Final Results

RNS Number : 0922D

System C Healthcare plc

10 September 2008

 



System C Healthcare plc

Preliminary Results for Year Ended 31 May 2008

System C Healthcare plc ("System C"), a leading supplier of healthcare products and services, announces its results for the year ended 31 May 2008.

Financial Highlights of the Year

• Revenues increased by 34% to £18.1m (2007: £13.5m), including 27% (£3.7m) organic growth

• Product revenues increased by 66% to £5.8m (2007: £3.5m)

• Services revenues increased by 23% to £12.3m (2007: £10m)

• Gross margin of 55% at £10.1m, an increase of £3.7m on the prior year (2007: £6.4m)

• Profit from operations up 292% at £2.4m (2007: £0.6m)

• Profit before taxation of £3.3m up from £1.3m in the year ended 31st May 2007

• EPS up 135% at 2.56 pence (2007: 1.09p)

• Strong cash generation with a net cash position as at 31 May 2008 of £12.4m (2007: £10m)

• Outstanding debt repaid during the year

• Proposed final dividend of 0.36p giving a full year dividend of 0.54p, a 50% increase on prior year (2007: 0.36p)

Dr Ian Denley, Chief Executive commented:

"We are delighted with the performance of the Group this year. We are in a strong financial position, have won significant new contracts, grown our client base, completed two strategic acquisitions, and created a new general healthcare consulting business. We have also launched our next generation Medway Sigma product range at a time when there are growing product opportunities both in the UK and overseas."

Operational Highlights for the Year

• The Services Division continued to enhance its reputation for delivery, successfully completing nearly 200 projects in the course of the year and for the first time achieving full national coverage. It expanded its client base, working on a wide range of complex deployments within the National Programme for IT ("NPfIT"), as well as directly with NHS Trusts and within the independent and private healthcare markets.

• The company delivered phase one of the Isle of Man's £7.5m Patient Administration System and Electronic Patient Record ("PAS/ EPR") on time and to budget. The modules delivered so far include Patient Administration, Emergency Care, Maternity and Business Intelligence.

• The Products Division focused on the development of the next generation Medway Sigma product range. The bulk of the phase one development is complete and the Emergency Care, Master Patient Index, Maternity and Business Intelligence modules are now installed and in live use. 

• Two important strategic acquisitions were completed during the year. IQ Systems Services Ltd and Care Records Ltd were acquired for an aggregate cash consideration of £1.8m, plus up to an additional £4m dependent upon future performance. These acquisitions took the System C Group into the independent sector healthcare market and expanded its portfolio of clinical products, technology and expertise.

• The company achieved significant success in the new NHS Additional Services Capability and Capacity ("ASCC") contract. System C was selected as a preferred supplier under the framework agreement in all 16 categories it tendered for, including the key PAS category.

For further information please contact

System C Healthcare plc
Ian Denley, Chief Executive
Jim Horsburgh, Chairman
Andrew Coll, Finance Director	Tel: [phone]
Maitland
Emma Burdett
Richard Farnsworth	Tel: [phone]
Collins Stewart Europe Limited
Mark Connelly
Stewart Wallace	Tel: [phone]

  Chairman's Statement

Introduction and highlights

2007/8 has been a very successful year for System C. The Group has increased its client base, won new contracts, completed two strategic acquisitions and achieved significant organic growth in revenues, profitability and cash generation.  

Building on its reputation as a premier healthcare IT services Group, System C has this year achieved full geographical coverage in England and increased its services revenues by 23%. The Group now has a substantial presence across all five English National Programme clusters. 

At the same time, System C has continued to make excellent progress in product development and delivery, with Product revenues up 66% on 2007. The Group successfully deployed its MedWay Patient Administration and Electronic Patient Record System ("PAS/EPR") in the Isle of Man. The development team also completed the process of converting most of the MedWay suite of software into Microsoft's latest .net technology, generating new product sales opportunities in the UK and overseas.  

