Final Results

AttentiV Systems Group PLC 19 November 2004 19 NOVEMBER 2004 ATTENTIV SYSTEMS GROUP PLC ('AttentiV' or 'the Company') PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 AttentiV Systems Group plc is a leading developer and supplier of software to the financial services sector. These are the first full year results reported by the Company since its successful AIM listing in March 2004. Financial highlights • Turnover up 25% to £32.1 million (2003 £25.7 million) • Underlying operating margin increased to 11% (2003 8%) * • Underlying operating profit increased to £3.6 million (2003 £2.0 million) * • Reported operating profit increased to £3.2 million (2003 £1.0 million) • £2.2 million operating cash flow generated during the period (2003 £2.7 million) with closing net cash of £5.1 million (2003 £3.0 million) • Maiden dividend as a quoted company of 0.66 pence per share which is six months earlier than anticipated at the time of the company's flotation * See note 3 for further details Operational highlights • Successful flotation on AIM in March 2004 • Delivery of Summit solution to The Royal Bank of Scotland plc group in one of the UK's largest technology transformation programmes • 5 year support and development agreement signed with Intelligent Finance • Strengthening of position in sub-prime market David Webber, Chief Executive of AttentiV, commented: 'The overall performance of the business over the financial year has been highly satisfactory. Trading subsequent to the year-end has also progressed in line with expectations. We expect our past success in selling a high level of additional services and software licences to our existing customers to continue and to enable fulfillment of our business plans for the financial year ending 30 September 2005.' ENQUIRIES: AttentiV Systems Group plc Tel: 01582 845000 David Webber, Chief Executive Philip Wood, Finance Director ICIS Limited Tel: 020 7651 8688 Archie Berens Caroline Evans-Jones WEBSITE A presentation in respect of preliminary results for the year ended 30 September 2004 will be posted to the investor section of the AttentiV website ( www.attentiv.com) at 9.30 a.m. on 19 November 2004. Background Information on AttentiV Systems Group plc AttentiV is a provider of software solutions and associated services to the financial services sector. AttentiV has three offerings to the financial services market. 1. Portfolio - a software solution for organisations offering asset-backed finance products, personal loans and debt management; 2. Summit - a software system that supports the selling and administration of mortgages, loans, savings, current accounts and associated services within the retail banking sector; and 3. Tailored Solutions - software applications that are designed and built to perform particular tasks within the financial services market place. The functionality and scope of these solutions is determined by individual customer requirements. AttentiV provides all services required for a successful implementation of its offerings including project management, business consultancy, technical services and training. AttentiV also provides software development services; for the Portfolio and Summit products all software development takes place as part of the single product offering which is available to all customers, whilst for tailored solutions the developed software resides solely in that particular customer's software installation. AttentiV retains all property rights over all the intellectual property it creates. AttentiV provides software support, maintenance and helpdesk services for customers once they are running their businesses with the software and through its Synergy outsourcing service can deliver any of its technology solutions as a managed service. ATTENTIV SYSTEMS GROUP PLC ('AttentiV' or 'the Company') PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 Chairman's Statement I am pleased to announce a strong set of results for the financial year ended 30 September 2004 with the AttentiV management team delivering the anticipated improvement in financial performance. Turnover has risen by 25% to £32.1 million (2003 £25.7 million). The AttentiV team has delivered on the first stage of its objective of operational improvement with underlying operating margin increased to 11% (2003 8%). The combination of successful project delivery, customer retention and efficiency improvements has led to reported operating profit increasing to £3.2 million (2003 £1.0 million) whilst underlying operating profit has increased to £3.6 million (2003 £2.0 million). Underlying operating profit is stated after adjustment for non-recurring costs related to the group's former ownership together with the costs in 2004 associated with the rebranding to AttentiV. The team continues to concentrate on appropriate financial diligence with £2.2 million operating cash flow generated during the period (2003 £2.7 million) and debtor days at the year end are maintained at our target of between 40 to 50 days. Overview of year The overall performance of the business over the financial year has been highly satisfactory. The Summit retail banking product has had considerable success during the year which culminated in the signature of a contract to provide mortgage application processing capability to the Portman Building Society. The excellent performance of Summit compensated for a lower than anticipated level of success for the Portfolio product due to competitive pressures within