RNS Number:0437I
Compass Software Group PLC
27 February 2003
COMPASS SOFTWARE GROUP PLC
Preliminary Results
for the year ended 30 November 2002
Highlights
* Sales up 13.2% to #4,829,562 (2001: #4,266,677)
* Gross margin % increase to 70.6% (2001: 62.5%)
* Profit before tax and goodwill up 48% at #839,827 (2001: #568,386)
* Adjusted diluted EPS up 49% to 5.24p (2001: 3.51p)
* Cash increased to #2,146,196 (2001: #973,171)
STATEMENT BY THE CHAIRMAN, BRIAN NORTH
Introduction
It is especially pleasing to report on continuing growth in turnover and
profitability for the year to 30 November 2002 despite the economic environment
and software industry conditions that prevailed during the year.
Following the Group's solid first half performance, which benefited from a major
collaborative development contract with Marks & Spencer, the second half of 2002
saw the addition of a record number of new software clients including Dots in
the US, Powerhouse in the UK electrical goods sector, Smythson, a high quality
stationery retailer, and The Officers Club, Kookai and Everyone Wants in our
traditional UK retail apparel sector. A number of these sales included software
applications developed from the Information Author source code acquired with MDA
Solutions in 2001. Guided Image revenues were also included for a full year,
following its acquisition in August 2001.
Service revenues benefited from work related to the new software sales, elements
of the collaborative development project with Marks & Spencer and recurring
consultancy work for existing clients, allowing efficient utilization of Group
resources and contributing to an 8% increase in gross margin percentage in the
year.
Support and maintenance revenue also grew strongly as a result of the timing of
existing client contracts entering their chargeable support periods.
It was most unfortunate that, shortly after the year end, Everyone Wants was put
into administration resulting in an exceptional doubtful debt charge in the 2002
accounts and reducing operating profit by #99,000. This charge was largely
offset by a profit of #85,700 generated by the sale of Fashion Studio source
code to Blue Fox N.V. in Holland, which although considered by the directors to
be part of the Group's normal operations, has been shown as profit on disposal
of fixed assets in the profit and loss account.
Cash balances improved by well over #1 million in the year, predominantly as a
result of operating activities, both in terms of profit and reduced working
capital.
Results
Sales for the year ended 30 November 2002 were up 13.2% at #4,829,562 (2001:
#4,266,677). As noted in the 2001 accounts, the turnover figure for 2001
includes #262,250 relating to resale, at zero margin, of third party software in
relation to the House of Fraser contract. Excluding this amount from the 2001
figure reveals an underlying increase in turnover of 20.6% this year.
Profit before tax and goodwill amortisation, representing the sum of profit on
ordinary activities of #398,649 (2001: #356,253) and the charge for the
amortisation of goodwill of #441,178 (2001: #212,133), increased by 47.7% to
#839,827 for the year (2001: #568,386). This mainly reflected the increased
sales and higher gross margins achieved in the year, despite necessary increases
in resources for research and development and the sales function.
Research and development in the year focused on enhancing existing modules and
expanding the functionality of the products into closely related merchandising
processes. Expenditure, which is written off as it is incurred, increased to
#680,889 representing 14.1% of turnover (2001: #520,699 representing 12.2% of
turnover) demonstrating the Group's continuing commitment to remaining at the
forefront of merchandise planning and design solutions.
The effective rate of tax reduced to 26% of profit before tax and goodwill
amortisation (2001: 31%) due to the early adoption of FRS 19 in 2001 in relation
to full provision for deferred tax.
Basic Earnings Per Share ("EPS") fell from 1.70p to 1.59p, and diluted EPS fell
from 1.61p to 1.52p. However, adjusted EPS (excluding goodwill amortisation),
which the directors believe gives a more consistent comparison of the operating
performance and cash generative capabilities of the group, rose by 48% to 5.49p
(2001: 3.70p) and adjusted diluted EPS rose 49% to 5.24p (2001: 3.51p).