Acquisitions

During the year we acquired two businesses, IQ Systems Services Ltd and Care Records Ltd, and successfully integrated them into the System C Group. These strategic acquisitions brought with them new products, new clients and high calibre teams, and accelerated the Group's expansion into the specialist clinical systems and the independent sector healthcare markets. 

We see scope for further acquisitions provided they meet our strict investment criteria and promise strong returns to our shareholders.

People and the Board 

We are primarily a people business. Our staff are dedicated, professional and passionate about healthcare. 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.

 "System C people have helped me resolve all kinds of complex deployment challenges in a professional and flexible manner.  I can tell you it is most refreshing".

Sue Wilson, Head of EPR at Sandwell & West Birmingham Hospitals NHS Trust.

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

Dividend

The Board is pleased to recommend a final dividend of 0.36p, giving a total dividend of 0.54p for the year. This represents an increase of 50% on 2007 and reflects the strong financial performance and cash generation of the business. If approved by the shareholders at the Annual General Meeting on 6 November 2008, the final dividend will be paid on 10 November 2008 to those shareholders on the register on 3 October 2008.

Current Trading and Outlook

We have had a good start to the new financial year, and anticipate another good performance in 2008/9. 

System C has a substantial order book for products and services for 2008/9 and beyond, and a healthy pipeline of opportunities. By growing and diversifying both our client base and our sources of revenue we have reduced risk and expanded our opportunities for further progress.

The Board considers that market prospects for healthcare services and products to be favourable, and is confident of achieving continued growth.

Chief executive officer's review

System C has performed well this year and I am pleased to report that we have made progress in each area of our business. 

Group revenues increased 34% to £18.1m, profit from operations increased to £2.4m (2007: £0.6m), and we closed the year with a strong net cash balance of £12.4m (2007: £10m). A large proportion of the revenue growth (£3.7m) was organic and the cash balance was net of the £1.8m consideration paid for acquisitions during the year. 

Since the early days of the National Programme for IT when System C was focused on a small number of key customers, the Group has worked hard to increase the breadth and diversity of its client base. We saw good progress in this respect in 2007/08 with additional product sales, a significant move into the independent healthcare sector, and the Group securing two major new Services clients.  

One of the key strengths of our business is that we combine a substantial and experienced services delivery capability with a broad, high quality product range. Our Product and Services divisions work together to maximise the cross-sharing of knowledge about delivery, workflow methodologies, technical skills and deployment, and we have continued to apply this combined resource to the benefit of our clients. For example, during 2007/8 we used our MedWay product design skills in support of NPfIT projects, while our Services deployment teams helped implement MedWay and other systems. The entire Group benefits from this synergy, and it has contributed to the creation of an efficient and cost-effective delivery service able to handle complex and high volume projects. 

Services and delivery capability

Revenue from our Services Division grew 23% to £12.3m in the year due to new business and increased demand from existing customers. 

The Services Division has continued to enhance its reputation for taking on and resolving the most complex issues. The team has delivered nearly 200 work packages in the course of the year, working in areas ranging from training to data migration. With new contract wins in London, the Group has achieved full national coverage for the first time. The Group's experience across care settings continues to grow. The team has worked extensively with acute hospitals, primary care trusts, GP practices, diagnostic centres, ambulance trusts and a broad range of clinical departments.  

The major services contract signed with NHS Connecting for Health ("CfH") in May 2007 continues to progress well, and CfH has recently signed a 12 month extension. In addition, Services staff continue to work for Local Service Providers ("LSPs") and NHS Trusts across the country supporting all aspects of National Care Record System ("NCRS") deployments.  

Outside of the National Programme, the Division worked in support of the Government's Independent Sector Diagnostics Programme by delivering a complex patient management and imaging system to 28 static and mobile sites across London. It is now working on a similar project for PET/CT imaging ("Position Emission Tomography and Computed Tomography").The Division is also providing direct services support to the companies acquired by the Group and, in an example of the synergies between System C and its acquisitions, is now providing significant levels of consultancy and deployment support to the new clients brought into the Group when the companies were purchased.  

