Interim Results
IDOX PLC
09 July 2007
09 July 2007
IDOX plc
IDOX plc
('IDOX')
Announcement of Interim Results
IDOX plc (AIM:IDOX), the information management company, specialising in the
development and delivery of software products, services and people principally
to the public sector, today announced its interim results for the half year
ended 30 April 2007.
Highlights:
• Successful turnaround with profit before tax £0.24m (2006 £nil)
• Cash balances up 15% to £6.19m (2006 £5.38m)
• Earnings per share 0.24p (2006 loss per share 0.07p)
• Maiden dividend paid
• Core Software business achieved double digit revenue growth of 15%
with continuing significant contract wins
• Improved gross margins in the Information Solutions business
• Slowly improving trading in the Recruitment business with discussions
ongoing with a number of interested parties looking to acquire this division
Martin Brooks, Chairman of IDOX, said,
'We achieved the turnaround required in the profitability of the business in the
first half of the year and the progress of our core software business has been
particularly gratifying in terms of new orders and overall revenues. The
subsequent acquisition of CAPS Solutions Ltd, on 7 June 2007, has demonstrated
our renewed and focused commitment to the public sector software and services
market. Integration of the businesses is proceeding well and we expect the Group
to deliver eventual benefits ahead of plan under the leadership of our new chief
executive, Steve Ainsworth working alongside Richard Kellett-Clarke as COO/CFO.'
For further information, call:
IDOX plc
Martin Brooks, Chairman 0870 333 7101
Steve Ainsworth, CEO 0870 333 7101
Richard Kellett-Clarke, COO/CFO 0870 333 7101
Noble & Company Limited
Matthew Hall, Director 020 7763 2200
Chairman's Statement
IDOX made a good trading recovery in the first half of the year compared to the
same period last year and as a result Group profitability was in excess of that
achieved in the first half of 2005. This was accompanied by further improvements
in cash flow.
This was principally due to an excellent improvement in revenue growth in our
core software business, as well as maintenance of revenues in our information
solutions business and a turnaround in profitability. There was a slow recovery
in the contract recruitment revenues from the low point in the second half of
last year, but it still remains at a level below the same period last year.
As a result, whilst gross margins have improved, the headline Group revenue
number was slightly below the 2006 figure. The recruitment business is scheduled
for divestment in the second half of the year.
The transforming acquisition of CAPS Solutions Ltd (CAPS) was completed on 7
June 2007 for a consideration of £21m before costs. This acquisition
consolidates our position and makes us the leading provider of Land and Property
software and solutions in the UK local authority market. The transaction was
funded through a combination of a placing, which was heavily oversubscribed,
debt, and through existing cash resources.
This acquisition more than doubles the size of the Group. A new combined
management team drawn from both CAPS and IDOX, and an integration plan which
will yield significant cost benefits is at an advanced stage of consultation
prior to implementation during the summer months.
The acquisition also cements our stated intention at the end of the last
financial year, of a renewed focus on the local authority software business as
the best way of rebuilding and enhancing shareholder value.
We have completed the first steps of the integration process ahead of schedule
and have already completed the actions necessary to deliver the forecast £1.5m
of annual cost savings and have identified further savings which will yield a
higher total, on completion of consultation on further reorganisation and the
rationalisation of property assets.
The acquisition allows us access to a combined customer base of over 320 local
authority customers which provides the Group with the exciting opportunity to
deliver software and solutions to some 70% of the local authorities in the UK.
Financial Review
Revenues for the half year were 3% below the same period last year, with the low
gross margin contract recruitment revenues off-setting a strong performance in
the software division, where revenues were 15% ahead.
The Group made a profit before taxation of £0.24m compared to a break-even
position last year.
The Company paid a maiden dividend but, through continued strong cash management
and a change in billing processes, ended the half year with cash of £6.19m
compared to £5.38m at the same time last year.
Operational Review
Software
The division was reorganised in the last quarter of the 2006 calendar year and
refocused on quality of service and product. It achieved early success in
closing new Revenues and Benefits product sales and has gone on to successfully
deliver and install them in record time.
The division's revenues grew strongly, up 15% on the same period last year and
are continuing to make similar progress in the second half. The gross margin
fell slightly, down 3% to 84% due, in part, to a change in mix of sales. The
sales organisation was strengthened with a greater emphasis on customer care and
service with the introduction of more client managers and a focus into regional
teams.
Information Solutions
Revenues for the first half were similar to the same period last year and the
gross margin improved by 7% to 67%. This was due to a change in the mix of
services provided. There have been some notable contract wins during the period,
including one from one of the largest professional services organisations in the
world and another from an international business information company.
Recruitment
Revenues in the first half were 24% lower than the same period last year. We
previously reported a drop in contract sales and a shift to direct billing. On a
gross margin basis the first half of the year has improved 5% over the second
half of last year but as yet has not returned to the same level as the first
half of last year. With the change in mix of revenues the gross margin has
improved by 4% from the same period last year to 43%.
