TIDMIDOX
RNS Number : 1792J
IDOX PLC
16 December 2015
16 December 2016
Idox plc
('Idox' or 'the Group' or 'the Company')
Final results for the year ended 31 October 2015
Financial highlights:
-- Revenues up 3% to GBP62.6m (2014: GBP60.7m)
-- Adjusted EBITDA* increased 11% to GBP18.2m (2014: GBP16.4m)
-- Adjusted EBITDA* margin improved to 29.1% (2014: 27.0%)
-- Adjusted profit before tax** was GBP14.5m up 14% (2014: GBP12.7m)
-- Profit before tax was 29% higher at GBP9.8m (2014: GBP7.6m)
-- Adjusted EPS** 3.28p up 17% (2014: 2.80p)
-- Net debt as at 31 October 2015 stood at GBP23.1m (31 October
2014 GBP15.8m; GBP10.6m cost of the two acquisitions in the second
half of the financial year)
-- Proposed final dividend of 0.525p (2014: 0.425p) making a
total of 0.85p (2014: 0.75p), an increase of 13% for the financial
year
Operational highlights:
-- Strong performance from Public Sector Software (PSS):
o Represented 78% of Group revenues
o Organic growth - won both more managed services and market
share
o Absorbed impact of lower elections revenues
o 14 new local authority customers - 92% of all local
authorities now customers
o Strong and improved margins
-- Acquisitions:
o Cloud Amber and Reading Room enhanced the Group's
capabilities
o Digital Spirit made a strong contribution to earnings
-- Engineering (EIM) de-risked having absorbed in the year headwinds:
o Double digits margins, costs rebased for current volumes
-- Group potential strengthened with appointment of Laurence
Vaughan as Chairman and Andrew Riley as Chief Operating Officer
Current trading:
-- For the first time in three years, there is a stable outlook in all our markets
-- Our expectations for the Group's financial performance are unchanged
* Adjusted EBITDA is defined as earnings before amortisation,
depreciation, restructuring, acquisition, corporate finance and
share option costs
** Adjusted profit before tax and adjusted EPS excludes
amortisation on acquired intangibles, restructuring and acquisition
costs
Richard Kellett-Clarke, Chief Executive said:
"Idox has achieved results in line with market expectations with
improved margins due to well controlled costs and realisation of
synergies across the Group. The Group continued to benefit from its
diversified business model and sources of earnings which helped
mitigate challenges in some of our markets.
"Overall, the outlook for Idox in the coming years is very
encouraging. Interesting opportunities are opening up in our core
markets and internationally through recent acquisitions. With the
enhanced team and closer operational integration, the business is
in a strong position and we are looking forward to a successful
year ahead."
For further information please contact:
Idox plc +44 (0) 870 333 7101
Richard Kellett-Clarke,
Chief Executive
Jane Mackie, Chief Financial
Officer
Andrew Riley, Chief Operations
Officer
N+1 Singer (Nominated
adviser and Broker) +44 (0) 20 7496 3000
Shaun Dobson
Alex Wright
MHP Communications +44 (0) 20 3128 8100
Reg Hoare/Andrew Leach/Charlie
Barker
About Idox plc
Idox plc is a supplier of specialist document management
collaboration solutions and services to the public sector and
increasingly to highly regulated asset intensive industries around
the world in the wider corporate sector.
Its Public Sector Software Division is the leading applications
provider to UK 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 Division provides public sector
organisations with tools to manage information and knowledge,
documents, content, business processes and workflow as well as
connecting directly with the citizen via the web, and providing
elections management solutions. It also supplies in the UK and
internationally, decision support content such as grants and
planning policy information and corporates compliance services.
The Engineering Information Management Division delivers
engineering document control, project collaboration and facility
management applications to many leading companies in industries
such as oil & gas, architecture and construction, mining,
utilities, pharmaceuticals and transportation in North America and
around the world.
The Group employs over 660 staff located in the UK, the USA,
Canada, Europe, India and Australia.
www.idoxgroup.com
CHAIRMAN'S STATEMENT
Overview
I am delighted to present Idox's first set of results since I
joined as non-Executive Chairman in August 2015. Idox performed
well in the year reporting further organic growth in its local
government businesses (excluding elections) and first time
contributions from acquisitions completed in the year; this
performance was achieved despite continued headwinds in energy
related markets and fluctuating exchange rates. In particular the
Group has made strategic progress towards positioning itself as a
key partner for its customers to achieve significant efficiencies
through the use of digital technologies.
Results
The Group has achieved results in line with market expectations
with improved margins due to well controlled costs and realisation
of synergies across the Group. Revenue grew by 3.1% while adjusted
EBITDA was ahead 11.1%. The Group continued to benefit from its
diversified business model and sources of earnings which helped
mitigate challenges in some of our markets.
88% (2014: 87%) of Idox's annual revenues were derived either
from recurring contracts with customers or from repeat customers
from whom the Group had derived revenues in the prior year; this
gives the Group significant revenue visibility and is evidence of
Idox's strong relationships and focus on customer service.
A summary of our financial key performance indicators is
presented below:
2015 2014 Change
Revenue 62,575 60,677 3.1%
Adjusted EBITDA* 18,215 16,393 11.1%
Adjusted EBITDA*
margin 29.1% 27.0% 2.1%
Adjusted EPS** 3.28p 2.80p 17.1%
*Adjusted EBITDA is defined as earnings before depreciation,
amortisation, restructuring, acquisition, corporate finance and
share option costs
**Adjusted EPS excludes amortisation on acquired intangibles,
restructuring and acquisition costs
Group strategy
Idox is a highly regarded company with market leading positions
in many segments of the public sector software market in the United
Kingdom and Europe. The Group is also increasingly well positioned
as a key partner with its customers to achieve efficiency savings
through the use of digital technology.
Our intention is to continue Idox's transformation into a much
larger business that is a market leader in its core markets. This
will be achieved via a combination of organic and acquisitive
growth, funded from the Group's cash flows and financial
facilities. This is intended to deliver double digit annual growth
with a short to medium term objective to grow the Group from its
current GBP63m in annual revenue to GBP100m at sustainable
margins.
