TIDMIDOX
RNS Number : 2246Z
IDOX PLC
11 January 2011
11 January 2011
IDOX plc
EBITDA up 16%, dividend increased 125% and three acquisitions
integrated
IDOX plc (AIM: IDOX, 'IDOX' or the 'Group'), a leading
independent supplier of software and services to the UK public
sector and other markets, announces its final results for the year
ended 31 October 2010.
Highlights
-- Revenues GBP31.3m (2009: GBP32.2m) reflecting reduction in
the low margin contract recruitment business and benefit of large,
one-off project in 2009 financial year, offset by acquisitions
-- EBITDA increased by 16% to GBP8.7m (2009: GBP7.5m)
-- Normalised pre-tax profit* GBP8.0m up 21% (2009: GBP6.6m)
-- Normalised EPS* increased 16% to 1.75p (2009: 1.51p), Basic
EPS 1.07p (2009: 1.01p)
-- Profit before tax GBP4.9m (2009: GBP4.5m) after a higher
non-cash amortisation charge related to the acquisitions made
during the year
-- Trebled final proposed dividend to 0.35p (2009: 0.12p),
making total for year of 0.45p (2009: 0.20p), 125% increase
-- GBP2.0m cash at period end, GBP0.9m net debt (2009: GBP6.9m
cash; GBP3.2m net cash) after funding GBP10.6m of acquisitions
-- Completed and fully integrated three earnings enhancing
acquisitions, further boosting revenue visibility and market
leading positions.
Martin Brooks, IDOX Chairman, said:
"2010 marked significant progression as we continued to improve
profits and margins and added to our capabilities in local
government shared and managed services.
"Following three key acquisitions in 2010, we have extended our
market share and increased our recurring revenues further in local
government, where some 90% of local authorities are now
customers.
"With the Comprehensive Spending Review (CSR) behind us, the new
financial year has started positively in our core local government
market and the recent purchase of McLaren software in December
extends our technical skills into new markets in the UK and
internationally."
* Normalised pre-tax profit & EPS excludes amortisation,
exceptional restructuring and corporate finance charges and share
option costs
Enquiries:
IDOX plc +44 (0) 20 7332 6000
Martin Brooks, Chairman
Richard Kellett-Clarke, Chief Executive
William Edmondson, Chief Financial
Officer
Investec Investment Banking +44 (0) 20 7597 5104
Andrew Pinder
Patrick Robb
FinnCap +44 (0) 20 7600 1658
Charles Cunningham (Corporate Finance)
Stephen Norcross (Corporate Broking)
College Hill +44 (0) 20 7457 2020
Adrian Duffield/Kay Larsen
About IDOX plc
IDOX plc is a supplier of software solutions and services to the
UK public sector and increasingly to the wider corporate sector. It
is the leading applications provider to local government for core
functions relating to land, people and property, such as its market
leading planning systems and election management software. Over 90%
of UK local authorities are now customers.
The Group provides public sector organisations with tools to
manage information and knowledge, documents and content, business
processes and workflow as well as connecting directly with the
citizen via the web.
These capabilities have been recently extended via the
acquisition of McLaren Software into the related area of
engineering document management and control applications, serving
many leading international companies in industries such as oil
& gas, mining, utilities, pharmaceuticals and
transportation.
IDOX also supplies decision support content and additional
specialist services via the IDOX Information Solutions business, as
well as transforming approaches to knowledge and content management
via consultancy and training in the UK and internationally.
In addition, it provides these specialist skills to customers
through its TFPL branded recruitment division.
For more information see www.idoxplc.com
Strategic overview
IDOX is a specialist high end provider of document management,
case management, workflow systems, content and related web-based
portals. These skills have been successfully applied to the local
government domain and are increasingly being developed on a managed
or shared service partnership basis with groups of councils to save
costs and gain efficiency. The Group is now positioned to apply
these skills to wider market sectors.
By the end of 2010, the Group served more than 90% of UK local
authorities, with 62% recurring revenues (2009: 55%) and the
Group's land & property software solutions business comprises
over 60% of installed UK local government planning solutions.
The Group was also bolstered through the acquisition and
integration of Grantfinder, Strand Electoral Management Services
and the Local Authority Modernisation Programme (LAMP) long-term
managed services contracts with 11 local authorities. These
acquisitions enabled the Group to expand into additional managed
service agreements, election management software and further grants
content. The acquisition of Grantfinder brings the critical mass
required to make the Solutions segment a significant profit
generator in forthcoming periods.