Divestment of the Recruitment Business
The Group has commenced the process of drawing up a short list of potential
acquirers and circulating a sales memorandum. Discussions are on going with a
number of parties.
Senior Management and Succession
Last summer I indicated to the Board that I was prepared to take on the role of
interim chief executive in addition to that of chairman to undertake a process
of reorganisation and recovery, and to reset the strategic direction of the
business. This has now been largely accomplished, and on completion of the CAPS
acquisition, I have handed over the role of chief executive to Steve Ainsworth,
formerly managing director of CAPS, a year to the day since I took it on.
Steve will now run the enlarged Group and I am very pleased that he and his team
from CAPS are now joining us. I have reverted to my former role as chairman. I
would also like to thank Richard Kellett-Clarke who now assumes the additional
role of Chief Operating Officer as well Chief Financial Officer, for all his
dedication and professionalism in achieving this with me.
Strategy
The acquisition of CAPS marks the first decisive step in the restatement of
strategy we made last year namely; a renewed focus on the IDOX core business of
providing software, solutions and services to government, particularly local
government and related bodies. The local government sector, in particular,
accounts for the largest proportion of public sector ICT spend and we believe
the outlook for future expenditure remains reasonable in a consolidating
supplier market. We aim to continue developing our business with this market in
mind and to take advantage of these consolidating opportunities.
Outlook
The immediate outlook for the combined IDOX and CAPS business continues to be
encouraging. Since the half year end new business wins have continued. We have
recently won a significant software contract combining both the CAPS and IDOX
product offerings at Newcastle City Council. Other software contracts already
won in the current half year include Clackmannanshire County Council and West
Berkshire District Council. In addition the information solutions business has
just concluded a long-term consultancy agreement with the Countryside Commission
for Wales (CCW).
The Group has also been short listed as a potential supplier for the Scottish
Executive's planning system project.
We expect the enlarged Group's performance in the second half of the year,
following the acquisition of CAPS, to be in line with market expectations.
Conclusion
It has been a privilege to serve as chief executive during this past year, and I
look forward to the continued progress of the Group during the coming years.
I would like to thank our staff for their professionalism and support during
this past year, and look forward to the opportunities that the newly enlarged
Group will offer them in the coming months and years.
Martin Brooks
Chairman
6 July 2007
This announcement was approved by the Board of Directors on 6 July 2007.
Consolidated Profit and Loss Account
For the six months ended 30 April 2007
Note 6 months to 30 6 months to 30 12 months to
April 2007 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover (2) 6,686 6,912 13,031
External charges (2,153) (2,604) (4,473)
________ _______ _______
4,533 4,308 8,558
Staff costs (2,935) (2,902) (5,931)
Exceptional staff costs (3) - - (299)
Other operating charges (1,455) (1,471) (2,992)
________ _______ _______
Operating profit/(loss) 143 (65) (664)
Interest receivable 96 66 149
________ _______ _______
Profit/(loss) on ordinary activities
before taxation 239 1 (515)
Tax on profit/(loss) on ordinary
activities (4) 223 (130) (472)
________ _______ _______
Profit/(loss) on ordinary activities
after taxation 462 (129) (987)
________ _______ _______
Earnings/(loss) per share (pence)
Basic and diluted (5) 0.24p (0.07)p (0.51)p
Consolidated Balance Sheet
At 30 April 2007
Note At At At
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Intangible assets 3,735 4,313 4,024
Tangible assets 423 511 433
________ _______ _______
4,158 4,824 4,457
Current assets
Debtors 3,609 3,863 3,019
Debtors
Cash at bank and in hand 6,189 5,384 4,830
________ _______ _______
9,798 9,247 7,849
Creditors: amounts falling due within one
year (5,071) (4,790) (3,899)
________ _______ _______
Net current assets 4,727 4,457 3,950
________ _______ _______
Total assets less current liabilities 8,885 9,281 8,407
Creditors: amounts falling due after more
than one year - (10) -
________ _______ _______
Net assets 8,885 9,271 8,407
________ _______ _______
Capital and reserves
Called up share capital (7) 1,953 1,953 1,953
Capital redemption reserve (8) 1,112 1,112 1,112
Share premium account (8) 820 8,982 820
Shares options reserve (8) 128 - -
Other reserves (8) 1,294 1,294 1,294
ESOP trust (8) (100) (90) (96)
________ _______ _______
Profit and loss account (8) 3,678 (3,980) 3,324
Shareholders' funds 8,885 9,271 8,407
________ _______ _______
Consolidated Cash Flow Statement
For the six months ended 30 April 2007
Note 6 months to 30 6 months to 30 12 months to
April 2007 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow from operating
activities (9) 1,704 926 554