Launch of Perigon Consulting

In March 2008, we launched Perigon Consulting, a new consultancy service aimed at helping healthcare organisations meet the challenges posed by the Government's reform agenda. This service utilises the clinical and healthcare management skills and experience of our employees, but its remit extends beyond IT to the broad operational issues associated with clinical change and service improvement. 

Perigon's focus is on improving services to patients through innovative clinical practice and associated business efficiencies. Areas of specialisation include the design and delivery of clinical assessment services, the redesign of clinical and business processes and public/employee engagement, a key component in the delivery of clinical assessment services.

This new offering has been created by combining the expertise of Perigon Healthcare, an existing independent healthcare consulting partnership specialising in 'future state' healthcare development, with System C's healthcare consulting service. Perigon operates as a division of System C Healthcare and has access to all of System C's people and resources.

This initiative has already secured its first contracts and Perigon promises to develop into a significant new line of business in the coming years.

Products 

Revenues within the Products Division grew by £2.3m to £5.8m in the year, driven both by organic growth of £1.4m (40%) and by the IQ and Care Records acquisitions which together contributed £0.9m of revenue.

During 2007/8, the Product teams focused on the deployment and support of existing healthcare products and on the development of the next generation Medway Sigma product range.

In November 2007, our Product and Services divisions combined to deliver our own MedWay Electronic Patient Record system to Nobles and Ramsey hospitals on the Isle of Man. This was the first phase of the Group's £7.5m 5-year contract to computerise healthcare across the island and included PAS, Accident and Emergency, maternity, document tracking, data warehouse and reporting systems. This was an extremely successful deployment, delivered on time and within budget in just eight months, and brought the Group significant positive publicity in the UK market.

We continue to support our existing clients with our MedWay software suite and have made many significant improvements to the product over the course of the year, including a new service to support the government's 18 week Referral to Treatment ("RTT") programme, enhanced support for clinicians via the integration of the Map of Medicine online clinical knowledgebase, and the integration of clinical systems such as electronic prescribing and maternity. 

Product development

System C recognises the value of continuous development of its healthcare products and has taken advantage of the Group's strong financial position to expand its development programme at a time when many UK healthcare systems providers have curbed their investment.  

The software development teams continue to make excellent progress with the redevelopment of the healthcare software suites into Microsoft .net technologies. The key patient management and clinical modules have now been completed on schedule and within budget, and a number of modules including master patient index, emergency care, electronic casenote, clinical coding, clinical letters, patient tracking, maternity, and business intelligence were installed in June 2008, three months earlier than planned. The new systems are performing well and are popular with clinical, administrative and management users. The upgraded product is known as Medway Sigma.

The move to a Microsoft .net based system is a significant achievement with many important benefits. The development provides full integration with Microsoft's core product set (including SQLServer, Exchange, Office Communications Server, Office, SharePoint and PerformancePoint), and gives users all of the benefits of these products from within the Medway Sigma software. Medway Sigma also becomes the first trust-wide product available in the UK to standardise on the new Common User Interface ("CUI") developed jointly by Microsoft and the NHS. The look and feel of the new product set is clean and modern and adherence to Microsoft and CUI standards means that the solutions are familiar to NHS users. This has the benefit of reducing training requirements for customers whilst enhancing functionality and usability.

Appointed supplier under Additional Services Capacity and Capability Contract ("ASCC")

In April 2008, System C secured a major framework agreement to provide a range of IT products and services to the NHS. 

The Group was successful in all of the 16 categories that it bid for, and now holds framework contracts for its PAS, maternity and A&E systems, as well as for a wide range of clinical software. System C was also successful in its bid to provide associated consultancy services such as deployment, data migration, training and interfacing for all of the above. Winning these contracts gives the Group a significant advantage in the English market.