The acquisition of J4b in 2009 had already added an
international dimension to our business in Holland and in late 2010
IDOX won its first contract in Spain.
The post financial year-end acquisition of McLaren Software, a
Glasgow-based company with a presence in Germany and Houston,
Texas, marks a step in the Group's strategy to provide its document
management services to broader public and private markets in the UK
and internationally. The acquisition broadens the Group's footprint
into McLaren's industrial markets in pharmaceuticals and oil &
gas.
The acquisition will also build on the Group's document
management systems, workflow and related technology and expertise
to expand a development centre of excellence in Scotland and offer
this expertise to other markets where IDOX can become a technology
and market leader.
The Group will continue to identify opportunities to diversify
into new geographies and new markets and aims through organic
growth, acquisition and expansion outside the UK and public sector
to grow its revenue and profits. The Board also continues to
buy-back shares to fund share option incentives whilst pursuing its
objective of promoting double-digit normalised EPS growth.
2010 highlights and markets
The publication of the government's CSR in October 2010 has
brought clarity to both central and local government spending
plans. As a result the Board is confident that there will be no
major adverse impact on software & services expenditure at
local government level where it supports efficiencies in areas like
planning.
Local government has become increasingly outcomes driven,
focused on return on investment and improvements in effectiveness
and the maintenance of services to the community. Since the CSR was
announced, independent market research company Kable has
re-iterated its forecast of modest growth in the local government
software & services market for the next three years.
In 2010 the Group passed a further milestone in its development
as it diversified beyond its traditional local government client
base into wider market sectors.
EBITDA rose 16% despite a 3% fall in revenues, which reflected
in part the successful wind down of the large Scottish government
planning portal project in the previous financial year.
Operating costs were reduced during the year, even after the
acquisitions of LAMP, Strand Electoral Management Services and
Grantfinder. On a like-for-like basis, excluding acquisitions,
overheads were GBP1.5m or 9% lower, as a result of tight cost
controls and continued productivity and efficiency gains.
In line with its previously announced policy of accelerating
dividend increases, the Board proposes a significant rise in its
final dividend to 0.35p per share.
Financial review
Group revenues were GBP31.3m (2009: GBP32.2m) reflecting the
reduction in the low-margin contract recruitment business and the
benefit in the prior year of the large Scottish Executive
contract.
The Software segment, which accounts for 77% of Group revenues,
delivered GBP24.1m (2009: GBP25.1m), of which around 62% were
recurring (2009: 52%). In 2009, Software revenue was boosted by
GBP1.0m by the inclusion of both the second and third phases of the
Scottish Government e-planning project.
In common with the previous financial year, newly contracted
business contained a higher proportion of maintenance and managed
service contracts which, on a like-for-like basis, contributed to a
6% increase in software maintenance revenues and increases revenue
visibility into 2011 and beyond.
The acquisition of the 11 LAMP managed services contracts in
March 2010 for GBP2.9m and Strand Electoral Management Services in
July 2010 for GBP4.4m together contributed GBP1.1m to Software
revenues.
The Solutions segment increased revenue by 24% to GBP4.2m (2009:
GBP3.4m) as a result of a six-month contribution from Grantfinder,
acquired in May 2010, which provides content to local authorities
and other public sector bodies. The acquisition of Grantfinder for
GBP3.3m has further augmented recurring revenues, which now make up
62% (2009: 53%) of Solutions turnover.
The Recruitment segment reported revenues of GBP3.0m (2009:
GBP3.8m), reflecting a GBP1.2m decline in the low margin contract
recruitment business. However, revenues in the high margin
permanent recruitment business doubled to GBP0.6m as its core
operating markets showed signs of recovery during the final quarter
of the financial year.
Gross margins for the Group saw a marked improvement to 83%
(2009: 77%), with increases in all three businesses. Software
margins of 87% (2009: 85%) improved due to the higher mix of
recurring maintenance and managed service revenues and the absence
of the additional costs incurred in 2009 in relation to the
delivery of the Scottish Government Stream 2 project.
The continuing shift within the Recruitment segment toward
permanent placements resulted in gross margins of 39% (2009: 31%).
The increased scale and recurring content subscription revenues
within the Solutions business generated margins of 92% (2009:
72%).
