RNS Number:1323Z
Comino Group PLC
27 May 2004
COMINO GROUP PLC: FINAL RESULTS
Profits in line with expectations
Comino Group plc ("Comino"), the provider of software based Service Delivery
Solutions for Local Government (LG), Social Housing, and Occupational Pensions
administration, announces Final Results for the year ended 31 March 2004.
In his Statement, David Quysner, Chairman, said:
"I am pleased to announce that results for the year ended 31 March 2004 show
significant progress and a level of profit that is in line with expectations. It
is particularly pleasing to note a strong performance in the Local Government
sector."
Financial Highlights
* Operating profit in line with market expectations.
* PBT before amortisation of goodwill but before exceptional legal costs of
#149,000, was #2.21m (2003: #1.61m) up 37%.
* PBT #1.71m (2003: #1.21m) up 41%.
* Group turnover of #24.5m (2003: #24.5m) was level after ceasing #800,000
of managed services.
* Turnover in LG, on a like for like basis, up by 11% with better
positioning for enterprise-wide solutions.
* Gross profit margin was 79% (2003: 79%).
* Final dividend of 4.4p; Total dividend for the year 6.6p (2003: 5.9p) up
by 12%.
* Cash balances at 31 March 2004 were #10.7m (2003: #8.3m).
* Adjusted earnings per share was 9.6p (2003: 8.3p)
Regarding Exceptional Items David Quysner said:
"The potential litigation referred to in the last interim statement has
regrettably materialised. The claim relates to an #850,000 contract in Social
Housing which commenced in May 2001. These accounts include exceptional
expenditure of #149,000 on related legal fees. No provision is made within these
accounts for future legal fees or any potential future settlement but there are
no other amounts in these accounts that are unprovided for in respect of this
disputed contract. Comino has entered a robust defence and counterclaim and is
in discussions with its professional indemnity insurers. At this stage, the
eventual outcome of this matter cannot be predicted with any certainty."
Operational Highlights
* Significant progress made in further improving Comino's Service Delivery
Solutions.
* P&L performance reflects resilient revenue streams; Strong balance sheet.
* Increased potential to sell significant enterprise-wide solutions to Local
Government
* Year end order book up 10% year-on-year.
* Integration of divisions within Comino plc, the main operating company,
offers further potential for increased efficiency and enhanced operating
profit margins.
Garth Selvey, Group Chief Executive, said:
"Comino continues to improve its Service Delivery Solutions for use by our
customers in dealing with members of the public. This is providing a proven
platform on which to base future growth in all of our market sectors."
Enquiries
Comino plc Binns & Co PR Ltd
Garth Selvey, Chief Executive Tel: 020 7786 9600 on the day Peter Binns, Paul McManus
Paul Clifford, Finance Director Thereafter: 01628 525 433 Tel: 020 7153 1485
Mob: 07980 541 893
Editor's Notes
Comino has a strong presence as a modern software solutions provider in Local
Government, Social Housing and Occupational Pensions. The Company's solutions
are based on Workflow, Electronic Document Management (EDM) and a high
competence level in the back-office administration systems that are associated
with their target markets. Improved service delivery solutions are at the heart
of the product strategy.
Comino's operating companies are based near Maidenhead and in Leeds, Croydon and
the West Midlands.
Chairman's Statement
I am pleased to announce that results for the year ended 31 March 2004 show
significant progress and a level of profit that is in line with expectations. It
is particularly pleasing to note a strong performance in the Local Government
sector.
Results
Profit, before tax and amortisation of goodwill but before exceptional legal
costs of #149,000, was #2.21m (2003: #1.61m) an increase of 37%. After
amortisation of goodwill of #350,000 (2003: #402,000) the profit before tax was
#1.71m (2003: #1.21m) an increase of 41%.
Turnover of #24.5m (#24.5m) is up by a modest 3% when #800,000 of managed
services business, ceased in March 2003, is taken into account. On the same
basis, turnover in Local Government sales is up by 11% and the company now has a
far stronger position from which to achieve further growth in enterprise-wide
systems. Gross profit margin was an unchanged 79%.
Cash balances at 31 March 2004 were #10.7m compared with #8.3m last year.