The new ASCC framework contracts are for a four year duration. They will allow NHS organisations and other NHS-funded establishments, such as Independent Treatment Centres, a faster and easier route to procure IT systems and services from suppliers who have demonstrated experience in the health sector. ASCC can be used to support both NPfIT related work and wider IT-related projects.

Acquisitions

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

We acquired IQ Systems Services Ltd in July 2007 for a cash consideration of £0.9 million with further amounts payable on achievement of specific performance criteria. This company develops and markets the IQUtopia patient management and clinical system to Independent Treatment Centres. The acquisition has furthered System C's expansion into the private healthcare market and the synergies between IQ and the Group has also meant that System C staff are now contracting directly with IQ clients. Our focus on strengthening IQ's business development activities has led to considerable interest in the product range from private healthcare providers in the UK and overseas. 

Care Records Ltd was acquired in January 2008 for a cash consideration of £0.9 million. Care Records is a developer of leading-edge technology for the design and development of clinical IT systems. It has used this core technology to produce the Eclipse maternity system and a diabetes management system, both of which have been installed in UK hospitals. Further clinical modules are currently under development. 

The Care Records clinical products are in the process of being integrated into the Medway Sigma product set and will advance the availability of extended clinical functionality into Sigma by several years. 

Key performance indicators (KPIs)

The Directors believe that the KPIs of the business are revenues, average revenue per head gross margins, operating profit margins, earnings per share and cash generation. This information  is summarised below:

Year ended 31 May	2008	2007
Revenue	£18.1m	£13.5m
Average revenue per head1	£101,842	£85,816
Gross margin2	55%	47%
Margin on profit from operations3	13%	4%
Basic EPS	2.56p	1.09p
Net Cash balance	£12.4m	£10m
Net cash generated by operating activities	£4.5m	£2.1m

Note 1 Average revenue per head is defined as the total revenue in the year divided by the average monthly number of employees.

Note 2 Gross margin is defined as gross profit divided by total revenue.

Note 3  Margin on profit from operations is defined as the profit from operations divided by total revenue 

Additional comments on the movement in Group's KPIs are contained within the Financial Review.

The Board sets targets and monitors progress against these and other operational performance measures on a regular basis.

Our strategy 

Over the last two years, we have consolidated our position as the UK's premier healthcare IT services supplier, and have developed an excellent reputation for the delivery of complex IT solutions in both the public and the private sectors. 

We are also expanding our consultancy services into general healthcare consulting, leveraging our skills and experience in clinical and healthcare management. In parallel, we have completed a significant redevelopment of our product range that positions us well for future patient management and clinical systems sales opportunities both in the UK and overseas. 

We continue to evaluate acquisition opportunities to enhance our consulting, services and products businesses on a selective basis.

These are exciting times, with considerable opportunities for expansion, and we would like to thank our customers, our employees and our shareholders for their continued support. 

Financial Review

The System C Group has achieved a year of significant growth with revenue up by 34% to £18.1m (2007:£13.5m). PBT rose by 146% to £3.3m (2007:£1.3m) and earnings per share grew by 1.47p to 2.56p per share (2007:1.09p). 

Revenue

Our Group delivered total revenues of £18.1m, an increase of £4.6m. This was driven by organic growth within both our Services and Product divisions, as well as the acquisition of IQ Systems and Care Records in the year, as illustrated in the table below:

Year ended 31 May	2008 Audited £m	2007 Audited £m
System C Products (excluding acquisitions)	4.9	3.5
System C Services	12.3	10.0
System C Healthcare Sub-Total	17.2	13.5
IQ Systems Services and Care Records (acquisitions)	0.9	-
Total Revenue	18.1	13.5
Gross Profit	10.1	6.4
Profit from operations	2.4	0.6
Net financial income	0.9	0.7
Profit before Tax	3.3	1.3
Tax	(1.1)	(0.4)
Profit after Tax	2.2	0.9
Basic EPS	2.56p	1.09p

We have continued to focus on expanding our client base.  We have taken on new public sector clients, increased our geographic coverage to include London,  delivered the first phase of our PAS/EPR system to the Isle of Man and, through the acquisition of IQ Systems, we secured new opportunities with Independent Sector Treatment Centre providers such as Care UK and Circle Healthcare.