Dividends
The Company has again reviewed its dividend policy in the light of the results
and cash flow for the year and its prospects for 2003 and beyond. As a result
the directors recommend a first dividend of 0.75 pence per share, amounting to
#88,214, which will be payable on 17 April 2003 to shareholders on the register
on 7 March 2003.
Employees
The number of employees has risen from 75 to 87 during the year. I should like
to thank all members of staff for their continuing dedication and outstanding
performance during the year, without which the improved results would not have
been achieved.
Current trading and future prospects
Although the Christmas and New Year period is traditionally quiet, the Group
continued to gain new clients, and ongoing implementation and consultancy
activity at existing clients continued at the expected rate. The signing of
Dots, our first major US client, prior to the year end is expected to provide
added impetus to the interest already generated by Planalytics, our
representative in North America. In addition the prospects in Europe are
encouraging.
The economic and retail sector environment in our core UK apparel market remains
challenging, but the nature of our products and the real benefits they provide
to clients, in terms of enhanced sales and gross margins makes them attractive
to retailers when prioritizing their expenditure budgets and assessing potential
return on investment from IT projects. Progress continues to be made in
expanding the appeal of our systems into other sectors of the retail market,
with growing interest in electrical and other hard-goods sectors. The signing
of Powerhouse as a client in the electrical equipment retail sector towards the
end of 2002 provides a reference for other potential new clients in 2003.
The ongoing collaborative development project with Marks & Spencer for the .net
version of our merchandise planning systems is expected to lead to further
revenue generating opportunities through the coming year, both with M&S and
potentially with its supplier base. Other long term relationships with existing
clients are also expected to generate recurring revenues during 2003.
In summary, the Board expects the strategic initiatives put in place during 2002
to result in continued growth in 2003 and beyond. Our continuing focus is on
controlled, profitable growth and cash generation through maximizing
opportunities to sell our skills and products into broader markets and
territories. Current prospects indicate that our expectations are achievable.
OPERATING REVIEW BY THE CHIEF EXECUTIVE, IAN BOWATER
Our main target market, the retail sector, was exposed to conflicting influences
during 2002. On one hand, consumer spending continued to be buoyant, on the
other, retailers' confidence was tested by expectations of a potential economic
downturn. As a result, Compass witnessed a high degree of indecision and
uncertainty towards investment in many projects.
Despite this level of indecision, the Group has made very positive progress
resulting in further growth in revenue, profit and adjusted earnings per share.
Cash flow has also been very positive with a 120% increase in cash since the
previous year-end.
I am delighted to report that these key performance indicators have led the
board to conclude that the business is now sufficiently mature to allow the
Company to pay its first dividend. I consider this to be a clear indicator of
the Group's continued development, but what is even more satisfying is our
ability to successfully implement the major planks of our strategic growth
objectives, which we set out as far back as our IPO prospectus in July 2000.
In the prospectus we covered areas such as solution development, overseas
growth, targeting of additional market tiers and diversification into related
market sectors. In 2002 we have made further strides in each of these areas thus
not only delivering the financial results for 2002, but also providing a
foundation for future growth.
Solutions Development
In the area of solutions development the group has recognised the importance of
remaining innovative whilst delivering business benefits to our customers. There
have been three strands to the Group's software development during the year, all
of which are focused on near-to-market investment. Firstly, the ongoing
enhancement of the main solutions, considered vital to maintaining the current
customers' loyalty to our software; secondly, the move, in collaboration with
Marks & Spencer Plc, to the Microsoft .net platform leading to the next
generation of Compass solutions; and finally, the introduction of a new solution
(SmartVM) to address how our clients can best display merchandise in each of
their stores. In all three cases, the Group has had very positive feedback and
all have contributed to the Group's performance.
During the year, the Board reviewed the prospects and ongoing development plans
and costs for the Fashion Studio design software, the source code for which was
acquired as part of the acquisition of Guided Image in 2001. The original Dutch
developer of the software had subsequently been acquired by Blue Fox N.V. and
the Board concluded that the most effective way to continue to use and update
the software was through the sale to Blue Fox of the source code and the
appointment by Blue Fox of Guided Image as the exclusive reseller for the UK and
Ireland.