Operating costs were further reduced to GBP17.3m (2009:
GBP17.4m) even after the three acquisitions in the last financial
year. On a like-for-like basis, excluding acquisitions, overheads
were GBP1.5m, or 9%, lower as a result of tight cost controls and
continued productivity and efficiency gains.
EBITDA increased by 16% to GBP8.7m (2009: GBP7.5m) reflecting
the progress made in managing revenues in a challenging
environment, increasing gross margins and managing operating costs
in addition to the maiden contribution from acquisitions. As a
result EBITDA margins increased to 28% (2009: 23%)
Normalised pre-tax profit, excluding amortisation, share options
costs and exceptional charges increased by 21% to GBP8.0m (2009:
GBP6.6m). Pre-tax profit was GBP4.9m (2009: GBP4.5m) after the non
cash amortisation charge following the acquisitions made in the
year, non cash share option charge and exceptional restructuring
and corporate finance charges of GBP0.6m (2009: GBP0.4m).
Normalised earnings per share were up 16% to 1.75p (2009:
1.51p). Basic earnings per share were 1.07p (2009: 1.01p).
The Board proposes a final dividend of 0.35p to give a full year
dividend of 0.45p (2009: 0.20p). The 125% increase in dividend
reflects the Board's continuing confidence in the long-term
strength of the business, its revenue visibility and its healthy
operating cash generation.
IDOX ended the year with GBP2.0m cash (2009: GBP6.9m) and net
debt of GBP0.9m (2009: GBP3.2m net cash) after funding the three
acquisitions, totalling GBP10.6m, a dividend payment of GBP0.8m and
share buy backs of GBP0.3m.
Operational review
2010 was a challenging year which IDOX successfully navigated.
The customer base started the year already well advanced in their
thinking on the need to cut costs, but uncertain as to the level of
savings they would be required to achieve. Despite the uncertainty
around the election in May, which distorted first half trading and
delivery schedules, as well as the mini budget in July and the CSR
in October, the outturn was broadly in line with most authorities'
expectations.
Going forward into 2011, IDOX's market is already well advanced
in its execution and is now making final adjustments. Therefore the
Group expects the market for application solutions that deliver a
tangible return on investment will grow now from a flat base in
2009/10.
The Software segment managed this change in the market well,
ending the year with a strong sales performance. The year closed
with a different mix from originally forecast as some major
projects were stopped and investment in dashboard productivity
solutions was surprisingly weak, but this was offset by strong
performance in public access web solutions.
The Software segment had some notable successes in partnering
with authorities to build shared service solutions. This approach,
plus a more comprehensive offering in managed technical services
and outsourcing, delivered tangible improvements in services, cost
efficiencies and speed of implementation.
Internally IDOX continued to place a strong emphasis on quality
and customer care with further improvements in product performance,
delivery and data migration. In 2011 the Group will further improve
customer support and enhance client customer communication and
strategic partnering.
The acquisition of the LAMP managed services contracts and
Strand Electoral Management Services added to the Group's market
penetration, provided further synergies and expanded and improved
the premium managed services offering.
When CAPS Solutions was acquired in 2007, the Group inherited a
large embryonic contract to provide a planning system for Northern
Ireland. This year not only saw the successful completion and roll
out of this system across Northern Ireland but also the completion
of the Scottish government contracts with a faultless post
completion audit.
Project sales within the Solutions segment were affected by
Government cutbacks. However, IDOX enters 2011 with a strong
pipeline. The Solutions segment gained critical mass through the
acquisition of Grantfinder, which has enabled it to deliver
improved grants information and policy web solutions to the UK and
now Europe utilising a common infrastructure. The same model is now
being extended in both Holland and Spain, building on the
division's EU grants information coverage.
The Recruitment segment had its most difficult year yet with
public sector contractor revenues falling materially in the middle
of the year and permanent recruitment revenues growing only slowly
as it tracked the hesitant private sector recovery. Despite this,
the business managed to deliver a positive contribution in the
year. The last quarter saw a marked improvement in sentiment in
both contract and permanent activity, giving the Board confidence
for the current trading year.
In 2010 IDOX continued to invest in software application
development and has coordinated a number of initiatives internally
to provide better solutions for customers. The Group has continued
to manage its cost base meticulously and integrated three
acquisitions without increasing overheads. As part of the
integration process, the Group has also revised its corporate
branding.
Outlook
The Group has started the current financial year in a strong
position, with greater predictability than has been the case for
the past two years and a strong pipeline in all its businesses.