Over the last ten years Idox has grown its revenues from GBP7m
to GBP63m through organic growth and contributions from acquired
businesses, a compound annual growth rate of 24.5%; the Board is
therefore confident that the Group has the experience and track
record to grow revenues from GBP63m to GBP100m in the coming
years.
Acquisitions
During the financial year, two acquisitions were completed in
line with our strategy, both of which contributed to the year's
financial performance whilst expanding our capabilities and
providing cross selling opportunities; the Group has a strong track
record of acquisition integration and achieving earnings, enhancing
contributions from such transactions. The recent acquisitions
were:
-- Cloud Amber in July 2015 broadened our capability to address
the opportunities around enabling integrated traffic management
systems and enhanced the international character of our product
range.
-- Reading Room in October 2015 added consultancy expertise in the area of digital change.
-- In addition, there was a strong contribution from the
acquisition of Digital Spirit, completed just prior to the previous
year end in October 2014.
The addition of the two new businesses means that across all its
specialist areas the Group is able to address the delivery of
content, domain specific solutions, managed and hosted services,
and now web services to improve processes, productivity and
customer engagement.
Dividends
The Board is pleased to propose, subject to shareholder approval
at the Group's Annual General Meeting, a final dividend of 0.525p,
bringing the total for the year to 0.85p. This represents an
increase of 13% over the previous year total of 0.75p, and is
consistent with both our improved performance and our progressive
dividend policy to grow dividends in line with earnings growth.
The Board
I took over as Chairman from Martin Brooks on 1 August 2015,
having previously been Chairman of a number of public and private
companies including Civica and Sytner Group. I would like to take
this opportunity to thank Martin on behalf of the employees and
shareholders for his contribution in growing the business
substantially during his ten year tenure.
In July 2015 Andrew Riley joined the Board as Chief Operating
Officer to focus on bringing the business together. Andrew's
promotion to the Board is part of Idox's growing trend of
leadership development, with Andrew becoming the second Director on
the current Idox Board as a result of an internal promotion. He was
previously chief executive of Idox's Public Sector Software
Division having joined the Group in 2000.
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I am sorry to announce that Professor Dame Wendy Hall will be
leaving the Board as a non-Executive Director due to her increasing
other commitments and imminent move to take up a visiting post at
the Library of Congress in Washington DC. The Group is currently
seeking a replacement for Wendy.
Outlook
I have joined the Group at an exciting period in its development
as it steps up its emphasis on delivering customer facing
solutions. Our potential has been enhanced by recent Board and
senior management changes which will allow for greater focus on
strategic initiatives to help deliver the Group's target to reach
annual revenues of GBP100m.
Innovation is a key ingredient for Idox's growth and success.
The product launch in December 2015 of our digital services
platform, with its first product release of iApply, a national
register for planning, building control and licensing services,
opens up exciting new revenue opportunities and the ability to
streamline and improve customer services and engagement.
For the first time in three years, there is a stable outlook in
all our markets. We believe the continued political focus on
delivering savings in the public sector will benefit our Public
Sector Software business as its products are focused on delivering
those savings. Engineering is well positioned to benefit from any
recovery in its markets. We expect full year contributions from our
two recent acquisitions will add approximately 20% to our pro forma
annual revenues. In addition, we believe the business as a whole is
capable of delivering around 3-5% organic revenue growth. Although
we anticipate slightly lower margins due to a different mix of
business in the coming year, our expectations for the Group's
financial performance are unchanged.
Overall, the outlook for Idox in the coming years is therefore
very encouraging. Interesting opportunities are opening up in our
core markets and internationally through recent acquisitions and
via potential partnerships. With the enhanced team and closer
operational integration the Directors believe that the business is
in a strong position and we are looking forward to a successful
year ahead.
Laurence Vaughan
Chairman
OPERATIONAL AND FINANCIAL REVIEW
Introduction
We are pleased to report that we delivered profit growth in line
with market guidance and were able to absorb the headwinds created
by the slowdown in the global engineering and project market
primarily as a result of the difficult environment in the energy
sector. The year saw the continued development of our digital
services platform, growth in all other parts of the business and
the addition of new capabilities in traffic systems and Web and
digital change consultancy. The main focus of management time and
effort during the year has been in the digital services platform
and driving efficiencies and performance across the Group.
Public Sector Software (PSS)
The Public Sector Software business, which represented 78% of
Group revenues for the year, had a particularly strong performance
with revenues up 14%, and continued to win both more managed
services and market share. With 14 new local authority customers in
the year our market share rose to a record 83% of the back office
market and 92% of all local authorities when including grants,
traffic and Facilities Management services are included.
The total number of new systems wins was close to double the
previous year at 86 bringing the total wins over the past three
years to more than 240. The division continues to expand its
offering into managed and hosted solutions and we now manage more
than 80 systems to give us a market share in excess of 20% which is
a significant platform to encourage other local authorities to
consider us as their managed service partner.
We won 14 new local authority customers during the year,
including Middlesbrough and Plymouth in England, Monmouthshire and
Swansea in Wales, and Aberdeen in Scotland.
The Grants business grew in double digits (16.7%) during the
period and closed its largest ever grants claim in the year. In
addition, the Grants business extended its customer base to provide
its managed services to larger companies thus improving its trading
margin through both an increase in the volume and the quality of
the business closed. We continue to invest in the business to
deliver further growth in 2016.
As mentioned at the half year the Digital Spirit compliance
acquisition completed in October 2014 was successfully integrated
and merged with our E-learning business based in Brussels,
outperforming our initial expectations on acquisition. As a result
revenues grew 174% year-on-year and the combined business is to be
rebranded as Idox Compliance. Plans are well advanced to grow this
further and to utilise the digital platform to provide the
compliance solution on demand online for small to medium sized
enterprises.