Territories
The Group has maintained its policy towards progressive territorial expansion
i.e. to adopt the prudent approach of appointing local representatives for
overseas markets whilst using a direct approach to localised markets. Client
wins in the UK market included The Officers Club, Everyone Wants, Kookai, Martin
Emprex International and Ted Baker, further strengthening the Group's 200+
portfolio of clients.
Our partner in South Africa (UCS), reports that the country's continuing
economic difficulties have meant that, whilst interest in the Compass solutions
remains strong, and both the relationship and identification of prospects is
progressing well, conversion of new clients is being held back. The Group has,
however, taken the opportunity to invite UCS to work with us in the UK on
specific projects which may lead to other mutual benefits in the future.
The Group did achieve the breakthrough it had sought in the US during the year.
Supported by Compass resource from the UK, the Group's partner, Planalytics,
gained the Cleveland based retailer Dots, a dynamic women's apparel retailer
with over 300 stores nationwide, as its first US client . The project commenced
in November 2002 and is expected to be fully implemented by July 2003. This
will provide an excellent reference site and it is hoped that this will be the
first of many such projects in the US.
Market Tiers
When the Group was floated in July 2000, our target customers were mainly large
scale (#200m+ turnover) multiple retailers, referred to as "tier 1". It was our
stated objective to develop the Group's solutions to make them appropriate for
all but the smallest of retailers, thereby addressing the needs of tiers 2 (#50m
- #200m) and 3 (#10m - #50m).
During 2002, recurring work remained strong from existing tier 1 clients, a
sector in which the company is already well represented. Significant progress
was made in tiers 2 and 3 of the market with the addition of the retailers
mentioned above. The generation of revenues from this wider client base has the
effect of making our overall revenues less "lumpy" and more predictable for the
future.
I am particularly pleased with the progress we have made with the introduction
of Growthmerchandising, our solution targeted at tier 3 customers.
Implementations have proceeded largely to plan and the pipeline is extremely
promising.
Market Sectors
The Group's skills and solutions are suitably adaptable to meet the business
intelligence needs of all businesses that are involved in retailing or the
retail supply chain. In the early stages of our growth, it was important that we
focused our marketing at a specific market niche, clothing retail, in order to
gain recognition and credibility. For the past seven years, this strategy has
served us well and has led to a high level of recognition and expertise.
During 2002 we began to fulfil our wish to commence expansion into other
sectors. The Group had, in the previous two years, gained clients in the
Department Store and Variety retail sectors and therefore gained valuable
experience relating to a broader supply chain including merchandise such as
electrical, hard goods, stationery, and homewares. This experience enabled the
group to win Powerhouse, a major UK electrical retailer, for its first
implementation of SmartChoice. This solution utilizes standard Compass
technologies, configured to meet the specific needs of retailers who have
merchandise that is delivered via a shorter supply chain and where brands
compete for space within the retailer's stores.
Clothing will remain a key specialism within the Group, but the Board is pleased
with the tangible steps taken during the year to broaden the base of sectors in
which the Group operates and is confident that this move will gather momentum
during 2003.
Organic Growth
Although I am delighted with how the growth strategy is developing into the new
areas highlighted above, this is as always underpinned by consolidation of our
strong position in existing markets i.e. organic growth.
The level of service utilization and additional projects from existing clients
have both been at record levels during 2002. This, we believe, emphasises the
level of mutual loyalty between the Group and its clients.
The .net project at Marks & Spencer has contributed particularly well to
revenues during 2002, which coupled with extensions to projects at Vroom &
Dreesman, River Island, Early Learning Centre and House of Fraser, has been
highly beneficial to the Group's result for the year.
Outlook for 2003
When I examine the Group's solutions and services propositions, the track
record, pipeline of interest and feedback from clients and prospects, I can feel
very optimistic about continued growth. When I take into account the generally
reported uncertainty over levels of consumer and resulting business confidence
for 2003, this level of optimism is diluted with a degree of prudence, which is
relevant to all of the growth initiatives, sectors and territories I have
outlined above.