Although total public sector spending is under intense pressure,
IDOX products and services enhance local government efficiencies
and the Group expects the market for solutions that deliver a
tangible return on investment to grow.
The Group also has a wider range of capabilities, larger market
share and broader reach in its markets. There are encouraging signs
of increased activity in a number of areas and IDOX is well
positioned to take advantage of new opportunities emerging in both
2011 and beyond.
Consolidated Statement of Comprehensive Income for the year
ended 31 October 2010
======================================================================
Note 2010 2009
============================================ ==== ======== ========
GBP000 GBP000
============================================ ==== ======== ========
Revenue 2 31,268 32,164
============================================ ==== ======== ========
Cost of sales (5,290) (7,283)
============================================ ==== -------- --------
Gross margin 25,978 24,881
============================================ ==== ======== ========
Staff costs (14,170) (14,026)
============================================ ==== ======== ========
Other operating charges (3,091) (3,376)
============================================ ==== -------- --------
Earnings before goodwill impairment,
amortisation, depreciation, restructuring,
corporate finance and share option
costs 8,717 7,479
============================================ ==== ======== ========
Depreciation (403) (372)
============================================ ==== ======== ========
Amortisation (2,260) (1,112)
============================================ ==== ======== ========
Goodwill impairment charge - (533)
============================================ ==== ======== ========
Restructuring costs (187) (427)
============================================ ==== ======== ========
Corporate finance costs (438) -
============================================ ==== ======== ========
Share option costs (185) (99)
============================================ ==== -------- --------
Operating profit 5,244 4,936
============================================ ==== ======== ========
Finance income 15 125
============================================ ==== ======== ========
Finance costs (316) (582)
============================================ ==== -------- --------
Profit before taxation 4,943 4,479
============================================ ==== ======== ========
Income tax expense 3 (1,305) (1,020)
============================================ ==== -------- --------
Profit for the year 3,638 3,459
============================================ ==== -------- --------
Other comprehensive income for the
year
Available-for-sale financial assets
- current year gain 35 -
============================================ ==== -------- --------
Other comprehensive income for the
year, net of tax 35 -
============================================ ==== -------- --------
Total comprehensive income for the
year attributable to owners of the
parent 3,673 3,459
============================================ ==== ======== ========
Earnings per share
============================================ ==== ======== ========
Basic 4 1.07p 1.01p
============================================ ==== ======== ========
Diluted 4 1.05p 1.00p
============================================ ==== ======== ========
Consolidated Balance Sheet
At 31 October 2010
2010 2009
GBP000 GBP000
ASSETS
Non-current assets
Property, plant and equipment 504 757
Intangible assets 44,629 32,608
Other long-term financial
assets 855 -
Deferred tax assets 283 315
------ ------
Total non-current assets 46,271 33,680
Current assets
Trade and other receivables 5,915 6,462
Cash and cash equivalents 2,004 6,947
------ ------
Total current assets 7,919 13,409
------ ------
Total assets 54,190 47,089
------ ------
LIABILITIES
Current liabilities
Trade and other payables 2,784 3,171
Other liabilities 11,794 8,138
Provisions 133 138
Current tax 1,052 187
Borrowings 1,000 1,000
------ ------
Total current liabilities 16,763 12,634
------ ------
Non-current liabilities
Deferred tax liabilities 4,549 3,501
Borrowings 1,866 2,781
------ ------
Total non-current liabilities 6,415 6,282
------ ------
Total liabilities 23,178 18,916
------ ------
Net assets 31,012 28,173
====== ======
EQUITY
Called up share capital 3,442 3,442
Capital redemption reserve 1,112 1,112
Share premium account 9,903 9,903
Treasury reserve (455) (212)
Share options reserve 630 454
Merger reserve 1,294 1,294
ESOP trust (93) (88)
Retained earnings 15,179 12,268
------ ------
Total equity 31,012 28,173
====== ======
Consolidated Cash Flow Statement
For the year ended 31 October 2010
2010 2009
GBP000 GBP000
Cash flows from operating activities
Profit for the period before taxation 4,943 4,479
