week waiting target, outcomes included a 20% reduction in staff sickness, a 90% drop in patient complaints and a 30% drop in patient 'did not attend' rates. 

We have supported this organic growth in services with two recent acquisitions, both of which bring us new skills and new clients. The acquisition of Bluestar has taken us into the growing fields of pathology and diagnostic services modernisation and project support. Similarly, the very recent acquisition of Liquidlogic will support expansion of the services we offer across both the health and social care sectors. 

Products - new technologies for changing markets

The investment programme for our products division has focused on the continued development of our next generation Medway Sigma product suite. This investment has involved both internal software development and the strategic acquisition of 

complementary products and technologies.

Medway Sigma is a modular electronic patient records system which makes use of the most up-to-date technologies and software development tools. The system is based on the Microsoft platform. By using the latest technologies, System C is able to develop attractive and highly-usable new functionality quickly and cost effectively. 

We launched Medway Sigma early in 2008, and since then have had over a dozen successful deployments of the system, including patient management, clinical, maternity, and business intelligence systems. The system is very well received by users, and our sales pipeline continues to grow. Revenues within the products division grew by 13% to £6.5m, driven through organic growth.

In 2007/8, we acquired IQ Systems Services Ltd and Care Records Ltd. IQ provided us with advanced scheduling and theatre management systems for the private sector, and Care Records provided us with complex clinical workflow tools. The integration of these technologies and their respective software teams has now been completed successfully.

The acquisition of Bluestar in May 2009 brought new and complementary products into the Medway suite including RFID (radio frequency identification) a key technological addition to many of our products, allowing clients to track patients, equipment and documentation in real time. Other Bluestar products include IGFlow, a new product allowing trusts to control flows of sensitive information. This product is already being implemented by a consortium of NHS Trusts across Kent. 

In May 2008, System C was one of a handful of suppliers to secure a major Additional Services Capability and Capacity Contracts (ASCC) framework agreement with the government for a wide range of products including our flagship Patient Administration System. These four-year contracts will give NHS organisations and other NHS-funded establishments a faster and easier way of procuring IT systems and services from suppliers who have demonstrated experience in the health sector. 

We regard this as a key strategic development for the Group. The Group has already won two ASCC contracts and we anticipate winning more as this new procurement process picks up speed. The National Programme for IT recently announced that three southern Strategic Health Authorities, comprising 52 NHS Trusts, could go ahead and procure PAS and clinical care systems of choice from holders of the framework agreement. This development will have the effect of accelerating deployments in the South, providing System C with significant product and services opportunities. 

Acquisitions

Our strategy is to identify acquisition opportunities which meet our investment criteria and provide System C with new clients in related markets and/or strategic technologies for use within our Medway Sigma product range. 

This was the rationale behind our acquisition of Bluestar in May 2009, and Liquidllogic in July 2009, both of which have developed strong, well-regarded products that meet the complex requirements of the health and social care sectors respectively.  

Future strategy 

Our strategy remains a clear and consistent focus on achieving profitable growth, while investing in the longer-term core assets of the business - our expertise, our employees, our clients and our Medway Sigma product range.  

To achieve this, we need to remain flexible and adaptable, and continue delivering innovative and creative solutions to clients. 

This is particularly important as we square up to the significant challenges facing the UK economy and the NHS. The healthcare sector is charged with delivering considerable efficiency savings, and the new watchwords are quality, prevention and innovation. At the same time, the shift away from a command economy and a culture of targets is being replaced by an emphasis on providing services which are sensitive to local needs. All this places a premium on sensitive, timely, secure and high quality information, and on systems and processes that save money and improve care. 

The government has made it clear that another theme of the coming months will be the integration of health and social care. The emphasis will be on close collaboration to keep people out of hospital and help them lead happy and full lives. Our investment in Liquidlogic reflects our strong belief in this convergence.  

Looking forward, we are confident of further growth. System C's products have been designed in order to help manage change and introduce efficiency in healthcare 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

The System C Group has achieved a year of strong growth in both its products and services divisions with group revenue up by 21% to £21.9m (2008: £18.1m). Profit from operations rose by 43% to £3.4m (2008: £2.4m) and earnings per share grew by 1.16p to 3.72p per share (2008: 2.56p). 