The overriding factor that will determine the level of the Group's performance
in 2003 relates to how soon retailers will move away from the state of
uncertainty in which they have been trapped in 2002. In the event that consumer
spending decreases, retailers will become focused on managing margins and
securing market share. These are objectives the Group's solutions can address
effectively, thus I feel that such a situation would be a positive opportunity.
Equally, in the event that consumer spending is maintained without the economic
uncertainty, this will allow retailers much greater scope to consider capital
expenditure and introduce new technologies such as those provided by the Group.
In conclusion, we continue to deliver business benefits for our customers and
offer some of the most innovative and advanced business intelligence solutions
available. This is why I can report that the Group is well positioned to achieve
the next stage of its growth.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 November 2002
2002 2001
# #
Turnover - continuing operations 4,829,562 4,266,677
Cost of sales (1,421,422) (1,600,773)
----------------- ------------------
Gross profit 3,408,140 2,665,904
Selling and distribution costs (687,736) (569,391)
Administrative expenses
- research and development (680,889) (520,699)
- goodwill amortisation (441,178) (212,133)
- exceptional bad debt charge (99,000) -
- other (1,204,177) 1,070,605)
----------------- ------------------
Total administrative expenses (2,425,244) (1,803,437)
----------------- ------------------
Total operating expenses (3,112,980) (2,372,828)
Operating profit
- before goodwill amortisation and exceptional 835,338 505,209
bad debt charge
- exceptional bad debt charge (99,000) -
- amortisation of goodwill (441,178) (212,133)
----------------- ------------------
Total operating profit - continuing operations 295,160 293,076
Profit on sale of intangible fixed assets 85,700 -
----------------- ------------------
Profit on ordinary activities before interest 380,860 293,076
Other interest receivable and similar income 46,967 71,977
Interest payable and similar charges (29,178) (8,800)
----------------- ------------------
Profit on ordinary activities before taxation 398,649 356,253
Tax on profit on ordinary activities (218,074) (176,187)
----------------- ------------------
Profit for the financial year 180,575 180,066
Dividend proposed on equity shares (88,214) -
----------------- ------------------
Retained profit for the year 92,361 180,066
----------------- ------------------
Basic earnings per share 1.59p 1.70p
Adjusted earnings per share 5.49p 3.70p
Diluted earnings per share 1.52p 1.61p
Adjusted diluted earnings per share 5.24p 3.51p
There were no recognised gains or losses other than the profit for each
financial year.
CONSOLIDATED BALANCE SHEET
at 30 November 2002
2002 2001
# #
Fixed assets
Intangible fixed assets - goodwill 2,760,478 3,387,646
- other 19,333 273,522
Tangible fixed assets 445,134 388,052
Investment in own shares 67,131 110,631
------------------ ------------------
3,292,076 4,159,851
Current assets
Stock 35,106 -
Debtors 1,838,510 2,543,252
Cash at bank and in hand 2,146,196 973,171
------------------ ------------------
4,019,812 3,516,423
Creditors: amounts falling due within one year (1,372,695) (1,578,903)
------------------ ------------------
Net current assets 2,647,117 1,937,520
------------------ ------------------
Total assets less current liabilities 5,939,193 6,097,371
Creditors: amounts falling due after more than one year (1,396,591) (1,650,357)
Provisions for liabilities and charges
- deferred taxation (32,150) (46,700)
------------------ ------------------
Net assets 4,510,452 4,400,314
------------------ ------------------
Capital and reserves
Called up share capital 117,619 115,952
Share premium account 2,060,985 2,060,985
Merger reserve 1,515,799 1,390,799
Shares to be issued 44,444 153,334
Profit and loss account 771,605 679,244
------------------ ------------------
Equity shareholders' funds 4,510,452 4,400,314
------------------ ------------------
The preliminary announcement was approved by the Board of Directors on 27
February 2003.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 November 2002
2002 2001
# #
Net cash flow from operating activities 1,087,743 (750,001)
Returns on investment and servicing of finance
Interest received 18,371 105,102
Taxation (33,450) (52,165)
Capital expenditure and financial investment
- purchase of tangible fixed assets (227,540) (168,598)
- purchase of intangible fixed assets (54,150) (1,000)
- disposal of fixed assets 432,051 18,000
Acquisitions and disposals - (41,834)
----------------- ---------------
Net cash inflow/(outflow) before financing and management of 1,223,025 (890,496)
liquid resources
Management of liquid resources 300,000 1,300,000
Financing - redemption of loan notes (50,000) -
----------------- ---------------
Increase in cash in the year 1,473,025 409,504
----------------- ---------------
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 Principal accounting policies
Basis of preparation and consolidation
The financial statements have been prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards.