Adjustments for:
Depreciation 403 372
Amortisation 2,260 1,112
Goodwill impairment - 533
Loss on disposal of property, plant
and equipment 160 -
Finance income (15) (125)
Finance costs 189 497
Debt issue costs amortisation 85 85
Share option costs 185 99
Exchange losses 8 27
Movement in receivables 1,055 1,955
Movement in payables (563) (1,541)
-------- -------
Cash generated by operations 8,710 7,493
Tax on profit paid (1,009) (2,152)
Net cash from operating activities 7,701 5,341
Cash flows from investing activities
Acquisition of subsidiary net of
cash acquired (5,543) (795)
Purchase of listed investment (820) -
Purchase of property, plant and
equipment (613) (595)
Purchase of intangible assets (3,470) (464)
Finance Income 15 125
-------- -------
Net cash used in investing activities (10,431) (1,729)
Cash flows from financing activities
Proceeds from issue of share capital - 20
Interest paid (189) (353)
Other loan related costs - (144)
Loan repayments (1,000) (3,000)
Equity dividends paid (757) (672)
Purchase of own shares (267) (204)
-------- -------
Net cash flows from financing activities (2,213) (4,353)
Net movement on cash and cash equivalents (4,943) (741)
-------- -------
Cash and cash equivalents at the
beginning of the period 6,947 7,688
-------- -------
Cash and cash equivalents at the
end of the period 2,004 6,947
======== =======
Consolidated Statement of Changes in Equity
At 31 October 2010
Called Capital Share
up share redemption Share Treasury options Merger ESOP Retained
capital reserve Premium reserve reserve reserve Trust earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
November 2008 3,442 1,112 9,883 - 364 1,294 (96) 9,447 25,446
Deferred tax on
share based
payments - - - - - - - 25 25
Issue of share
capital - - 20 3 - - - - 23
Transfer on exercise
of share options - - - - (9) - - 9 -
Purchase of treasury
shares - - - (207) - - - - (207)
Share options
granted - - - - 59 - - - 59
Share repurchase - - - (8) - - - - (8)
Share option reserve - - - - 40 - - - 40
Equity dividends
paid - - - - - - - (672) (672)
ESOP trust - - - - - - 8 - 8
----- ---------- ------- -------- ------- ------- ------ -------- ------
Transactions with
owners - - 20 (212) 90 - 8 (638) (732)
----- ---------- ------- -------- ------- ------- ------ -------- ------
Profit for the
period - - - - - - - 3,459 3,459
----- ---------- ------- -------- ------- ------- ------ -------- ------
Total comprehensive
income for the
period - - - - - - - 3,459 3,459
----- ---------- ------- -------- ------- ------- ------ -------- ------
Balance at 31
October 2009 3,442 1,112 9,903 (212) 454 1,294 (88) 12,268 28,173
----- ---------- ------- -------- ------- ------- ------ -------- ------
Deferred tax on
share based
payments - - - - - - - - -
Transfer on exercise
of share options - - - - (9) - - (5) (14)
Purchase of treasury
shares - - - (249) - - - - (249)
Share options
granted - - - - 185 - - - 185
Share repurchase - - - 6 - - - - 6
Equity dividends
paid - - - - - - - (757) (757)
ESOP trust - - - - - - (5) - (5)
----- ---------- ------- -------- ------- ------- ------ -------- ------
Transactions with
owners - - - (243) 176 - (5) (762) (834)
----- ---------- ------- -------- ------- ------- ------ -------- ------
Profit for the
period - - - - - - - 3,638 3,638
Other comprehensive
income
Available-for-sale
financial assets
- current year
gain - - - - - - - 35 35
----- ---------- ------- -------- ------- ------- ------ -------- ------
Total comprehensive
income for the
period - - - - - - - 3,673 3,673
----- ---------- ------- -------- ------- ------- ------ -------- ------
At 31 October 2010 3,442 1,112 9,903 (455) 630 1,294 (93) 15,179 31,012
----- ---------- ------- -------- ------- ------- ------ -------- ------
Notes to the announcement
For the year ended 31 October 2010
1 Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) and the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of certain financial
assets and liabilities, being available for sale investments.
The financial information set out in the announcement does not
constitute the group's statutory accounts for the year ended 31
October 2010 within the meaning of section 434 of the Companies Act
2006. The financial information for the year ended 31 October 2009
is derived from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The auditors reported
on those accounts; their report was unqualified and did not contain
a statement under Section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 October 2010 are
expected to be finalised on the basis of the financial information
presented by the directors in this preliminary announcement.
2 Segmental Analysis
As at 31 October 2010, the Group is primarily organised into
three main business segments, which are detailed below.