Revenue

The Group delivered total revenues of £21.9m an increase of £3.8m. This was driven by organic growth within both the services and product divisions as illustrated below:  

Year ended 31 May	2009	2008
	£m	£m
System C Products	£6.5m	£5.8m
System C Services	£15.4m	£12.3m
Total Group Revenue	£21.9m	£18.1m
Gross Profit	£12.2m	£10.1m
Profit from operations	£3.4m	£2.4m
Net financial income	£0.7m	£0.9m
Profit before Tax	£4.1m	£3.3m
Tax	(£0.9m)	(£1.1m)
Profit after Tax	£3.2m	£2.2m
Basic EPS	3.72p	2.56p

We continued to focus on expansion of our client base within the public and private sectors. During the year we delivered further core phases of the Isle of Man contract, as well as the first phase of our Clinical Intelligence deployment. The services division has also been expanding the work it undertakes directly for NHS trusts as a complement to the Group's core local service providers (LSP) and central government contracts.

Gross margin

Gross margin remained at circa 56%, broadly in line with the prior year.

Profit from operations

Profit from operations was £3.4m, a 43% increase on 2008 (£2.4m). The increase in revenues and gross margins, combined with the continued control of operating costs, has led to an increase in the margin on profit from operations to 16% from 13% in 2008/9.

The growth in overall research and development expenses reflects the acceleration in investment in the Medway product range. The administrative expenses were largely contained, with only a 5% increase which principally reflected increased bidding costs across the Group. 

The Group continues to focus on ensuring that the core cost base is maintained at an appropriate level.

Net financial income

Interest receivable on customer contracts relates mainly 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. 

The interest receivable on cash balances declined this year as the interest rates on deposits fell due to the economic situation.

Taxation

The taxation charge for 2008/09 was £0.9m, equating to 22% of PBT reflecting the benefit of research and development tax credits.

Earnings per share

Basic earnings per share increased to 3.72p (2008: 2.56p). The weighted average number of shares during the period used for the EPS calculation was 87,289,846 (2008: 87,243,442).

Dividends

An interim dividend of 0.22p (2008: 0.18p) was declared and paid during the year. The Board proposes a final dividend of 0.44p (2008: 0.36p) per share bringing the total for the year to 0.66p per share (2008: 0.54p).

Cash and treasury

	2009	2008
	£m	£m
Cash generated from operations	3.8	4.5
Net financial income	0.8	0.7
Acquisition of subsidiaries	(0.5)	(1.8)
Capital expenditure	(1.3)	(0.6)
Net cash inflow before financing activities	2.8	2.8
Financing activities	(0.5)	(0.9)
Net cash inflow	2.3	1.9

The Group continued to generate strong cashflow with net cash generated from operating activities of £3.8m (2008: £4.5m).

On 5 May 2009 the Group acquired Bluestar UK Group Ltd. The total cash outlay in the year for this acquisition was £0.4m. Further consideration of up to £2.6m may be payable over three years dependent on the achievement of demanding performance criteria.

On 15 July 2009 the Group acquired Liquidlogic Ltd for an initial cash consideration of £10.2m. The acquired net asset value of £2.4m including £2.3m of cash. Further consideration of up to £4m may be payable under the terms of a one year performance-related earn out arrangement.  

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. This was approved by shareholders on Monday 3 August 2009, and the formal admission to the AIM market took place on August 5 2009.

Group Income Statement

		Year Ended	Year Ended
		31 May	31 May
		2009	2008
	Note	£'000	£'000
Revenue	1,2	21,887	18,128
Cost of sales		(9,657)	(8,075)
Gross profit		12,230	10,053
Research and development costs		(1,880)	(1,105)
Amortisation of acquired intangible assets		(259)	(183)
Share based payments		(105)	(72)
Administration		(6,565)	(6,250)
Profit from operations before the amortisation of acquired intangibles, impairment of goodwill and share based payments		3,785	2,698
Profit from operations		3,421	2,443
Finance income	3	692	891
Finance costs	3	(11)	(48)
Profit before taxation	4	4,102	3,286
Taxation	5	(857)	(1,052)
Profit for the year		3,245	2,234
Earnings per ordinary share
- Basic	6	3.72	2.56
- Diluted	6	3.66	2.54

Group Balance Sheet

	At 31 May	At 31 May
	2009	2008
	£'000	£'000
Assets
Non-current assets
Goodwill	2,306	1,884
Other intangible assets	3,020	2,250
Property, plant and equipment	380	415
Deferred tax assets	373	23
Trade and other receivables	213	428
	6,292	5,000
Current assets
Trade and other receivables	7,435	6,489
Cash and cash equivalents	14,703	12,427
	22,138	18,916
Total Assets	28,430	23,916
Liabilities
Current liabilities
Trade and other payables	4,872	4,010
Deferred consideration	326	680
Current tax liability	792	162
	5,990	4,852
Non-current liabilities
Deferred consideration	598	670
Deferred tax liability	818	414
Provisions	141	104
	1,557	1,188
Total Liabilities	7,547	6,040
Net Assets	20,883	17,876
Shareholders' Equity
Share capital	897	895
Share premium account	9,805	9,766
Capital redemption reserve	3,127	3,127
Own shares held in trust	(1,235)	(1,235)
Retained earnings	8,289	5,323
Total Equity	20,883	17,876