the motor and consumer finance markets. In addition to the successful delivery of projects for London Scottish Bank plc, Toyota Financial Services (UK) plc and a number of mortgage lenders including Britannia Building Society and Bristol & West plc, AttentiV has strengthened its position in the sub-prime mortgage market with the addition of Mortgages plc, the Merrill Lynch subsidiary, as a customer. It is particularly pleasing that AttentiV has consolidated its position as the UK's leading provider of mortgage systems by its supply to The Royal Bank of Scotland plc group of a solution to enable the consolidation of its primary mortgage processing platforms in one of the UK's largest technology transformation programmes. The programme is scheduled to be completed in autumn 2005. Software licence revenues for the group increased to £4.8 million (2003 £3.0 million) with services and third party revenues increasing to £15.7 million (2003 £10.9 million). Support & maintenance and outsourcing revenues were £11.6 million (2003 £11.8 million). In the year ended 30 September 2004 gross operating costs of £30.5 million (2003 £26.6 million) were reduced by £1.6 million (2003 £2.0 million), which represents a net increase in work-in-progress on long term contracts, resulting in the reported operating costs of £28.9 million (2003 £24.6 million). Dividend Following the group's flotation on AIM the board is pleased to announce the proposed payment of a dividend ahead of the expectations set on flotation. The board proposes the payment of a final dividend of 0.66p per ordinary share which together with the pre-flotation dividend of £1,267,000 (paid to the company's then parent) makes the total dividend paid and proposed equivalent to 3.16p per share (2003 6.58p). The final dividend will be paid on 14 February 2005 to shareholders on the register as at 28 January 2005. The shares are expected to be quoted ex dividend on 26 January 2005. Operational Review Portfolio Revenue for the Portfolio product was £4.6 million (2003 £5.1 million) which was below expectations due to the level of competition within the consumer and motor finance sector. During the period Toyota Financial Services (UK) plc completed the roll out of the AttentiV motor finance solution across their operations and London Scottish Bank plc completed the roll out of the AttentiV personal loan and collection solution across their UK branches. Stroud & Swindon Building Society, The Cooperative Bank plc and Mortgages plc also completed projects to deploy the Portfolio collections and credit management solution. Summit Revenue for the Summit product was £22.0 million (2003 £14.1 million). This performance was ahead of expectations due to the continuing consolidation of Summit's position within the sector together with the continued closure of sales opportunities within the growing user base. During the period Britannia Building Society successfully migrated their 2.5 million savings accounts and 188 branches to the Summit Savings and Branch Cashiering solution with the licence fee associated with this project being recognised in the first half of the financial year. Following the signing of a contract with The Royal Bank of Scotland plc in December 2003 the implementation of Summit has progressed well with the Royal Bank of Scotland, NatWest and Ulster Bank brands successfully processing mortgages subsequent to our financial year-end. In two further rapid deployments of Summit both the National Counties and Darlington Building Societies have successfully commenced transacting live mortgage business during the year. In August, Bristol & West plc successfully migrated their historic mortgage book on to the Summit mortgage platform. On 1 September 2004 Mortgages plc, the Merrill Lynch subsidiary, successfully commenced transacting live mortgage business on Summit. They join Southern Pacific Mortgages Limited and Preferred Mortgages Limited, the Lehman's subsidiaries, as sub-prime lenders using mortgage lending solutions from AttentiV: further evidence of the opportunity we believe exists for AttentiV in the sub-prime market. During the autumn, our mortgage customers have migrated to Summit Release 9.1 in support of their compliance with the FSA's Mortgage Conduct of Business rules. Tailored Solutions Revenue for Tailored Solutions was £5.5 million (2003 £6.5 million). This reduction was expected and was due to a client taking their support and maintenance in house on 31 December 2003. The five-year support and development agreement signed with Intelligent Finance, the HBOS plc internet bank, to support the bank's mortgage, savings and offsetting systems, has progressed well through the year. Investment During the year AttentiV has completed further investments in its software products with additional enhancements to the user interfaces for Summit and Portfolio. There was also significant investment in the Summit product to support regulatory requirements and greater performance capability for high business volumes. Additionally, a new mortgage point of sale solution provided in collaboration with a partner, has been promoted since the early summer. This has already resulted in three customers adopting the solution. The savings and mortgages offset capability for Summit remains on track for delivery within the next release of Summit and the revolving credit capability developed for Portfolio Credit will shortly be available to customers. Improvement Building upon the improvements in operating