Returns on investments and servicing
of finance
Interest received 96 66 149
________ _______ _______
Net cash inflow from returns on
investments and servicing of finance 96 66 149
Capital expenditure and financial
investment
Purchase of tangible fixed assets (139) (319) (378)
Purchase of investment (ESOP trust) (4) (11) (17)
________ _______ _______
Net cash outflow from capital
expenditure and financial investment (143) (330) (395)
Equity dividends paid (98) - -
Acquisitions
Deferred consideration paid (200) - (200)
________ _______ _______
Net cash outflow from acquisitions (200) - (200)
________ _______ _______
Increase in cash (10) 1,359 662 108
________ _______ _______
Notes on the Interim Report
For the six months to 30 April 2007
1 BASIS OF PREPARATION
The interim financial information has been prepared in accordance with
applicable United Kingdom accounting standards and under the historical cost
convention. The principal accounting policies of the Group are set out in the
Group's 2006 annual report and financial statements. The policies remain as
stated in the annual report for the year ended 31 October 2006 with the
exception of the adoption of FRS 20 'Share Based Payments'. This has resulted
in a charge to the current period results of £128,000. There was no impact on
the results for prior periods as a result of adopting FRS 20. The financial
information set out in this report does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The figures for the year ended
31 October 2006 have been extracted from the statutory accounts, which have been
filed with the Registrar of Companies. The auditors' report on those financial
statements was unqualified and did not contain a statement under section 237(2)
of the Companies Act 1985. The interim financial statements have been reviewed
by the Company's auditors. A copy of the auditors' review report is attached to
this Interim Report.
2 SEGMENTAL ANALYSIS
Turnover, operating profit and net assets by class of business are set out
below:
6 months to 6 months to 12 months to
30 April 2007 30 April 2006* 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover
Software Solutions 3,054 2,661 5,204
Information Solutions 1,703 1,711 3,271
Recruitment 1,929 2,540 4,556
________ ________ ________
6,686 6,912 13,031
________ ________ ________
Operating profit/(loss)
Software Solutions 665 411 286
Information Solutions 86 (278) (436)
Recruitment (191) 91 64
________ ________ ________
560 224 (86)
Share options charge (128) - -
Goodwill amortisation (289) (289) (578)
________ ________ ________
143 (65) (664)
________ ________ ________
Net assets
Software Solutions 2,352 1,908 1,750
Information Solutions 1,312 1,227 1,100
Recruitment 1,486 1,823 1,533
________ ________ ________
5,150 4,958 4,383
Goodwill 3,735 4,313 4,024
________ ________ ________
8,885 9,271 8,407
________ ________ ________
* Results for the 6 months to 30 April 2006 have been restated to be in line
with segmental analysis for other periods.
3 EXCEPTIONAL STAFF COSTS
Exceptional costs of £299,000 in the 12 months to October 2006 relate to the
implementation of the Group's announced policy of restructuring and refocusing
the business.
4 TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax (credit)/charge is made up as follows:
6 months to 6 months to 12 months to
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Current tax
UK corporation tax 28 - 43
________ ________ ________
Adjustment in respect of prior periods - 41 -
________ ________ ________
Total current tax 28 41 43
________ ________ ________
Deferred tax - origination and reversal of
timing differences (251) 89 429
________ ________ ________
Tax (credit)/charge on profit on ordinary
activities (223) 130 472
________ ________ ________
During the period, £624,000 of tax losses surrendered in exchange for the
research and development tax credits in respect of the year ended 31 October
2003 were reinstated. Unrelieved trading losses of £1,394,000 (30 April 2006:
£1,683,000), which when calculated at the standard rate of corporation tax in
the United Kingdom of 30%, amounts to £418,000 (30 April 2006: £505,000). These
remain available to offset against future taxable trading profits.
The deferred tax asset recognised is as set out below:
At At At
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Accelerated capital allowances 61 105 75
________ ________ ________
Other timing differences 60 19 28
________ ________ ________
Tax losses carried forward 418 505 185
________ ________ ________
539 629 288
________ ________ ________
There were no unprovided deferred tax assets or liabilities at 30 April 2007, 30
April 2006 or 31 October 2006.
5 EARNINGS/(loss) PER SHARE
The earnings/(loss) per share is calculated by reference to the earnings/(loss)
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during each period, as follows:
6 months to 6 months to 12 months to
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit/(loss) for the period 462 (129) (987)
________ ________ ________
Weighted average number of shares in issue 194,229,779 190,479,843 192,517,399
________ ________ ________
Basic and diluted earnings/(loss) per share 0.24p (0.07)p (0.51)p
The share options are anti dilutive under FRS 22.