Group Statement of Changes in Shareholders' Equity

	Attributable to equity holders of the company
				Own
		Share	Capital	shares
	Share	premium	redemption	held in	Retained	Total
	capital	account	reserve	trust	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000
As at 31 May 2007	895	9,757	3,127	(1,235)	3,371	15,915
Profit for the year	-	-	-	-	2,234	2,234
Share based payments charge	-	-	-	-	72	72
Deferred tax	-	-	-	-	12	12
Premium on issue of new shares	-	9	-	-	-	9
Dividends	-	-	-	-	(366)	(366)
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	2	-	-	-	-	2
Premium on issue of new shares	-	39	-	-	-	39
Dividends	-	-	-	-	(506)	(506)
As at 31 May 2009	897	9,805	3,127	(1,235)	8,289	20,883

Group Cash Flow Statement

	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	3,816	4,712
Finance costs	(1)	(21)
Income tax paid	(52)	(184)
Net cash generated by operating activities	3,763	4,507
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired	(458)	(1,804)
Purchases of property, plant and equipment	(225)	(122)
Purchase of intangible software	(10)	-
Capitalised development costs	(1,174)	(591)
Finance income	845	748
Net cash used in investing activities	(1,022)	(1,769)
Cash flows from financing activities
Repayment of borrowings	-	(528)
Issue of share capital	41	9
Dividends paid	(506)	(366)
Net cash used in financing activities	(465)	(885)
Net increase in cash and cash equivalents	2,276	1,853
Cash and cash equivalents at beginning of year	12,427	10,574
Cash and cash equivalents at end of year	14,703	12,427

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

	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Profit for the financial year	3,245	2,234
Taxation	857	1,052
Finance income	(692)	(891)
Finance costs	11	48
Profit from operations	3,421	2,443
(Increase)/decrease in trade and other receivables	(208)	752
(Decrease)/increase in trade and other payables	(537)	702
Net movement on provisions	37	2
Share based payments charge	105	72
Depreciation of property, plant and equipment	282	387
Amortisation of intangible assets	716	352
Loss on disposal of fixed assets	-	2
Net cash inflow from operating activities	3,816	4,712

1.  Basis of preparation

The board of Directors approved these preliminary audited results on 24 September 2009. 

The financial information set out above is abridged and does not constitute the Company's statutory financial statements for the year ended 31 May 2009 or 31 May 2008. Statutory financial statements for the year ended 31 May 2008 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 2009 will be posted no later than 9 October 2009 to shareholders and once approved will be delivered to the Registrar of Companies following the Annual General Meeting on 3 November 2009. The report for the year ended 31 May 2008 was unqualified.

Copies of the Annual Report and Financial Statements for the year ended 31 May 2009 will be available in due course from the Company Secretary, System C Healthcare plc, Brenchley House, Week Street, Maidstone, ME14 1RF.

2.  Segmental information

The Group's primary format for segmental reporting is business segment. As the business only operates in the UK the Group does not have a secondary reporting format. 

The Group's sole activity is the design, development and implementation of computer hardware and software. 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 revenue and expenses directly attributable to or able to be allocated to each such segment on a reasonable basis. 

	Year ended 31 May 2009
			Development
			and Shared
	Products	Services	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
Financial income	264	-	428	692
Financial expense	-	-	(11)	(11)
Profit/(loss) before taxation	3,399	7,002	(6,299)	4,102
Total assets	3,267	4,222	20,568	28,057
Total liabilities	(1,328)	(833)	(3,776)	(5,937)
Net assets	1,939	3,389	16,792	22,120
Capital expenditure - PPE	85	-	140	225
Capital expenditure - Intangible	-	-	1,182	1,182
Depreciation of tangible assets	173	-	109	282
Amortisation of intangible assets	462	-	271	733
Share based payment charge	-	-	105	105

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 2008
			Development
			and Shared
	Products	Services	Services	Total
	£'000	£'000	£'000	£'000
Revenue	5,790	12,338	0	18,128
Profit/ (loss) from operations	2,316	4,992	(4,865)	2,443
Financial income	294	0	597	891
Financial expense	(20)	0	(28)	(48)
Profit/ (loss) before taxation	2,590	4,992	(4,296)	3,286
Total assets	3,261	3,267	17,365	23,893
Total liabilities	(1,148)	(755)	(3,561)	(5,464)
Net assets	2,113	2,512	13,804	18,429
Other segmental disclosures
Capital expenditure - property, plant and equipment	47	-	75	122
Capital expenditure - Intangible assets	27	-	564	591
Depreciation of tangible assets	213	-	174	387
Amortisation of intangible assets	142	-	210	352
Share-based payment credit	-	-	72	72