Gross margin

Gross margin increased to 55% from 47% in 2007, reflecting growth of higher margin product revenues within System C, as well as the impact of the acquisition of IQ Systems.

Profit from operations

Profit from operations was £2.4m, a significant increase from prior year (2007:£0.6m). 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 13% from 4% in the prior year.

The growth in overall administrative expenses includes £0.2m in respect of amortisation of intangibles, as well as the impact of the acquisition of Care Records and IQ Systems. 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. Offsetting this income is the interest on financing loans taken out to fund the contract assets. The financing loans amounting to £0.9m at the start of the year were fully repaid during the year. Interest receivable also includes interest generated on our cash balances.

Taxation

The taxation charge was £1.1m, equating to 32% of PBT. During the year the company utilised brought forward tax losses, and as a result the deferred tax assets available to offset against future Corporation Tax liabilities decreased to £0.02m at the year end (2007: £0.9m)

Earnings per share

Basic earnings per share increased to 2.56p (2007:1.09p). The weighted average number of shares during the period used for the EPS calculation was 87,243,442 (2007: 87,148,360).

Dividends

An interim dividend of 0.18p (2007: 0.12p) was declared and paid during the year. The Board proposes a final dividend of 0.36p (2007 0.24p) per share bringing the total for the year to 0.54p per share (2007: 0.36p).

Cash and treasury

	2008	2007
	£m	£m
Net cash generated by operating activities	4.5	2.1
Net financial income	0.9	0.7
Acquisition of subsidiaries Capital expenditure	(1.8) (0.8)	- (0.5)
Net cash inflow before financing activities	2.8	2.3
Financing	(0.9)	(1.3)
Net cash inflow	1.9	1.0

The Group continued to generate strong cash flow with net cash generated from operating activities of £4.5m (2007:£2.1m).

On 2 July 2007 the Group acquired 100% of the share capital of IQ Systems Services Ltd and on 28 January 2008 the Group acquired 100% of the share capital of Care Records Ltd. The total cash outlay in the year for these acquisitions was £1.8m (including initial acquisition costs). Further consideration may be payable depending on the achievement of demanding performance criteria.

Group Income Statement

		Year Ended	Year Ended
		31 May	31 May
		2008	2007
	Note	£'000	£'000
Revenue	2	18,128	13,473
Cost of sales		(8,075)	(7,061)
Gross profit		10,053	6,412
Selling and marketing costs		(379)	(487)
Research and development costs		(1,105)	(1,045)
Administration and general overheads		(6,126)	(4,257)
Profit from operations		2,443	623
Financial income		891	803
Financial expense		(48)	(92)
Profit before taxation	4	3,286	1,334
Taxation	5	(1,052)	(384)
Profit for the financial year		2,234	950
Earnings per ordinary share
- Basic	6	2.56	1.09
- Diluted	6	2.54	1.08

The results above relate entirely to continuing operations.

Group Balance Sheet

		At 31 May	At 31 May
		2008	2007
		£'000	£'000
ASSETS
Non-current assets
Goodwill		1,884	-
Property, plant and equipment		415	673
Intangible assets		2,250	351
Deferred tax assets		23	927
Trade and other receivables		428	774
		5,000	2,725
Current assets
Trade and other receivables		6,489	6,492
Cash and cash equivalents		12,427	10,574
		18,916	17,066
TOTAL ASSETS		23,916	19,791
LIABILITIES
Current liabilities
Trade and other payables		4,010	3,154
Deferred consideration		680
Current tax liability		162	92
Borrowings			528
		4,852	3,774
Non-current liabilities
Deferred consideration		670	-
Deferred tax liability		414	-
Provisions and other liabilities		104	102
		1,188	102
TOTAL LIABILITIES		6,040	3,876
NET ASSETS		17,876	15,915
SHAREHOLDERS' EQUITY
Share capital		895	895
Share premium account		9,766	9,757
Capital redemption reserve		3,127	3,127
Own shares held in trust		(1,235)	(1,235)
Retained earnings		5,323	3,371
TOTAL EQUITY		17,876	15,915