The Group financial statements consolidate the results of the Company and its
subsidiaries up to 30 November in each year and the balance sheets of those
companies remaining members of the Group at the year end. The results of
subsidiaries acquired or disposed of during the year are included from the date
of acquisition or to the date of disposal as appropriate. Profits or losses on
intra-Group transactions are eliminated in full on consolidation.
In accordance with UITF 13 as amended by FRS 14, the results and net assets of
the Compass Software Group Plc Employee Benefit Trust 2000 ("the EBT") are
incorporated into the financial statements of the Group and of the holding
company. The EBT results are disclosed separately on the face of the
consolidated profit and loss account where considered material to an
understanding of the results of the Group.
The Company has taken advantage of Section 131 Companies Act 1985 in relation to
its acquisitions of MDA Solutions Limited and Guided Image Limited, and has
dispensed with the normal requirement to recognize the share premium arising on
the issue of shares to fund those acquisitions. An equivalent merger reserve
arises on consolidation.
Turnover
Turnover represents the delivered value of products and services falling within
the Group's ordinary activities, net of sales discounts and VAT.
The Group derives revenues predominantly from sale of perpetual software
licences, software configuration and implementation services, software support
and maintenance contracts, design services, consultancy and training.
Income on perpetual software licence sales is recognised in accordance with
contractual arrangements with clients (the principal conditions of which
determine when the licence has been delivered, vendor obligations, the sale
price and any contract warranties) provided that collection of the sale proceeds
is considered probable. In practice, this results in either recognition of the
total licence fee on signature of an unconditional contract and delivery of the
core applications, prior to configuration, implementation and final customer
acceptance, or recognition of revenue in agreed stages as individual elements of
the software are delivered, if such phased delivery is a condition of payment in
the contract terms.
Income in respect of support and maintenance contracts is recognised evenly over
the life of the contract.
Deferred income on support and maintenance contracts and any deferred element of
software licence sales, is carried forward as a creditor in the balance sheet to
be released as revenue to the profit and loss account in the appropriate period.
Consultancy, software implementation and other service income is recognised in
the period the work is carried out.
Research and development expenditure
In accordance with the accounting treatment allowed under SSAP 13, software
development expenditure, including that relating to specific projects that are
expected to generate future profits, is written off in the period in which it is
incurred. The directors consider this to be the generally accepted accounting
policy within the UK software industry.
Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its
residual value, over the estimated useful economic life of that asset, on a
straight line basis as follows:
Leasehold improvements over the life of the lease
Fixtures and fittings 10% - 25% per annum
Office equipment and furniture 10% - 33% per annum
Computer equipment and software 25%
Goodwill
Goodwill represents the difference between the fair value of the consideration
given for an acquisition and the fair value of the assets acquired.
Goodwill is written off over its estimated economic life on a straight line
basis. The directors consider this to be the generally accepted accounting
policy within the UK software industry. No goodwill has previously been written
off to reserves. The estimated economic life of goodwill relating to the MDA
Solutions and Guided Image acquisitions in 2001 is eight years. Goodwill
arising in relation to the pre-flotation acquisition of the business of Compass
Business Systems in 2000 has an estimated economic life of 3 years.
Operating leases
Rentals paid under operating leases are charged to the profit and loss account
as incurred.
Deferred taxation
Deferred tax is provided in full on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallize based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in the financial statements. Deferred tax is
not provided on timing differences arising from the revaluation of fixed assets
where there is no commitment to remit these earnings. Deferred tax assets are
recognized to the extent that it is regarded as more likely than not that they
will be recovered. Deferred tax assets and liabilities are not discounted.