performance over the past year, a programme has been established for further operational improvements in productivity to be achieved in 2005. For the development and support functions, there are particular metrics that are being monitored on a monthly basis to track against this programme and any variances to the plan are being reported to the AttentiV Board. The management team is confident that improvements will be achieved in 2005 and this will underpin our continuing focus on removing our dependency on licence revenues. Staff We have continued to invest in the training of our employees over the year. Average employee numbers have risen from 368 in 2003 to 391 in 2004 but we do not envisage employee numbers significantly increasing beyond that number within 2005. Retention has been maintained at 89% for the year. Current Trading & Outlook Trading since 30 September 2004 has continued in line with expectations, with our Summit customers transacting new mortgage business in accordance with the Mortgage Conduct of Business rules, to schedule, on 1 November 2004. In accordance with our business plans we have subsequent to the financial year end reduced our delivery capacity for the Portfolio product. This was in response to the level of competitive pressures within the motor and consumer finance sector resulting from the low barriers to entry, compared to core banking systems, for new suppliers to the sector. However, the opportunities within the retail banking sector and our existing customer base is expected to compensate for the challenging motor and consumer finance sector. Our aspirations for growth within the consumer finance sector are supported by a detailed programme of marketing activities and we remain encouraged by the pipeline of opportunities. Our view is that a number of mortgage providers, with internally developed lending systems, will need to take very tactical approaches to achieving mortgage compliance and that there will be both cost and efficiency burdens associated with the solutions they have adopted. A number of these organisations will need to make strategic decisions regarding their mortgage processing platforms during 2005 and securing sales wins to these organisations will lay the basis for further business success for AttentiV for the year ending 30 September 2006. We expect our past success in selling a high level of additional services and software licences to our existing customers to continue and thereby facilitate fulfillment of our business plans for the financial year ending September 2005. The company has £7.1 million (2003 £6.0 million) of contracted licences not yet booked to revenue together with a maintenance and contracted recurring revenues base at 30 September 2004 of £12.4 million (2003 £10.8 million). Looking forward, we expect the level of regulation in UK financial services to continue to be an important factor that will lead organisations to abandon in house developed solutions, because of the accelerating cost burden of compliance. Instead, we expect they will find it more efficient to adopt product solutions where the regulatory cost burden is shared across a broad user community. We therefore expect further opportunities to arise over the coming year within the mortgage market in the UK and Ireland as organisations assess their need to enhance their strategic platforms to meet future regulatory and market requirements. Peter Bertram Chairman 19 November 2004 ATTENTIV SYSTEMS GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 Consolidated profit and loss account For the year ended 30 September 2004 2004 2003 Notes £'000 £'000 Turnover 2 32,071 25,655 Operating costs (28,874) (24,625) --------- --------- Operating profit 3,197 1,030 Net interest receivable 125 103 --------- --------- Profit on ordinary activities before taxation 3,322 1,133 Tax on profit on ordinary activities (635) 1,866 --------- --------- Profit on ordinary activities after taxation 2,687 2,999 Dividends 4 (1,667) (3,330) --------- --------- Profit/(Loss) for the period 1,020 (331) ========= ========= Earnings per share - basic 5 4.8 p 5.9 p - diluted 5 4.6 p 5.9 p All of the activities of the group are classed as continuing. There were no recognised gains or losses other than the profit for the financial year. ATTENTIV SYSTEMS GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 Consolidated balance sheet As at 30 September 2004 2004 2003 £'000 £'000 Fixed assets Tangible assets 2,100 2,146 --------- --------- Current assets Stocks and work in progress 19 50 Debtors 9,867 7,223 Cash at bank and in hand 5,072 3,041 --------- --------- 14,958 10,314 Creditors: amounts falling due within one year (6,987) (7,942) --------- --------- Net current assets 7,971 2,372 --------- --------- Total assets less current liabilities 10,071 4,518 Creditors: amounts falling due after more than one year - (6) --------- --------- 10,071 4,512 Accruals and deferred income (5,234) (4,369) --------- --------- Net assets 4,837 143 ========= ========= Capital and reserves Share capital 3,029 2,529 Share premium 3,295 121 Profit and loss account (1,487) (2,507) --------- --------- Shareholders' funds 4,837 143 ========= ========= ATTENTIV SYSTEMS GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 Consolidated cash flow statement For the year ended 30 September 2004 2004 2003 Notes £'000 £'000 Net cash inflow from operating activities 6 2,231 2,706 --------- --------- Returns on investments and servicing of finance Interest received 