Group Statement of Changes in Shareholders' Equity

	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 1 June 2006	893	9,732	3,127	(1,235)	2,756	15,273
Profit for the financial year	-	-	-	-	950	950
Share-based payment charge	-	-	-	-	(53)	(53)
Deferred tax	-	-	-	-	14	14
Issue of new shares	2	-	-	-	-	2
Premium on issue of new shares	-	25	-	-	-	25
Dividends	-	-	-	-	(296)	(296)
As at 31 May 2007	895	9,757	3,127	(1,235)	3,371	15,915
Profit for the financial year	-	-	-	-	2,234	2,234
Share-based payment 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

Group Cash Flow Statement

	Year ended	Year ended
	31 May	31 May
	2008	2007
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	4,712	2,109
Financial expense	(21)	(92)
Income tax paid	(184)	-
Net cash generated by operating activities	4,507	2,017
Cash flows from investing activities
Acquisition of subsidiaries, net of overdrafts acquired	(1,669)	-
Overdrafts acquired with subsidiaries	(135)	-
Purchases of property, plant and equipment	(122)	(227)
Capitalised development costs	(591)	(299)
Financial income	748	796
Net cash (used in)/ generated from investing activities	(1,769)	270
Cash flows from financing activities
Repayment of borrowings	(528)	(992)
Issue of equity share capital	9	27
Dividends paid	(366)	(296)
Net cash used in financing activities	(885)	(1,261)
Net increase in cash and cash equivalents	1,853	1,026
Cash and cash equivalents at beginning of year	10,574	9,548
Cash and cash equivalents at end of year	12,427	10,574

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

	Year ended	Year ended
	31 May	31 May
	2008	2007
	£'000	£'000
Profit for the financial year	2,234	950
Taxation	1,052	384
Financial income	(891)	(803)
Financial expense	48	92
Profit from operations	2,443	623
Share-based payment charge/(credit)	72	(53)
Depreciation of property, plant and equipment	387	575
Amortisation of intangible assets	352	110
Decrease in trade and other receivables	752	196
Increase in trade and other payables	702	637
Loss on disposal of property, plant and equipment	2	-
Net movement on provisions	2	21
Cash generated from operations	4,712	2,109

 1 Basis of preparation

The Board of Directors approved these preliminary audited results on 9 September 2007. 

The financial information set out above is abridged and does not constitute the Company's statutory financial statements for the years ended 31 May 2008 or 31 May 2007. Statutory financial statements for the year ended 31 May 2007 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 2008 will be posted no later than 7 October 2008 to shareholders and once approved will be delivered to the Registrar of Companies following the Annual General Meeting on 6 November 2007. The report for the year ended 31 May 2007 was unqualified. 

Copies of the Annual Report and Financial Statements for the year ended 31 May 2008 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 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. 

Segment assets and liabilities are those assets and liabilities directly attributable or which can be allocated to each such segment on a reasonable basis.