The Facilities Management business was removed from the
engineering division at the start of the year to help improve its
focus away from the engineering market. It was a logical move given
its existing customer base in health and local government and its
diversity of customers outside pure construction environments. As a
result it grew top line revenues 10% and improved its
profitability.
The two acquisitions made in the second half of the year - Cloud
Amber and Reading Room - are complementary to our ambitions to
provide solutions for Smart Cities of tomorrow and to provide user
solutions which are based around ease of use, self-taught,
solutions:
-- Cloud Amber through its data collection, aggregation,
analytics and multiple reporting options allows consumers, fleet
managers, and local government traffic managers to more efficiently
handle accidents, road works, congestion and air quality and to
redirect or make informed travel routing for cars, buses, taxis and
other modes of transport to enable the Smart Cities of the
future.
-- Reading Room extends our reach into existing markets in the
charities and government sector as well as the private sector. As
architects of digital change the business has successfully provided
consulting services across a broad range of customers to deliver
operational improvements using digital technology and design as
part of the solution to drive efficiency, productivity or a better
user experience. We expect this addition to be complementary to our
ambition to expand our digital services platform and apply it
across a wide range of opportunities.
Both businesses are being rapidly integrated within the Group
and, to date, have traded in line with our expectations and are
expected to enhance earnings in a full year of ownership.
The results in our Election business partly reflected the
expected lower level of activity in the election cycle during the
year - with only the UK General Election - compared with 2014 as
well as some unexpected delays beyond our control. However, the
current financial year has started well with a contract to deliver
local government elections in Scotland for early 2017.
Engineering Information Management (EIM)
We started the year with expectations of growth across all parts
of Idox, but it became increasingly clear there was not going to be
a quick rebound in the engineering markets as had happened in
previous cyclical market downturns.
The Board quickly took the decision to address this head-on and
successfully absorbed a considerable down shift in activity within
the year. As a result although EIM revenues were down 21% on the
prior year, our actions to reduce the cost base helped mitigate the
impact to profitability. Given the strong recurring revenues and
the spread between utilities, energy, and construction we now
expect to maintain the business at this level and for it to
continue to contribute in line with previous years. We continue to
work on productivity and performance improvements and retain the
flexibility to benefit from any market recovery.
EIM represented 22% of Group revenues during the year; on a pro
forma basis assuming full year contributions from our recent
acquisitions, EIM's revenues would have accounted for 18% of the
Group total.
Technology
The core focus in the year was completing the first phase of a
three year journey to deliver an improved managed services and
digital services cloud platform. The first step was to re-engineer
our products and the way they operated so they could be hosted more
cost effectively and be applicable to both large and small
authorities.
The second step was to deliver a national cloud platform that
could assemble and integrate documents and data from any system and
deliver an easily configurable platform to deliver applets for both
citizens and business users in a more intuitive and easy to use
format chargeable on a pay as you use or sponsored basis.
On 1 December 2015 the Group launched iApply, its national
planning, building control and licensing portal for the UK with the
ability to action and pay online for the filing of planning,
building control and licensing applications nationally. This
innovation streamlines the planning process and injects the
applications into our back office systems. As a result we are
developing additional services to complement this capability in
partnership with our customers.
Markets
The Group continues to operate successfully and had grown in
challenging markets with continued pressure on local government
expenditure and grant funding and more recently the flattening in
demand in engineering. Our diversity of offerings and tight
integration of businesses into a single management structure allows
us to take advantage of and respond to challenges in our markets as
demonstrated by this year's performance.
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We see no change in outlook for our core markets. Recent
announcements concerning public sector savings over the next three
years are in line with our planning and expectations and should
drive take-up of our new cost saving solutions. Our broad portfolio
of relevant and cost effective engineering solutions, where we
address construction, energy and utility markets also gives us some
resilience in an uncertain world as these markets develop at
varying growth rates.
Growth strategy
Due to the continued pressure on public sector finances we
believe the future revenue model needs to evolve as a 'pay as you
go' sponsorship model for services rendered and increasingly
business systems need smaller lightweight integration of documents
and data to drive the efficient and cost effective execution of
single actions.
The platform is an extension of our communication and forms
technology sitting on top of our managed services infrastructure
that can be adapted to help customers change their processes and
streamline their actions by the application of digital
services.
In addition to this publishing and transaction processing we
hope the assembled data sets can be marketed to help customers with
market intelligence and drive other actions. The acquisition of
Reading Room, a web consultancy which specialises in digital change
and web publishing, is expected to help drive wider consultancy
services in the future.
In the first half of the year we completed the partial
restructuring of the operational and supervisory board and the
first stage of an integration of engineering into a profit center
rather than a separate division within the Group. The first steps
in a move towards broadening our offering in our core markets and
reorienting the business to deliver front office, pay as you go
solutions created with an emphasis on the user interface, mobility
and ease of use.
FINANCIAL REVIEW
Group revenues grew by 3% to GBP63m (2014: GBP61m) due to the
impact of one acquisition made during 2014 and two acquisitions in
2015 and also as a result of organic growth in the PSS division.
The Group maintained the geographical split of its revenues with
34% generated outside of the UK (2014: 31%). Gross profit earned
was 4% higher at GBP56m (2014: GBP54m) and the Group maintained
gross margin at 89%. Earnings before amortisation, depreciation,
restructuring, acquisition, corporate finance and share option
costs ("Adjusted EBITDA") increased by 11% to GBP18.2m (2014:
GBP16.4m) with Adjusted EBITDA margins of 29% (2014: 27%).