126 105 Finance lease interest paid (1) (2) --------- --------- Net cash inflow from returns on investments and servicing of finance 125 103 --------- --------- Taxation (8) 184 --------- --------- Capital expenditure Purchase of tangible fixed assets (743) (468) --------- --------- Net cash outflow from capital expenditure (743) (468) --------- --------- Financing Net proceeds on issue of share capital 3,674 - Net movement on loans - (142) Capital element of finance lease rentals (8) (7) --------- --------- Net cash inflow/(outflow) from financing 3,666 (149) --------- --------- Equity Dividends paid (3,240) (1,357) --------- --------- Increase in cash 7 2,031 1,019 ========= ========= ATTENTIV SYSTEMS GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 Notes to the preliminary financial information 1. Basis of preparation The principal accounting policies of the group are set out in the Placing and Admission to AIM document of March 2004. The policies have remained unchanged. 2. Turnover The turnover and profit before tax are attributable to the one principal activity of the group. An analysis of turnover by geographical market is given below: 2004 2003 £'000 £'000 United Kingdom 30,641 24,103 Rest of Europe 1,422 1,440 Rest of World 8 112 --------- --------- 32,071 25,655 ========= ========= 3. Underlying operating profit The underlying operating profit detailed in the financial highlights is stated after adjustment for non-recurring costs related to the group's former ownership together with the costs associated with the rebranding to AttentiV in 2004. The two adjusted items in 2004 are i) £0.2 million of the aforementioned rebranding costs; and ii) £0.2 million pre-flotation management charge from AttentiV's former parent company. The two adjusted items in 2003 are i) £0.4 million management charge from AttentiV's former parent company; and ii) £0.6 million of costs associated with establishing and terminating a discontinued distribution agreement with a former group undertaking. 4. Dividends 2004 2003 £'000 £'000 Interim dividend of 2.50p per share (2003 2.68p) 1,267 1,357 Final dividend of 0.66p per share (2003 3.90p) 400 1,973 ------- --------- 1,667 3,330 ======= ========= The comparative information for dividend per share has been recalculated as if the sub-division on 17 February 2004 of 25,288,897 issued ordinary shares of 10 pence each into 50,577,794 issued ordinary shares of 5 pence each had occurred at the time of the interim and final dividends in 2003. The final dividend will be paid on 14 February 2005 to shareholders on the register as at 28 January 2005. The shares are expected to be quoted ex-dividend on 26 January 2005. 5. Earnings per share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Basic earnings Dilutive effects Diluted earnings per share of options per share Year to 30 September 2004 Earnings £'000 2,687 - 2,687 Weighted average number of shares 55,605,267 2,617,774 58,223,041 -------- ----------- ------------ Per share amount pence 4.8 - 4.6 ======== =========== ============ Year to 30 September 2003 Earnings £'000 2,999 - 2,999 Weighted average number of shares 50,577,794 - 50,577,794 -------- ----------- ------------ Per share amount pence 5.9 - 5.9 ======== =========== ============ The earnings per share information has been prepared on the basis that the sub-division on 17 February 2004 of 25,288,897 issued ordinary shares of 10 pence each into 50,577,794 issued ordinary shares of 5 pence each had occurred at 1 October 2003. 6. Net cash inflow from operating activities 2004 2003 £'000 £'000 Operating profit 3,197 1,030 Depreciation 789 956 Decrease in work in progress 31 30 (Increase)/decrease in debtors (3,215) 674 Increase in creditors 1,429 16 --------- --------- Net cash inflow from operating activities 2,231 2,706 ========= ========= 7. Reconciliation of net cash flow to movement in net funds 2004 2003 £'000 £'000 Increase in cash in the year 2,031 1,019 Cash flow from financing with former group undertakings - 142 Cash flow from finance leases 8 7 ------- --------- Change in net funds resulting from cash flows 2,039 1,168 Non-cash financing movements with former group undertakings - 2,197 ------- --------- Movement in net funds in the year 2,039 3,365 Net funds at start of year 3,027 (338) ------- --------- Net funds at end of year 5,066 3,027 ======= ========= 8. Publication of non-statutory accounts The financial information above does not constitute the Company's statutory financial statements for the year ended 30 September 2004 but is derived from those financial statements. Statutory financial statements for 2003 have been delivered to the Registrar of Companies and those for 2004 will be delivered prior to the Company's annual general meeting. The auditors have reported on those financial statements; their reports were unqualified and did not contain statements under s237(2) or (3) Companies Act 1985. 9. Annual General Meeting The Company's Annual General Meeting will be held at the offices of Investec, 2 Gresham Street, London, EC2V 7EE on 20 January 2005 at 10.00 a.m. The Company's Annual Report is expected to be posted to shareholders in early December 2004. Copies of the Annual Report will be available from that date from the Company's registered offices, Gainsborough House, Houghton Hall Park, Houghton Regis, Bedfordshire LU5 5XF This information is provided by RNS The company news service from the London Stock Exchange

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