6 DIVIDENDS
6 months to 6 months to 12 months to
30 April 2006 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Final dividend paid in respect of the
year ended 31 October 2006 108 - -
________ ________ ________
Pence per ordinary share 0.05p - -
________ ________ ________
7 SHARE CAPITAL
At At At
30 April 2006 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Authorised:
297,000,000 ordinary shares of 1p each 2,970 2,970 2,970
________ ________ ________
Allotted, called up and fully paid
195,260,900 ordinary shares of 1p each 1,953 1,953 1,953
________ ________ ________
8 SHARE PREMIUM ACCOUNT AND RESERVES
Issued share Capital Share Share Other ESOP Profit and Total
capital redemption premium options reserves trust loss account
reserve reserve
£000 £000 £000 £000 £000 £000 £000 £000
At 1 November
2006 1,953 1,112 820 - 1,294 (96) 3,324 8,407
Share options
granted - - - 128 - - - 128
Equity
dividends paid - - - - - - (108) (108)
ESOP - - - - - (4) - (4)
trust - - - - - (4) - (4)
Profit for
the period - - - - - - 462 462
______ _______ ______ ______ _______ _______ _______ _______
At 30 April
2007 1,953 1,112 820 128 1,294 (100) 3,678 8,885
______ _______ ______ ______ _______ _______ _______ _______
The capital redemption reserve for the Group and the Company was created during
2003 when the entire deferred ordinary share capital was bought in exchange for
one ordinary 1p share. Other reserves relate to the issued share capital and
share premium account in the Company's subsidiary undertaking, IDOX Software
Limited, and has been treated in accordance with FRS 6 under merger accounting.
The share options reserve relates to the charge arising under FRS 20 in relation
to the 4.5 million share options granted in the period.
9 NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months to 6 months to 12 months to
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Operating profit/(loss) 143 (65) (664)
Depreciation 149 133 270
Goodwill amortisation 289 289 578
Share options charge 128 - -
(Increase)/decrease in debtors (339) 139 642
Increase/(decrease) in creditors 1,334 430 (272)
______ ______ ______
Net cash inflow from operating
activities 1,704 926 554
______ ______ ______
10 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
6 months to 6 months to 12 months to
30 April 2007 30 April 2006 31 October 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Increase in cash in the period, being movement
in net funds in the period 1,359 662 108
Net funds at 1 November 2006 4,830 4,722 4,722
________ _______ ______
Net funds at 30 April 2007 6,189 5,384 4,830
________ _______ ______
11 POST BALANCE SHEET EVENTS
On 31 May 2007, the Group purchased 123,328 ordinary shares in the Company at a
price of 9p as part of the IDOX share investment plan. Of the shares purchased,
half relates to the matching shares purchased by the Group.
On 7 June 2007, the acquisition of CAPS Solutions Limited was completed at a
consideration of £21 million. CAPS Solutions Limited is a privately owned,
profitable UK based company focused on the provision of software solutions,
primarily to local authorities.
In order to finance in part the acquisition, £11 million was raised (£9.6
million after expenses) by way of a Placing of 146,666,667 New Ordinary Shares
of 1p each in the Company at 7.5p per share. The New Ordinary Shares rank pari
passu with the existing ordinary shares of the Company. £12 million (£11.6
million after expenses) in bank debt has been raised, comprising of two term
loans totalling £8 million and a revolving credit facility of £4 million. On
completion of the acquisition, Martin Brooks stepped down as CEO of the Group
to resume his role as Chairman and Steve Ainsworth (CEO of CAPS Solutions
Limited) took over the role of CEO of the Group. On 7 June 2007 the Company
granted options over 4.5 million ordinary shares of 1p each in the Company, at a
price of 7.5p per share, to Steve Ainsworth on the recommendation of the
Remuneration Committee. The options are granted under both the IDOX Plc
enterprise management incentive scheme and the IDOX Plc Share Option Plan.
INDEPENDENT REVIEW REPORT TO IDOX PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 April 2007 which comprises the consolidated profit and
loss account, consolidated balance sheet, consolidated cash flow statement and
the related notes 1 to 11. We have read the other information contained in the
interim report which comprises only the Chairman's statement and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information. Our responsibilities do not extend to any other
information.
This report is made solely to the company's members, as a body, in accordance
with guidance contained in APB Bulletin 1999/4 'Review of Interim Financial
Information'. Our review work has been undertaken so that we might state to the
company's members those matters we are required to state to them in a review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the
company's members as a body, for our review work, for this report, or for the
conclusion we have formed.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. They are
responsible for preparing the interim report and ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists primarily of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards of Auditing (UK & Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 April 2007.
GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS
LONDON
6 July 2007
Notes:
1. The maintenance and integrity of IDOX plc website is the responsibility
of the directors: the interim review does not involve consideration of these
matters and, accordingly, the company's reporting accountants accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and
dissemination of the interim report differ from legislation in other
jurisdictions.
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