Performance by segment
The PSS division, which accounted for 78% of Group revenues
(2014: 71%), delivered revenues of GBP49m (2014: GBP43m). Local
authority revenue grew organically by 7% to GBP30.4m (2014:
GBP28.3m) driven by further market share gains and a significant
number of local council contract wins for managed services and
hosting. Election revenue decreased from GBP4.9m to GBP2.6m due to
less election activity during the year. In 2015 election revenue
was only generated from the UK General Election, whereas in 2014
revenue was generated from the Scottish Referendum, European
elections and the Individual Electoral Registration project. The
Grants business in the UK and Netherlands saw double digit growth
on the prior period with revenues of GBP6.5m (2014: GBP5.8m). The
Compliance business in Europe saw significant growth on the prior
year with the addition of Digital Spirit acquired in October 2014,
with revenues of GBP6.1m (2014: GBP2.2m). Facilities management was
transferred from the EIM division to PSS in the year and saw 10%
growth in revenues to GBP2.3m (2014: GBP2.1m). The 2015
acquisitions of Cloud Amber (July 2015) and Reading Room (October
2015) respectively added GBP0.6m and GBP0.5m revenues to the
division.
Recurring revenues within the PSS division were 41% (2014: 48%).
Divisional Adjusted EBITDA increased by 24% to GBP16.0m (2014:
GBP12.9m), delivering a 33% margin, a 3% increase on 2014 (30%) due
to cost efficiencies and a change in mix of revenues.
The EIM division accounted for 22% of Group revenues (2014: 29%)
and reported a revenue decline of 21% to GBP13.6m (2014: GBP17.3m).
The proportion of recurring revenues in the EIM business from
maintenance and Software-as-a-Service ("SaaS") were 56% (2014:
47%). Divisional Adjusted EBITDA for the EIM division declined 37%
to GBP2.2m (2014: GBP3.5m), 12% of the Group total with margins
down at 16% (2014: 20%).
Profit before tax
Adjusted EBITDA increased 11% to GBP18.2m (2014: GBP16.4m). Cost
of sales were down 5% excluding acquisitions due to less print
costs associated with election activity. Administrative expenses
decreased 1% to GBP45.3m (2014: GBP45.8m), or excluding
acquisitions in the year by 11%. Staff costs decreased by 7% on a
like for like basis with EIM staff costs decreasing by 27% due to
restructuring of the division. Other overheads decreased by 19% on
a like-for-like basis with cost efficiencies achieved through
reduction in travel costs and office rationalisation.
Financing costs were in line with the prior year at GBP1.2m
(2014: GBP1.1m) and included interest payable of GBP0.7m (2014:
GBP0.7m) and bank charges of GBP0.4m (2014: GBP0.4m).
Reported profit before tax was up 29% to GBP9.8m (2014:
GBP7.6m). Amortisation of intangibles decreased GBP0.9m to GBP3.7m
(2014: GBP4.6m) due to intangibles from prior acquisitions becoming
fully amortised. Amortisation on Research and Development was
GBP1.0m (2014: GBP0.9m) and amortisation on software licences
increased to GBP0.7m (2014: GBP0.5m). Restructuring charges of
GBP1.0m (2014: GBP0.4m) relate to the internal reorganisation of
the EIM division and the integration of Digital Spirit.
The Group continues to invest in developing innovative
technology solutions and has incurred capitalised Research and
Development costs of GBP1.2m (2014: GBP1.0m). Research and
Development costs expensed in the period were GBP4.1m (2014:
GBP5.4m).
Taxation
The effective tax rate for the period was 19.80% (2014: 22.91%).
Work performed during 2015 resulted in a large overprovision which
was reversed during the year. This work related primarily to the
group R&D tax claim which lowered the final tax liability on
2014 profits, reflected in a lower effective tax rate for 2015. The
higher effective tax rate in 2014 was due to a higher proportion of
UK profits being subjected to tax following the unwind of all UK
trading losses in 2013, alongside partial derecognition of deferred
tax assets in the US. Other factors decreasing the tax rate in 2015
include an increase in the R&D provision following detailed
work performed during the year and non-provided tax repayments
received in the UK and the US of GBP166,000 relating to historic
loss carry backs.
Earnings per share and dividends
Adjusted earnings per share increased by 17% to 3.28p (2014:
2.80p). Adjusted diluted earnings per share increased by 17% to
3.13p (2014: 2.68p).
Basic earnings per share increased by 34% to 2.21p (2014:
1.65p). Diluted earnings per share increased by 32% to 2.10p (2014:
1.59p).
The Board proposes a final dividend 0.525p, an increase of 24%
on the previous final dividend, giving a total dividend for the
year of 0.85p and a 13% growth for the full year. This is in line
with our progressive dividend policy for our dividends to track our
earnings per share. Subject to shareholder approval at the
forthcoming Annual General Meeting, the final dividend is expected
to be paid on the 22(nd) April 2016 to shareholders on the register
at 8(th) April 2016.
Balance sheet and cashflows
The Group's balance sheet continued to strengthen during the
period and at 31 October 2015 net assets were GBP53.6m compared to
GBP48.6m at 31 October 2014.
Cash generated from operating activities before tax as a
percentage of Adjusted EBITDA was 53%, down from 81% in the
previous year. This was partly due to a significant number of
orders and longer term contracts closed and delivered in October
resulting in a large increase in debtors and accrued income at the
year end. The change in mix in revenues this year has also had an
impact with election revenues decreasing on the prior year.
The Group ended the period with net debt of GBP23.1m (2014:
GBP15.8m) after utilising the facility for the acquisition of Cloud
Amber (GBP3.75m paid in cash and a further GBP1.2m which will be
utilized in the next financial year) and Reading Room (GBP5.6m).
The Group's total signed debt facilities at 31 October 2015 stood
at GBP40m, a combination of a GBP17m term loan and GBP23m revolving
credit facility, split GBP25m with the Royal Bank of Scotland and
GBP15m with the Silicon Valley Bank.
Deferred income, representing invoiced maintenance and SaaS
contracts yet to be recognised in revenue, stood at GBP14.6m at 31
October 2015 (2014: GBP13.3m). Accrued income, representing future
cash flows from local authority longer term contracts increased to
GBP13.2m (2014: GBP8.8m).