Financial information is reported to the Board on a business
unit basis with revenue and operating profits split by business
unit. Each business unit is deemed a reportable segment as each
offer different products and services.
-- Software - delivers software and service solutions to mainly
local government customers across a broad range of departments
-- Solutions - delivering both an information service and
consultancy services to a diverse range of customers across both
private and public sectors
-- Recruitment - providing personnel with information,
knowledge, records and content management expertise to a diverse
range of customers
Segment revenue comprises of sales to external customers and
excludes gains arising on the disposal of assets and finance
income. Segment profit reported to the board represents the profit
earned by each segment before the allocation of tax, interest
payments and share option charges. The assets and liabilities of
the Group are not reviewed by the chief executive decision-maker on
a segment basis.
The Group does not place reliance on any specific customer and
has no individual customer that generates 10% or more of its total
Group revenue.
The segment revenues by geographic location for the year ended
31 October 2010 are as follows:
United Kingdom Rest of World Total
GBP000 GBP000 GBP000
Revenues from external customers 30,724 544 31,268
The segment revenues by geographic location for the year ended
31 October 2009 are as follows:
United Kingdom Rest of World Total
GBP000 GBP000 GBP000
Revenues from external customers 31,856 308 32,164
The segment results by business
unit for the year ended 31 October
2010 are as follows: Software Solutions Recruitment Total
GBP000 GBP000 GBP000 GBP000
Revenues from external customers 24,140 4,165 2,963 31,268
Cost of sales (3,125) (348) (1,817) (5,290)
-------- --------- ----------- --------
Gross profit 21,015 3,817 1,146 25,978
Operating costs (12,749) (3,530) (982) (17,261)
-------- --------- ----------- --------
Profit before interest, tax,
depreciation, amortisation and
redundancy costs 8,266 287 164 8,717
-------- --------- ----------- --------
Depreciation (311) (90) (2) (403)
Amortisation (1,822) (429) (9) (2,260)
Share option costs (185) - - (185)
Redundancy (113) (49) (25) (187)
-------- --------- ----------- --------
Profit before interest and
taxation 5,835 (281) 128 5,682
Interest receivable 8 - - 8
-------- --------- ----------- --------
Segment profit (see reconciliation
below) 5,843 (281) 128 5,690
-------- --------- ----------- --------
The segment results by business
unit for the year ended 31 October
2009 are as follows: Software Solutions Recruitment Total
GBP000 GBP000 GBP000 GBP000
Revenues from external customers 25,053 3,352 3,759 32,164
Cost of sales (3,766) (934) (2,583) (7,283)
-------- --------- ----------- --------
Gross profit 21,287 2,418 1,176 24,881
Operating costs (14,120) (2,071) (1,211) (17,402)
-------- --------- ----------- --------
Profit before interest, tax,
depreciation, amortisation,
impairment and redundancy costs 7,167 347 (35) 7,479
-------- --------- ----------- --------
Depreciation (291) (79) (2) (372)
Amortisation (1,039) (73) - (1,112)
Share option costs (99) - - (99)
Goodwill impairment charge - (533) - (533)
Redundancy (351) (76) - (427)
-------- --------- ----------- --------
Profit before interest and
taxation 5,387 (414) (37) 4,936
Interest receivable 22 3 4 29
-------- --------- ----------- --------
Segment profit (see reconciliation
below) 5,409 (411) (33) 4,965
-------- --------- ----------- --------
Reconciliations of reportable profit
2010 2009
GBP000 GBP000
Profit:
Total profit for reportable
segments 5,690 4,965
Corporate finance costs (438) -
Net financial costs (309) (486)
------ ------
Profit before taxation 4,943 4,479
====== ======
Other financial costs relate to loan interest, exchange
differences, bank loan fee facility amortisation and interest
receivable which have not been included in reportable segments.
3 Taxation
The tax charge is made up as follows:
2010 2009
GBP000 GBP000
Current tax
Corporation tax on profits for the period 1,909 1,637
Over provision in respect of prior periods (37) (384)
------ ------
Total current tax 1,872 1,253
------
Deferred tax
Origination and reversal of temporary differences (373) (321)
Amortisation of intangibles difference in
tax rate (198) -
Adjustments in respect of prior periods 4 88
------ ------
Total deferred tax (567) (233)
------ ------
Total tax charge 1,305 1,020
====== ======
Unrelieved trading losses of GBP116,000 (2009: GBP116,000)
which, when calculated at the standard rate of corporation tax in
the United Kingdom of 28% (2009: 28%), amount to GBP32,000 (2009:
GBP32,000). These remain available to offset against future taxable
trading profits.