Pensions
The Group administers a defined contribution Group Personal Pension Plan on
behalf of employees. The pension costs charged against income represent the
Company's agreed contributions in the period in which they are incurred.
Employee Benefit Trust
Shares beneficially owned by the Compass Software Group Plc Employee Benefit
Trust 2000 ("the EBT") at the balance sheet date which are held for the purpose
of satisfying existing and future share options granted or to be granted to
employees, are treated as "own shares" and are disclosed as fixed assets in the
balance sheet. The shares are carried at cost less provisions for permanent
diminution in value.
Stock
Stock, comprising software purchased for resale to customers, is valued at the
lower of cost and net realizable value. Net realizable value is based on
estimated selling price less costs of disposals. Provision is made for
obsolete, slow-moving and defective items as appropriate.
Foreign currencies
Company
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction.
Monetary assets and liabilities at the balance sheet date are re-translated at
the rate of exchange ruling at the balance sheet date.
Group
The accounts of overseas subsidiary undertakings are translated at the rate of
exchange ruling at the balance sheet date. Exchange differences arising on
re-translation of opening balances are taken directly to reserves. All other
translation differences are taken to the profit and loss account with the
exception of differences on foreign currency borrowings to the extent that they
are used to finance or provide a hedge against Group equity investments in
foreign enterprises, which are taken to reserves along with the exchange
difference on the net investment (including intra-group loans) in these
enterprises.
2 Turnover and segmental analysis
Analysis by geographical location of customer
Year ended Year ended
30 November 30 November
2002 2001
Turnover # #
United Kingdom 4,012,345 3,436,905
European Union 668,427 704,518
North America 142,387 83,265
Other 6,403 41,989
------------------ -----------------
Total turnover 4,829,562 4,266,677
------------------ -----------------
Analysis by class of revenue
Year ended Year ended
30 November 30 November
2002 2001
Turnover # #
Consultancy and services 2,689,750 2,257,768
Software licences 1,534,953 1,690,596
Support and maintenance 494,255 271,669
Other 110,604 46,644
------------------ -----------------
Total turnover 4,829,562 4,266,677
------------------ -----------------
In the 2001 comparative figures, turnover to the United Kingdom and Software
turnover both include #262,250 relating to the sale of third party software at
zero margin as part of the House of Fraser contract.
The Group is not divisionalised and it is therefore not possible to disclose
operating profit and net assets by class of revenue.
3 Operating profit
Operating profit for the year ended 30 November 2002 comprises:
2002 2001
# #
Turnover 4,829,562 4,266,677
Cost of sales (1,421,422) (1,600,773)
------------------- ------------------
Gross profit 3,408,140 2,665,904
Selling and distribution (687,736) (569,391)
Research and development (680,889) (520,699)
Doubtful debt charge (15,298) (13,650)
Exceptional bad debt charge (99,000) -
Other administrative costs (1,012,933) (912,551)
(excluding depreciation
and amortisation)
------------------- ------------------
EBITDA * 912,284 649,613
Depreciation of fixed assets (138,909) (127,720)
Amortisation of intangibles (37,037) (16,684)
Amortisation of goodwill (441,178) (212,133)
------------------- ------------------
Operating profit 295,160 293,076
------------------- ------------------
*Earnings before interest, tax, depreciation and amortisation
Operating profit is stated after charging: Year ended Year ended
30 November 30 November
2002 2001
# #
Auditors' remuneration
- as auditors to the Group 18,500 16,600
- as auditors to the Company - -
- non-audit services 4,000 5,900
Depreciation 138,909 127,720
Amortisation of intangibles 37,037 16,684
Amortisation of goodwill 441,178 212,133
Doubtful debt charge (including exceptional item) 114,298 13,650
Operating lease costs - computer equipment 1,491 1,988
- land and buildings 73,000 75,790
- motor vehicles 26,889 18,725
-------------------- ------------------
Research and development expenditure 680,889 520,699
------------------- ------------------