Consolidated Statement of Comprehensive Income for the year
ended 31 October 2015
Note 2015 2014
GBP000 GBP000
Revenue 2 62,575 60,677
Cost of sales (6,684) (6,413)
-------- --------
Gross profit 55,891 54,264
Administrative expenses (45,347) (45,774)
Operating profit 10,544 8,490
Analysed as:
Earnings before depreciation,
amortisation, restructuring,
acquisition costs, corporate
finance costs and share option
costs 18,215 16,393
Depreciation (785) (813)
Amortisation (5,480) (5,953)
Restructuring costs (1,025) (365)
Acquisition costs 34 (148)
Corporate finance costs - (157)
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Share option costs (415) (467)
---------------------------------- ---- -------- --------
Finance income 445 233
Finance costs (1,226) (1,144)
Profit before taxation 9,763 7,579
Income tax expense 3 (1,934) (1,736)
Profit for the year 7,829 5,843
-------- --------
Other comprehensive income
for the year
Items that will be reclassified
subsequently to profit or
loss:
Exchange losses on retranslation
of foreign operations (276) (107)
-------- --------
Other comprehensive income
for the year, net of tax (276) (107)
-------- --------
Total comprehensive income
for the year attributable
to owners of the parent 7,553 5,736
======== ========
Earnings per share attributable
to owners of the parent during
the year
Basic 4 2.21p 1.65p
Diluted 4 2.10p 1.59p
Consolidated Balance Sheet
At 31 October 2015
Restated
2015 2014 2014
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Property, plant and
equipment 1,077 1,449 1,449
Intangible assets 74,812 66,794 66,794
Deferred tax assets 1,649 1,570 1,570
Other receivables 4,956 3,256 2,262
------- -------- -------
Total non-current
assets 82,494 73,069 72,075
------- -------- -------
Current assets
Trade and other receivables 26,713 17,852 18,846
Cash and cash equivalents 4,084 5,855 5,855
Total current assets 30,797 23,707 24,701
------- -------- -------
Total assets 113,291 96,776 96,776
------- -------- -------
LIABILITIES
Current liabilities
Trade and other payables 7,109 4,788 4,788
Other liabilities 19,083 16,649 16,649
Provisions 29 18 18
Current tax 1,815 1,003 1,003
Borrowings 2,428 7,397 7,397
Total current liabilities 30,464 29,855 29,855
------- -------- -------
Non-current liabilities
Deferred tax liabilities 4,357 4,038 4,038
Borrowings 24,831 14,293 14,293
------- -------- -------
Total non-current
liabilities 29,188 18,331 18,331
------- -------- -------
Total liabilities 59,652 48,186 48,186
------- -------- -------
Net assets 53,639 48,590 48,590
======= ======== =======
EQUITY
Called up share capital 3,587 3,587 3,587
Capital redemption
reserve 1,112 1,112 1,112
Share premium account 11,741 11,741 11,741
Treasury reserve (1,271) (1,001) (1,001)
Share options reserve 1,900 1,636 1,636
Merger reserve 1,294 1,294 1,294
ESOP trust (242) (213) (213)
Foreign currency retranslation
reserve (238) 38 38
Retained earnings 35,756 30,396 30,396
------- -------- -------
Total equity 53,639 48,590 48,590
======= ======== =======
Consolidated Statement of Changes in Equity
At 31 October 2015
Called Capital Share Treasury Share Merger ESOP Foreign Retained Total
up redemption premium reserve options reserve trust currency earnings
share reserve account reserve retranslation
capital reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
GBP000
Balance at 1
November
2013 3,493 1,112 10,355 (12) 1,955 1,294 (142) 145 26,486 44,686
Issue of share
capital 94 - 1,386 - - - - - - 1,480
Share options
granted - - - - 365 - - - - 365
Transfer on
exercise
of share
options - - - 8 (684) - - - 663 (13)
Purchase of
treasury
shares - - - (997) - - - - - (997)
Deferred tax
movement
on share
options - - - - - - - - (21) (21)
ESOP trust - - - - - - (71) - - (71)
Equity
dividends
paid - - - - - - - - (2,575) (2,575)
Transactions
with
owners 94 - 1,386 (989) (319) - (71) - (1,933) (1,832)
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- ----------
Profit for the
period - - - - - - - - 5,843 5,843
Other
comprehensive
income
Exchange gains
on
retranslation
of foreign
operations - - - - - - - (107) - (107)
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- ----------
Total
comprehensive
income for
the period - - - - - - - (107) 5,843 5,736
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- ----------
Balance at 31
October
2014 3,587 1,112 11,741 (1,001) 1,636 1,294 (213) 38 30,396 48,590
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- ----------
Share options
granted - - - - 309 - - - - 309
Exercise of
share
options - - - - (45) - - - - (45)
Purchase of
treasury
shares - - - (270) - - - - - (270)
Deferred tax
movement
on share
options - - - - - - - - 199 199
ESOP trust - - - - - - (29) - - (29)
Equity
dividends
paid - - - - - - - - (2,668) (2,668)
Transactions
with
owners - - - (270) 264 - (29) - (2,469) (2,504)
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- --------
Profit for the
period - - - - - - - - 7,829 7,829
Other
comprehensive
income
Exchange gains
on
retranslation
of foreign
operations - - - - - - - (276) - (276)
Total
comprehensive
income for
the period - - - - - - - (276) 7,829 7,553
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- --------
At 31 October
2015 3,587 1,112 11,741 (1,271) 1,900 1,294 (242) (238) 35,756 53,639
-------- ----------- -------- --------- -------- -------- ------- -------------- --------- --------
Consolidated Cash Flow Statement
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For the year ended 31 October 2015
2015 2014
GBP000 GBP000
Cash flows from operating
activities
Profit for the period before
taxation 9,763 7,579
Adjustments for:
Depreciation 785 813
Amortisation 5,480 5,953
Acquisition costs (156) -
Finance income (135) (48)
Finance costs 892 856
Interest rate swap liability - (66)
Debt issue costs amortisation 100 233
Share option costs 309 365
Movement in receivables (7,070) (1,300)
Movement in payables (225) (1,078)
-------- --------
Cash generated by operations 9,743 13,307
Tax on profit paid (1,670) (1,807)
Net cash from operating activities 8,073 11,500
Cash flows from investing
activities
Acquisition of subsidiaries (9,350) (1,586)
Cash acquired on acquisition
of subsidiaries 433 93
Purchase of property, plant
and equipment (559) (909)
Purchase of intangible assets (1,826) (1,647)
Finance income 135 48
-------- --------
Net cash used in investing
activities (11,167) (4,001)
Cash flows from financing
activities
Interest paid (579) (892)
New loans 13,000 22,000
Loan related costs (178) (532)
Loan repayments (7,538) (23,337)
Equity dividends paid (2,668) (2,575)
Purchase of own shares (344) (1,084)
Sale of own shares - 1,483
-------- --------
Net cash flows from financing
activities 1,693 (4,937)
Net movement on cash and
cash equivalents (1,401) 2,562
Cash and cash equivalents
at the beginning of the period 5,855 3,399
Exchange gains on cash and
cash equivalents (370) (106)
-------- --------
Cash and cash equivalents
at the end of the period 4,084 5,855
======== ========
Notes to the announcement
For the year ended 31 October 2015
1 ACCOUNTING POLICIES
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 derivatives at fair value through
profit or loss.