Factors affecting the tax charge in the period:
2010 2009
GBP000 GBP000
Profit before taxation 4,943 4,479
====== ======
Profit on ordinary activities multiplied
by the standard
rate of corporation tax in the UK of 28%
(2009: 28%) 1,384 1,254
Effects of:
Expenses not deductible for tax purposes 156 49
Marginal relief (4) -
Share based payments - (62)
Prior year deferred tax 4 -
Difference in deferred tax rate (198) (2)
Adjustments to tax charge in respect of
prior year (37) (296)
Net movement on deferred tax on intangibles - 77
------ ------
1,305 1,020
====== ======
4 Earnings per Share
The earnings per ordinary share is calculated by reference to
the earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during each period, as
follows:
2010 2009
GBP000 GBP000
Profit for the year 3,638 3,459
----------- -----------
Basic earnings per share
Weighted average number of shares in issue 341,003,888 342,706,522
----------- -----------
Basic earnings per share 1.07p 1.01p
=========== ===========
Weighted average number of shares in issue 341,003,888 342,706,522
Add back:
Treasury shares 2,525,500 928,069
ESOP shares 628,978 523,775
----------- -----------
Allotted, called up and fully paid share
capital 344,158,366 344,158,366
----------- -----------
Diluted earnings per share
Weighted average number of shares in issue
used in basic earnings per share calculation 341,003,888 342,706,522
Dilutive share options 5,841,718 3,890,563
----------- -----------
Weighted average number of shares in issue
used in dilutive earnings per share calculation 346,845,606 346,597,085
Diluted earnings per share 1.05p 1.00p
=========== ===========
Normalised earnings per share
Add back:
Amortisation 2,260 1,112
Impairment - 533
Share option costs 185 99
Corporate finance costs 438 -
Restructuring costs 187 427
Tax effect (737) (459)
Normalised profit for year 5,971 5,171
----------- -----------
Weighted average number of shares in issue 341,003,888 342,706,522
Normalised earnings per share 1.75p 1.51p
=========== ===========
Normalised diluted earnings per share 1.72p 1.49p
=========== ===========
5 Acquisitions
Grantfinder
On 4 May 2010, the Group acquired the entire share capital of
Grantfinder Limited for a consideration of GBP3.3m, which was
satisfied as detailed below.
Grantfinder is an important provider of value-added databases
for government and EU funding information to a wide range of UK
public and private customers. The acquisition will extend the
capabilities of the IDOX Group with additional value-added content
and boost its subscription-based recurring revenue stream.
Grantfinder will be easily integrated into the enlarged IDOX
Information Solutions Business which includes J4B, acquired in
2009, and the longstanding planning content business. This will
deliver a market leading position in the provision of grant related
information in the UK.
Goodwill arising on the acquisition of Grantfinder Limited has
been capitalised and consists largely of the workforce valuation,
synergies and economies of scale expected from combining the
operations of Grantfinder with Idox Information Solutions Limited.
None of the goodwill recognised is expected to be deductible for
income tax purposes. The purchase of Grantfinder Limited has been
accounted for using the acquisition method of accounting.
Fair value
Book value adjustments Fair value
GBP000 GBP000 GBP000
Intangible assets 59 2,929 2,988
Property, plant and
equipment 7 - 7
Trade receivables 299 - 299
Other receivables 108 - 108
Cash at bank 51 - 51
----------- ------------- -----------
TOTAL ASSETS 524 2,929 3,453
Trade payables (13) - (13)
Deferred revenue - (1,627) (1,627)
Social security and
other taxes (161) - (161)
Accruals (24) (15) (39)
Deferred tax liability - (806) (806)
----------- -------------
TOTAL LIABILITIES (198) (2,448) (2,646)
----------- -------------
NET ASSETS 326 481 807
Purchased goodwill
capitalised 2,494
-----------
3,301
Satisfied by:
Cash to vendor 2,793
Director's loan account 108
Deferred consideration 400
-----------
Total consideration 3,301
-----------
The fair values stated above are provisional. The fair value
adjustment for the intangible assets relates to trade names,
customer relationships database and order backlog. A related
deferred tax liability has also been recorded as a fair value
adjustment. Other adjustments were made to the revenue recognition
policy for subscription income in order to bring it in line with
group policy.