4 Reconciliation of operating profit to net cash flow from
operating activities
2002 2001
# #
Operating profit - continuing operations 295,160 293,076
Depreciation 138,909 127,720
Amortisation of intangibles 37,037 16,684
Amortisation of goodwill 441,178 212,133
Decrease/(increase) in debtors 704,741 (1,684,676)
Decrease/(increase) in stock (35,106) -
(Decrease)/increase in creditors (494,176) 285,062
---------------- ----------------
Net cash flow from operating activities 1,087,743 (750,001)
---------------- ----------------
5 Directors and employees
Year ended Year ended
30 November 30 November
2002 2001
# #
Staff costs (including executive directors)
Wages and salaries 2,736,916 2,270,475
Social security costs 298,102 241,378
Other pension costs 129,838 82,912
----------------- --------------
Total staff costs 3,164,856 2,594,765
----------------- --------------
Average numbers employed
(including executive directors)
Research and development 15 12
Implementation and support services 41 33
Sales and administration 22 16
---------------- --------------
Total numbers employed 78 61
---------------- --------------
6 Interest receivable and payable
Net interest receivable in the year relates to interest earned on bank deposit
accounts, treasury deposits and units held in The Royal Bank of Scotland
International Money Market Fund, less interest payable on loan notes issued in
connection with the acquisition of Guided Image Limited, as follows:
Year ended Year ended
30 November 30 November
2002 2001
# #
Interest receivable:
Bank accounts 39,293 3,272
Treasury deposits - 49,120
RBSI Money Market Fund 7,674 19,585
------------- ------------
46,967 71,977
Interest payable:
Variable Rate Unsecured Loan Notes 2011 (29,178) (8,800)
-------------- ------------
Net interest receivable 17,789 63,177
-------------- -----------
Interest on the loan notes is payable at six monthly intervals on 21 February
and 21 August each year, calculated on a daily basis at a rate of 1% below the
base lending rate of National Westminster Bank plc.
7 Tax on profit on ordinary activities
The taxation charge for the year ended 30 November 2002 represents an effective
tax rate of 26% (2001: 31%) of the profit before tax and goodwill amortisation
for the year.
Deferred tax has been provided in full as required by FRS 19.
Analysis of tax charge for the year Year ended Year ended
30 November 30 November
2002 2001
# #
UK Corporation tax at 30% 238,800 148,467
Adjustment in respect of prior years (6,176) -
------------------ -----------------
Corporation tax charge 232,624 148,467
------------------ -----------------
Current year deferred tax charge 12,165 27,720
Adjustment in respect of prior years (26,715) -
------------------ -----------------
Deferred tax charge (14,550) 27,720
------------------ -----------------
Tax on profit on ordinary activities 218,074 176,187
------------------ -----------------
8 Dividends
The directors have reviewed the Company's policy on dividend payments and
recommend the payment of a final dividend for the year of 0.75 pence per share,
amounting to #88,214.
9 Earnings per share
The earnings per share ("EPS") figure for each period has been calculated based
on the profit after taxation divided by the weighted average number of ordinary
shares in issue during the relevant period.
In the basic EPS calculation the figure used for profit was #180,575 (2001:
#180,066) and the figure used for number of shares was 11,318,725 (2001:
10,589,628). Diluted EPS uses the same profit figure and takes account of
share options granted to employees and non-executive directors, giving a
weighted average number of shares of 11,871,890 (2001: 11,183,435).
Adjusted EPS figures have also been shown, which use an adjusted profit figure
excluding the effects of amortisation of goodwill. The directors believe that
this represents a more meaningful basis on which to report the EPS of the
business and it continues to be the intention of the directors to present the
adjusted EPS figure on a consistent basis in future periods.
The figures used for number of shares were 11,318,725 (2001: 10,589,628) for
basic adjusted EPS, and 11,871,890 (2001: 11,183,435) for diluted adjusted EPS.
The figure for adjusted earnings was #621,753 (2001: #392,199). A summary of
adjustments to the earnings figure is shown below, along with the effect on 2002
EPS.