The financial information set out in the announcement does not
constitute the group's statutory accounts for the year ended 31
October 2015 within the meaning of section 434 of the Companies Act
2006. The financial information for the year ended 31 October 2014
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 2015 are
expected to be finalised on the basis of the financial information
presented by the directors in this preliminary announcement.
Restatement of comparative figures
The Group have restated the 2014 balance sheet to reflect a
change in the amounts recoverable on contracts which are receivable
in greater than one year. Amounts recoverable on contracts are
included in trade and other receivables and represent revenue
recognised in excess of payments on account. The Group have
reclassified GBP994k from current assets into non-current assets
following a review of the 2014 balances.
The Group have revised the adjusted earnings per share
calculation to conform to common practice within the industry. The
calculation now adjusts for amortisation on acquired intangibles,
acquisition costs, restructuring costs and the tax effect on these.
The impact of this is a reduction in the 2014 adjusted EPS from
3.25p to 2.80p and a reduction in the adjusted diluted EPS from
3.11p to 2.68p.
During 2015, the Facilities Management team was transferred from
the EIM division to the PSS division. As a result of this, the
comparative figures for 2014 have been restated to show Facilities
Management results within the PSS division within segmental
analysis. This resulted in a transfer of segment profit of
GBP927,000 from EIM to PSS for 2014.
2 SEGMENTAL ANALYSIS
As at 31 October 2015, the Group is primarily organised into two
main operating segments, which are detailed below.
Financial information is reported to the chief operating
decision maker, which comprises the Chief Executive Officer, the
Chief Financial Officer and the Chief Operating Officer, monthly on
a business unit basis with revenue and operating profits split by
business unit. Each business unit is deemed an operating segment as
each offers different products and services.
-- Public Sector Software (PSS) - provides public sector
organisations with tools to manage information and knowledge,
documents, content, business processes and workflow as well as
connecting directly with the citizen via the web, and providing
elections management solutions. It also supplies in the UK and
internationally, decision support content such as grants and
planning policy information and corporates compliance services.
-- Engineering Information Management (EIM) - delivers
engineering document control, project collaboration and facility
management applications to many leading companies in industries
such as oil & gas, architecture and construction, mining,
utilities, pharmaceuticals and transportation in North America and
around the world
During 2015 the Facilities Management team was transferred from
the EIM division to the PSS division. As a result of this, the
comparative figures for 2014 have been restated to show Facilities
Management results within the PSS division. This resulted in a
transfer of segment profit of GBP927,000 from EIM to PSS for
2014.
Segment revenue comprises 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 taxation, Group
interest payments and Group acquisition costs. The assets and
liabilities of the Group are not reviewed by the chief operating
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 are as follows:
2015 2014
GBP000 GBP000
Revenues from external
customers
United Kingdom 41,463 41,628
USA 6,987 10,051
Europe 12,804 7,519
Australia 617 595
Rest of World 704 884
------- -------
62,575 60,677
======= =======
Revenues are attributed to individual countries on the basis of
the location of the customer.
2015 2014
GBP000 GBP000
Revenues by type
Recurring revenues 27,613 29,173
Non-recurring revenues 34,962 31,504
62,575 60,677
======= =======
The segment results by business
unit for the year ended 31 Total
October 2015 are as follows: PSS EIM operations
GBP000 GBP000 GBP000
Revenues from external customers 48,969 13,606 62,575
Cost of sales (5,022) (1,662) (6,684)
-------- ------- -----------
Gross profit 43,947 11,944 55,891
Administrative expenses (27,974) (9,702) (37,676)
-------- ------- -----------
Profit before interest, tax,
depreciation, amortisation,
share option costs, acquisition
costs and restructuring costs 15,973 2,242 18,215
Depreciation (656) (129) (785)
Amortisation (4,124) (1,356) (5,480)
Restructuring (610) (415) (1,025)
Acquisition costs 34 - 34
Share option costs (422) 7 (415)
Profit before interest and
taxation 10,195 349 10,544
Finance income (23) 428 405
Finance costs (214) (8) (222)
Segment profit (see reconciliation
below) 9,958 769 10,727
-------- ------- -----------
The segment results by business
unit for the year ended 31
October 2014 are as follows: Restated Restated Restated
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Total
PSS EIM operations
GBP000 GBP000 GBP000
Revenues from external customers 43,336 17,341 60,677
Cost of sales (4,739) (1,674) (6,413)
-------- ---------- -----------
Gross profit 38,597 15,667 54,264
Administrative expenses (25,699) (12,172) (37,871)
-------- ---------- -----------
Profit before interest, tax,
depreciation, amortisation,
share option costs, acquisition
costs and restructuring costs 12,898 3,495 16,393
Depreciation (671) (142) (813)
Amortisation (4,695) (1,258) (5,953)
Restructuring (183) (182) (365)
Acquisition costs (144) (4) (148)
Share option costs (322) (145) (467)
Profit before interest and
taxation 6,883 1,764 8,647
Finance income 45 3 48
Finance costs 114 (86) 28
Segment profit (see reconciliation
below) 7,042 1,681 8,723
-------- ---------- -----------
Reconciliations of reportable
profit 2015 2014
GBP000 GBP000
Total profit for reportable
segments 10,727 8,723
Corporate finance costs - (157)
Net financial costs (964) (987)
Profit before taxation 9,763 7,579
====== ======
Net financial costs relate to Group bank loan interest, bank
facility fee amortisation and fair value gain on financial
derivatives which have not been included in reportable segments.