The revenue included in the consolidated statement of
comprehensive income since 4 May 2010 contributed by Grantfinder
Limited was GBP775k. Grantfinder Limited also contributed profit of
GBP106k over the same period. Had Grantfinder Limited been
consolidated from 1 November 2009, the beginning of the Group's
financial year, the consolidated statement of comprehensive income
would have included revenue of GBP1,769k and profit of GBP320k.
Strand
On 29 July 2010, the Group acquired the entire share capital of
Strand Electoral Management Services Limited for a consideration of
GBP4.4m, which was satisfied in cash.
Strand Electoral Management Services Limited is one of the UK's
leading providers of electoral management software and services,
supplying 116 local authorities that cover a voting population of
13 million people.
The acquisition of Strand Electoral Management Services Limited
is an important strategic addition for IDOX, enabling it to enter
another very active local government market with a strong suite of
products and good opportunities for growth through cross
selling.
Goodwill arising on the acquisition of Strand Electoral
Management Services Limited has been capitalised and consists
largely of the workforce valuation, synergies and economies of
scale expected from combining the operations of Strand Electoral
Management Services Limited with Idox Software Limited. None of the
goodwill recognised is expected to be deductible for income tax
purposes. The purchase of Strand Electoral Management Services
Limited has been accounted for using the acquisition method of
accounting.
Fair value
Book value adjustments Fair value
GBP000 GBP000 GBP000
Intangible assets 159 2,961 3,120
Property, plant and
equipment 2 - 2
Trade receivables 3 - 3
Other receivables 99 - 99
Cash at bank 1,207 - 1,207
----------- ------------- -----------
TOTAL ASSETS 1,470 2,961 4,431
Trade payables (167) - (167)
Deferred revenue (887) - (887)
Accruals (33) - (33)
Deferred tax liability - (843) (843)
----------- -------------
TOTAL LIABILITIES (1,087) (843) (1,930)
----------- -------------
NET ASSETS 383 2,118 2,501
Purchased goodwill
capitalised 1,899
-----------
4,400
Satisfied by:
Cash to vendor 3,900
Deferred consideration 500
-----------
Total consideration 4,400
-----------
The fair values stated above are provisional. The fair value
adjustment for the intangible assets relates to trade names,
software and customer relationships. A related deferred tax
liability has also been recorded as a fair value adjustment.
The revenue included in the consolidated statement of
comprehensive income since 29 July 2010 contributed by Strand
Electoral Management Services Limited was GBP344k. Strand Electoral
Management Services Limited also contributed profit of GBP102k over
the same period.
Had Strand Electoral Management Services Limited been
consolidated from 1 November 2009, the beginning of the Group's
financial year, the consolidated statement of comprehensive income
would have included revenue of GBP1,565k and profit of GBP139k.
6 Post Balance Sheet Events
The Group signed a short term working capital banking facility
of GBP6m on 10 December 2010.
On 13 December 2010, the Group announced the acquisition of
McLaren Software Group Limited for GBP1.0m in cash. McLaren is a
leading supplier of engineering document management and control
applications serving many leading international companies in
industries including oil & gas, mining, utilities,
pharmaceuticals and transportation.
McLaren had revenues of GBP6.4m for the year ended 31 December
2009, with an operating profit of GBP0.4m and a loss before
taxation of GBP1m resulting from the pre-acquisition capital
structure. Net liabilities at completion are expected to be
GBP1.3m.
The acquisition of McLaren extends IDOX's core skills in
planning and building documents management into the related area of
engineering drawings. This will provide IDOX with the opportunity
of broadening its activities into complementary UK and
international markets in both the private and public sector,
particularly where the management of complex engineering systems
interacts with regulatory oversight.
Full IFRS 3(R) disclosure has not been included in the financial
statements due to the timing of the acquisition.
7 Further Copies
Copies of this announcement and, on finalisation, the full
annual report and accounts will be available, free of charge, for a
period of one month from the Company's Nominated Adviser and Broker
Investec Bank plc, 2 Gresham Street, London Ec2V 7QP, Tel: 020 7597
5970 or from IDOX plc, 2nd floor, 160 Queen Victoria Street,
London, EC4V 4BF, Tel: 020 7332 6000. Copies of the full financial
statements will be made available to shareholders in due
course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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