	Group
	Year ended 31 May 2008
	Products	Services	Development and Shared Services	Total
	£'000	£'000	£'000	£'000
Revenue	5,790	12,338	-	18,128
Profit/ (loss) from operations	2,316	4,992	(4,865)	2,443
Financial income	294	-	597	891
Financial expense	(20)	-	(28)	(48)
Profit/ (loss) before taxation	2,590	4,992	(4,296)	3,286
Total assets	3,261	3,267	17,388	23,916
Total liabilities	(1,148)	(755)	(4,137)	(6,040)
Net assets	2,113	2,512	13,251	17,876
Other segmental disclosures:
Capital expenditure - PPE	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 charge	-	-	72	72

		Group Year Ended 31 May 2007
	Products	Services	Development and Shared Services	Total
	£'000	£'000	£'000	£'000
Revenue	3,488	9,985	-	13,473
Profit/ (loss) from operations	1,358	4,125	(4,860)	623
Financial income	318	-	485	803
Financial expense	(88)	-	(4)	(92)
Profit/ (loss) before taxation	1,588	4,125	(4,379)	1,334
Total assets	4,442	3,024	12,325	19,791
Total liabilities	(1,694)	(269)	(1,913)	(3,876)
Net assets	2,748	2,755	10,412	15,915
Other segmental disclosures
Capital expenditure - PPE	224	-	3	227
Capital expenditure - Intangible assets	61	-	239	299
Depreciation of tangible assets	373	-	202	575
Amortisation of intangible assets	87	-	23	110
Impairment of trade receivables	(13)	-	-	(13)
Share-based payment credit	0	-	(53)	(53)

3 Employees

Staff numbers

The average monthly number of people (including Executive Directors) employed during the year is as follows:

	Group
	Year ended	Year ended
	31 May	31 May
	2008	2007
	Number	Number
Products	46	31
Services	97	95
Development and shared services	35	31
	178	157

  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
	2008	2007
	£'000	£'000
Staff costs excluding share-based payments	9,472	8,523
Share-based payments charge/(credit)	72	(53)
Research and development expenditure	1,105	1,045
Depreciation of property, plant and equipment:
- Contract assets	212	373
- Other assets	175	202
Amortisation of intangible assets:	352	110
Operating lease rentals:
- Land and buildings	217	190
- Motor vehicles and other leases	55	78
Loss on disposal of property, plant and equipment	2	-

In addition to the research and development expenditure disclosed above, £591,000 was capitalised in respect of software development in accordance with IAS 38 (2007: £299,000).

5 Taxation

• Analysis of tax charge in the year

	Group
	Year ended	Year ended
	31 May	31 May
	2008	2007
	£'000	£'000
Current tax:
United Kingdom corporation tax at 28%/30%	164	92
Adjustments in respect of previous years	24	-
Total current tax charge	188	92
Deferred tax:
Current year	822	301
Adjustments in respect of previous years	42	(9)
Total deferred tax charge	864	292
Total tax charge in the income statement (note 5(b))	1,052	384
Tax on items credited/(charged) to equity:
Deferred tax on share-based payment	(12)	(14)

  (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% (2007: 30%) as explained below:

	Group
	Year ended	Year ended
	31 May	31 May
	2008	2007
	£'000	£'000
Profit before tax	3,286	1,334
Profit before tax multiplied by standard rate of UK Corporation Tax of 28%/30%	920	400
Effects of:
-  Permanent differences	117	71
-  Rate differences on current tax	-	(53)
-  Tax difference arising on treatment of share options	-	(25)
- Amortisation of intangibles not deductible	(51)	-
-  Adjustments in respect of prior years - Current tax	24	-
-  Adjustments in respect of prior years - Deferred tax	42	(9)
Total tax charge (Note 5(a))	1,052	384

(c) Deferred tax reconciliation

	Group
	Year ended	Year ended
	31 May	31 May
	2008	2007
	£'000	£'000
At 1 June (net)	927	1,205
Debited to goodwill	(466)	-
Charged to the income statement	(864)	(292)
Credited to shareholders' equity	12	14
At 31 May (net)	(391)	927

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 2008.

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 2008			Year ended 31 May 2007
	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
Earnings attributable to ordinary shareholders	2,234	87,243,442	2.56	950	87,148,360	1.09
Effect of dilutive shares		526,856	(0.02)		451,949	(0.01)
Diluted EPS	2,234	87,770,298	2.54	950	87,600,309	1.08

 

END

 

 

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