Corporate finance costs are in relation to the banking facility
which was opened during 2014.
3 INCOME TAX
The tax charge is made up as follows:
2015 2014
GBP000 GBP000
Current tax
UK corporation tax on profits
for the period 2,310 1,439
Foreign tax on overseas companies 498 489
Over provision in respect of prior
periods (259) (75)
------ ------
Total current tax 2,549 1,853
------
Deferred tax
Origination and reversal of temporary
differences (555) (4)
Adjustment for rate change - (104)
Adjustments in respect of prior
periods (60) (9)
------ ------
Total deferred tax (615) (117)
------ ------
Total tax charge 1,934 1,736
====== ======
The differences between the total tax charge above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax, together with the impact on the
effective tax rate are as follows:
2015 % ETR 2014 % ETR
GBP000 movement GBP000 Movement
Profit before taxation on
continuing operations 9,763 7,579
Profit on ordinary activities
multiplied by the standard
rate of corporation tax in
the UK of 20% (2014: 21.83%) 1,953 20.00 1,654 21.83
Effects of:
Share option deduction 84 0.86 (325) (4.29)
International losses not recognised 3 0.03 166 2.19
Other timing differences 150 1.54 222 2.93
Expenses not deductible for
tax purposes 103 1.06 52 0.69
Prior year over-provision (330) (3.38) (77) (1.02)
Non-taxable income (46) (0.47) (4) (0.05)
Adjustment for tax rate differences
in foreign jurisdictions 85 0.86 40 0.53
R&D enhanced relief (99) (1.01) (6) (0.08)
Foreign tax suffered 31 0.31 14 0.18
1,934 19.80 1,736 22.91
====== ======== ====== ========
The effective tax rate for the period was 19.80% (2014: 22.91%).
Work performed during 2015 resulted in a large overprovision which
was reversed during the year. This work related primarily to the
Group R&D tax claim which lowered the tax liability on 2014
profits, reflected in a lower effective tax rate for 2015. The
higher effective tax rate in 2014 was due to higher anticipated tax
on UK profits following the unwind of all UK trading losses in
2013, alongside partial derecognition of deferred tax assets in the
US. Another factor decreasing the tax rate in 2015 is an increase
in the R&D provision following detailed work performed during
the year.
Movement on trading losses during 2015 are as follows:
UK unrelieved Foreign Total
trading unrelieved unrelieved
losses trading trading
losses losses Tax effect
Recognised trading GBP000 GBP000 GBP000
losses GBP000
As at 1 November 2014 - 3,289 3,289 658
Recognised during the
year 397 (693) (296) (58)
Utilised during the
year (397) (315) (712) (142)
- 2,281 2,281 456
============= =========== =========== ==========
Unrecognised trading
losses
Losses not recognised - (131) (131) (26)
- (131) (131) (26)
============= =========== =========== ==========
As noted above, no UK trading losses were brought forward to
2015. Additional losses were uncovered on finalisation of the 2014
UK corporation tax returns following an increase in identified
R&D qualifying expenditure. This resulted in additional losses
of GBP397,000, all of which were utilised in 2015. The foreign
losses utilised during the year of GBP315,000 occurred mainly in
France with a small element utilised in the US. The foreign losses
derecognised in the year of GBP693,000 all relate to the US. The
decision was made to derecognise these assets following uncertainty
over their future utilisation. Across the year the total deferred
tax asset in respect of unrelieved trading losses has decreased
from GBP658,000 to GBP456,000.
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:
2015 2014
GBP000 GBP000
Profit for the year 7,829 5,843
----------- -----------
Basic earnings per share
Weighted average number of shares
in issue 354,730,817 353,448,442
----------- -----------
Basic earnings per share 2.21p 1.65p
=========== ===========
Weighted average number of shares
in issue 354,730,817 353,448,442
Add back:
Treasury shares 2,863,552 1,005,841
ESOP shares 1,139,245 1,263,989
----------- -----------
Weighted average allotted, called
up and fully paid share capital 358,733,614 355,718,272
----------- -----------
Diluted earnings per share
Weighted average number of shares
in issue used in basic earnings
per share calculation 354,730,817 353,448,442
Dilutive share options 17,234,828 15,015,960
----------- -----------
Weighted average number of shares
in issue used in dilutive earnings
per share calculation 371,965,645 368,464,402
Diluted earnings per share 2.10p 1.59p
=========== ===========
Restated
Adjusted earnings per 2015 2014
share GBP000 GBP000
Profit for the year 7,829 5,843
Add back:
Amortisation on acquired
intangibles 3,778 4,569
Acquisition costs (34) 148
Restructuring costs 1,025 365
Tax effect (961) (1,036)
-------------- --------------
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Adjusted profit for year 11,637 9,889
-------------- --------------
Weighted average number
of shares in issue - basic 354,730,817 353,448,442
Weighted average number
of shares in issue - diluted 371,965,645 368,464,402
Adjusted earnings per
share 3.28p 2.80p
Adjusted diluted earnings
per share 3.13p 2.68p
5 ACQUISITIONS
Cloud Amber Limited
On 7(th) July 2015 the Group acquired the entire share capital
of Cloud Amber Limited for a total consideration of GBP4.95m in
cash. Cloud Amber is a provider of solutions delivering integrated
intelligence for the Management and control of Traffic and Public
Transport networks. The product suite is focused on strategic
highway control, local transport network management, public
transport information and fleet management systems. The acquisition
is complementary to Idox's solution in support of highways planning
and will provide a more comprehensive solution to new and existing
customers of the Group.