Reportable segments are reconciled to total assets as follows:

	2009	2008
	£'000	£'000
Segmental assets for reportable segments	28,057	23,893
Unallocated
Deferred tax assets	373	23
Total assets per balance sheet	28,430	23,916

Reportable liabilities are reconciled to total liabilities as follows:

	2009	2008
	£'000	£'000
Segmental liabilities for reportable segments	5,937	5,464
Unallocated
Current tax liabilities	792	162
Deferred tax liabilities	818	414
Total liabilities per balance sheet	7,547	6,040

3.  Finance income and costs

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Interest receivable on bank and short term deposits	428	597
Other interest	264	294
Finance income	692	891
Interest payable on bank loans and overdrafts	(1)	(2)
Unwinding of discount on deferred consideration	(10)	(27)
Interest payable on financing loans (note 14)	-	(19)
Finance costs	(11)	(48)
Net Finance Income	681	843

4.  Profit before taxation

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

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Staff costs excluding share-based payments	12,112	9,472
Share-based payments charge	105	72
Research and development expenditure	1,880	1,105
Depreciation of property, plant and equipment:
- Contract assets	173	212
- Other assets	109	175
Amortisation of intangible assets:	716	352
Operating lease rentals:
- Land and buildings	221	217
- Motor vehicles and other leases	50	55
Loss on disposal of property, plant and equipment	-	2

Services provided by the Company's auditor

During the year the Group obtained the following services from its auditor at cost as detailed below:

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Audit services
Fees payable to the Group's auditor for the audit of the Group and Parent Company and consolidated financial statements	69	50
Fees payable to the Group's auditor for the audit of the financial statements of the subsidiaries	25	20
Non-audit services
Fees payable for services relating to taxation	24	24
Fees payable for other regulatory reporting	58	-

5.  Taxation

(a) Analysis of tax charge in the year

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Current Tax
UK corporation tax on profits for the year at 28%	790	164
Adjustments in respect of prior years	(25)	24
	765	188
Deferred tax
Origination and reversal of temporary differences	245	822
Adjustment in respect of prior years	(153)	42
	92	864
Total tax charge in the income statement	857	1,052
Tax on items credited/(charged) to equity:
Deferred tax on share-based payment	(122)	(12)

(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% (2008: 29.7%) as explained below:

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
Profit before taxation	4,102	3,286
Profit before taxation multiplied by the standard rate of	1,149	920
corporation tax in the UK of 28% (2008: 29.7%)
Permanent Differences	64	117
Amortisation of intangibles not deductible	-	(51)
Additional deduction for research and development expenditure	(154)	-
Tax relief for share option exercises	(22)	-
Adjustments in respect of prior years - deferred tax	(153)	42
Adjustments in respect of prior years - current tax	(25)	24
Rate differences on current tax	(2)	-
Total tax charge/(credit) per accounts	857	1,052

(c) Current tax liability

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
UK corporation tax liability
At 1 June	162	92
Arising on acquisitions	8	66
Charged to income statement during the year	765	188
Paid during the year	(143)	(184)
At 31 May	792	162

(d) Deferred tax reconciliation

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
	£'000	£'000
(Liability) /asset at 1 June (net)	(391)	927
Arising on acquisitions	(84)	(466)
Charged to income statement during the year	(92)	(864)
Credited to shareholders' equity	122	12
At 31 May	(445)	(391)

(e) Analyses of deferred tax balances in the balance sheet

	Group
	Year ended	Year ended
	31 May	31 May
	2009	2008
Deferred tax asset:	£'000	£'000
Accelerated capital allowances	136	98
Unutilised losses	36	74
Share options	201	-
Short term timing differences	-	(149)
	373	23
Deferred tax liability:
Short term timing differences	(436)	-
Intangible assets	(382)	(414)
	(818)	(414)
Net deferred tax (liability)	(445)	(391)

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets because it is probable that those assets will be recovered. 

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

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 2009.

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 2009			Year ended 31 May 2008
		Weighted			Weighted
		average	Per		average	Per
		number	share		number	share
	Earnings	of shares	amount	Earnings	of shares	amount
	£'000	Number	Pence	£'000	Number	Pence
Basic EPS
Earnings attributable to ordinary shareholders	3,245	87,289,846	3.72	2,234	87,243,442	2.56
Effect of dilutive shares		1,395,956	(0.06)		526,856	(0.02)
Diluted EPS	3,245	88,685,802	3.66	2,234	87,770,298	2.54

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END

 

 

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