Basic EPS Diluted EPS Year ended Year ended
2002 2002 30 November 30 November
(pence) (pence) 2002 2001
# #
1.59 1.52 EPS / profit after taxation 180,575 180,066
3.90 3.72 Add: amortisation of goodwill 441,178 212,133
- - Tax effect of adjustments - -
------------- ------------- ----------------- --------------
5.49 5.24 EPS / adjusted earnings 621,753 92,199
------------- -------------- ----------------- --------------
10 Share capital and reserves
30 November 30 November
2002 2001
Authorised
Number of 1p ordinary shares 13,000,000 13,000,000
Nominal value # 130,000 130,000
----------------- ----------------
Issued and fully paid
Number of 1p ordinary shares 11,761,903 11,595,236
Nominal value # 117,619 115,952
----------------- ----------------
Movements in issued share capital, share premium and merger reserve in the year
comprised:
Number of Share Share Merger
ordinary capital premium reserve
shares # # #
As at 30 November 2001 11,595,236 15,952 2,060,985 1,390,799
Issued at 76p per share as additional
consideration for acquisition of Guided
Image 166,667 1,667 - 125,000
---------------- ------------ ------------- ---------------
As at 30 November 2002 11,761,903 17,619 2,060,985 1,515,799
---------------- ------------ -------------- ---------------
11 Shares to be issued
2002 2001
# #
At 1 December 153,334 -
Shares issued in 2002 re Guided Image acquisition earn-out (153,334) 153,334
Shares to be issued in 2003 re MDA acquisition retention 44,444 -
-------------- ------------
At 30 November 44,444 153,334
-------------- ------------
The 166,667 shares issued in February 2002 in relation to the Guided Image
acquisition were calculated for the purposes of the 30 November 2001 balance
sheet at 92 pence per share, being the market price at that date. The shares
were actually issued at 76 pence per share as noted in note 10 above.
The value of the 55,555 shares to be issued in 2003 in relation to the retention
element of the acquisition consideration for MDA Solutions Limited (acquired in
March 2001) has been calculated at 80 pence per share, the market price at 30
November 2002
The closing balances comprise:
30 November 30 November
2002 2001
Group # #
Nominal value of shares to be issued 556 1,667
Merger reserve arising on consolidation (at year end share price 43,888 151,667
of 80p)
------------- -------------
44,444 153,334
------------- -------------
Company
Nominal value of shares to be issued 556 1,667
------------- -------------
12 Movement on profit and loss reserve
Group Company
Profit and Profit and
loss loss
account account
# #
Balance at 30 November 2000 499,178 334,518
Retained profit for the year ended 30 November 2001 180,066 65,488
------------- ------------
Balance at 30 November 2001 679,244 400,006
Retained profit/(loss) for the year ended 30 November 2002 92,361 (58,346)
------------- -------------
Balance at 30 November 2002 771,605 341,660
------------- -------------
13 Reconciliation of movements in shareholders' funds
Year ended Year ended
30 November 30 November
Group 2002 2001
# #
Retained profit for the financial year 92,361 180,066
Issue of ordinary share capital 126,667 1,400,000
(Decrease)/increase in shares to be issued (108,890) 153,334
-------------- ------------
Increase in shareholders' funds 110,138 1,733,400
Shareholders' funds at start of year 4,400,314 2,666,914
--------------- -------------
Shareholders' funds at 30 November 4,510,452 4,400,314
--------------- -------------
14 The financial information set out in this announcement does not
constitute the Company's statutory accounts for the years ended 30 November 2002
and 2001. The financial information for the year ended 30 November 2001 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 s237 (2) or (3)
Companies Act 1985. The statutory accounts for the year ended 30 November 2002
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies.
Enquiries:
Ian Bowater, Group Chief Executive
Simon Duckworth, Group Finance Director
Compass Software Group Plc
Today: 0207 588 7511
Thereafter: 01455 202727
www.compass-software.co.uk
Alan Cooke
Citigate Dewe Rogerson
Tel: 0121 455 8370
This information is provided by RNS
The company news service from the London Stock Exchange
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