Goodwill arising on the acquisition of Cloud Amber has been
capitalised and consists largely of the workforce value, synergies
and economies of scale expected from combining the operations of
Cloud Amber with Idox. None of the goodwill recognised is expected
to be deductible for income tax purposes. The purchase of Cloud
Amber has been accounted for using the acquisition method of
accounting.
Provisional
fair value
Book adjustments Fair value
value GBP000 GBP000
GBP000
Intangible assets 491 1,802 2,293
Property, plant and
equipment 4 (3) 1
Trade receivables 1,075 (107) 968
Other receivables 163 - 163
Cash at bank 347 - 347
--------- ------------- -------------
TOTAL ASSETS 2,080 1,692 3,772
Trade payables (758) - (758)
Other liabilities (294) - (294)
Deferred income (334) (240) (574)
Social security and
other taxes (167) - (167)
Deferred tax liability - (373) (373)
TOTAL LIABILITIES (1,553) (613) (2,166)
--------- -------------
NET ASSETS 1,606
Purchased goodwill capitalised 3,344
-------------
Total consideration 4,950
-------------
Satisfied by:
Cash to vendor 3,750
Earn out consideration 1,200
------
Total consideration 4,950
------
The fair values stated above are provisional based on
management's best estimate. The fair value adjustment for the
intangible assets includes GBP1,861,000 in relation to customer
relationships, trade names and software. A related deferred tax
liability has also been recorded as a fair value adjustment.
Adjustments were also processed to align Company policies with Idox
Group policies. These included GBP59,000 in respect of intangible
assets and GBP3,000 in relation to property, plant and
equipment.
The fair value of trade debtors is equal to the gross
contractual amounts receivable. An initial review of trade debtors
has indicated a fair adjustment of GBP107,000 for bad debt
provision.
The revenue included in the consolidated statement of
comprehensive income since 7(th) July 2015, contributed by Cloud
Amber was GBP565,000. Cloud Amber also made a loss of GBP133,000
for the same period. If Cloud Amber had been included from 1
November 2014, it would have contributed revenue of GBP2,242,000
and a loss after tax of GBP483,000.
The earn out period is 1 December 2014 to 30 November 2015. The
earn out arrangement requires the Group to pay the former owners of
Cloud Amber an amount to be determined by revenue in the earn out
period, up to a maximum of GBP1,200,000 in cash. GBP1,200,000 has
been recognised at the date of acquisition, which represents the
fair value of the contingent consideration. At the reporting date,
management's best estimate is that the full contingent
consideration will be payable.
Reading Room Limited
On 8(th) October 2015 the Group acquired the entire share
capital of Reading Room Limited for a total consideration of
GBP5.6m in cash. Reading Room is an international digital
consultancy with a reputation for digital innovation, strategy and
delivery. Reading Room services are centred on digital change and
range from full enterprise strategy development to projects related
to specific aspects of digital business. The acquisition supports
the Group's strategy of expansion into sector neutral content and
digital platforms.
Goodwill arising on the acquisition of Reading Room has been
capitalised and consists largely of the workforce value, synergies
and economies of scale expected from combining the operations of
Reading Room with Idox. None of the goodwill recognised is expected
to be deductible for income tax purposes. The purchase of Reading
Room has been accounted for using the acquisition method of
accounting.
Provisional
fair value
Book adjustments Fair value
value GBP000 GBP000
GBP000
Intangible assets 238 3,616 3,854
Property, plant and
equipment 329 - 329
Trade receivables 1,245 - 1,245
Other receivables 1,326 - 1,326
Cash at bank 86 - 86
--------- ------------- -------------
TOTAL ASSETS 3,224 3,616 6,840
Trade payables (384) - (384)
Other liabilities (1,113) - (1,113)
Social security and
other taxes (597) - (597)
Deferred tax liability - (723) (723)
TOTAL LIABILITIES (2,094) (723) (2,817)
--------- -------------
NET ASSETS 4,023
Purchased goodwill capitalised 1,577
-------------
Total consideration 5,600
-------------
Satisfied by:
Cash to vendor 5,600
Earn out consideration -
------
Total consideration 5,600
------
The fair values stated above are provisional, based on
management's best estimate. The fair value adjustment for the
intangible assets relates to customer relationships and trade
names. A related deferred tax liability has also been recorded as a
fair value adjustment.
The fair value of trade debtors is equal to the gross
contractual amounts receivable. An initial review of trade debtors
has not indicated any recoverability issues.
The revenue included in the consolidated statement of
comprehensive income since 8 October 2015, contributed by Reading
Room was GBP518,000. Reading Room also made a loss of GBP9,000 for
the same period. If Reading Room had been included from 1 November
2014, it would have contributed revenue of GBP9,531,000 and a loss
after tax of GBP179,000.
There is no earn out period for Reading Room.
Acquisition costs of GBP50,000 have been written off in the
consolidated statement of comprehensive income.
Digital Spirit GmbH
During the period there have been several fair value adjustments
in respect of the acquisition of Digital Spirit GmbH on 22 October
2014. The adjustments totalled GBP300,000.
A number of adjustments were processed to align Company policies
with Idox Group policies. These included GBP239,000 in respect of
intangible assets, GBP24,000 in respect of property, plant and
equipment, GBP98,000 in respect of the bad debt provision, and the
release of a GBP102,000 guarantee provision.
There were adjustments totalling GBP41,000 processed in respect
of pre-acquisition trading, including GBP48,000 for a
pre-acquisition management charge.
During the period the deferred consideration relating to the
acquisition was released to acquisition costs in the statement of
comprehensive income as the consideration conditions were not
met.
Acquisition cash flows
Acquisition cash flows in the year are as follows:
Net cash
outflow
Subsidiaries acquired during the year: GBP000
Cloud Amber Limited 3,403
Reading Room Limited 5,514
8,917
========
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