Dividends
An increased final dividend of 4.4pence per share (2003: 4.0p) will be paid on
23 July 2004 to shareholders on the register at 2 July 2004. This will take the
total dividend for the year to 6.6 pence (2003: 5.9p).
Exceptional item
The potential litigation referred to in the last interim statement has
regrettably materialised. The claim relates to an #850,000 contract in Social
Housing which commenced in May 2001. These accounts include exceptional
expenditure of #149,000 on related legal fees. No provision is made within these
accounts for future legal fees or any potential future settlement but there are
no other amounts in these accounts that are unprovided for in respect of this
disputed contract. Comino has entered a robust defence and counterclaim and is
in discussions with its professional indemnity insurers. At this stage, the
eventual outcome of this matter cannot be predicted with any certainty.
Operational
During the year, Local Government, Comino Techflow and Comino Connect all
exceeded expectations. However, the market for replacement administration
systems in Occupational Pensions remained difficult and, despite some
significant new business at the year end, turnover was down in this period.
Social Housing was also behind plan, with a lower than expected level of new
business. In part, this was a result of the commitment to meet customer needs on
existing installations but also to the need for organisational change, which has
now been implemented.
Outlook
Local Government continues to improve and has won more than #1m of new business
in the first month of the new year. In spite of some recent difficulty, housing
across the Group has achieved notable successes and there are continuing
opportunities for this business. Occupational Pensions essentially awaits an
upturn in replacement levels of administration systems.
The Group has integrated the divisions within Comino plc, its main operating
company, into one unit under a single Managing Director. This has resulted in a
stronger management structure, greater and more flexible use of resources and
easier dissemination of best practice throughout the Group. The changes that
have been made also reflect a need for the Group to be more project than sector
oriented so as to compete for larger and more complex contracts.
Comino maintains its emphasis on Workflow and Electronic Document & Records
Management and with the cooperation of our customers, we continue to deliver
sophisticated products that meet the demands both of process based front-office
service delivery and complex back-office systems.
As ever, the results achieved this year reflect the skills, commitment and
application of Comino's staff. On your behalf, I thank them for their valuable
contribution.
David Quysner
Chairman
Review of Operations
For the last four years, Comino plc, the principal operating company, has traded
with a divisional structure. The activities of Local Government, Social Housing
and Occupational Pensions have now been integrated within Comino plc. Comino
Techflow and Comino Connect remain as separate company units.
Integration provides a number of benefits. It allows the selection of a stronger
management team and common management processes. In addition, it facilitates
fuller adoption of best practice across all areas of the company's operations;
for example, a standard methodology has been adopted for all project
management. Most importantly, integration allows more flexible and efficient use
of resource.
Comino has a resilient mix of revenues, the cornerstone of which is recurring
annual support. However, in any given market sector, activity levels can vary
from period to period, because of market factors or because of the current
position in the product cycle. Rapid reaction to changing demands is required if
operating margins are to be improved. The larger contracts, which Comino is
increasingly winning, can be particularly demanding and will benefit from the
integration of the divisions.
The company's revenue streams still fall into the three main categories of
support, product and services and each of these areas is being further improved
by the integration process. One notable ratio is that the gross profit from
recurring revenues covers 54% (2003: 48%) of the group's overheads, something
which is clearly a strong resilience factor.
Comino will continue to employ specialists in key market sectors and remains
firmly committed to its Local Government, Housing and Occupational Pension
markets.
Products
The company's products can broadly be divided into two types - front-office (or
customer service delivery) and back-office (or transactional). Workflow
technology drives service delivery to the customer and is more readily
associated, in the public environment, with the front-office. However, the
success of the front-office is much enhanced by effective integration with the
back-office to achieve a modern enterprise-wide solution. Considerable progress
and balance has been achieved in this area.
Electronic Document Management (EDM) is expanding into Records Management to
meet the requirements of the Public Records Office. It is often now referred to
as Electronic Document & Records Management (ED&RM) and often supports the needs
of both front-office and back-office systems. It is common ground and is
increasingly regarded as being at the enterprise level of the organisation and a
key to 'joining up' processes and departments.
Foremost amongst Comino's front-office products is Contact Manager. This
coordinates all contact with a customer via telephone, mail, e-mail, web, kiosk
or visitor centre and can then commence any Workflow process that is required.
Contact Manager links to back-office systems where necessary to obtain current
transaction details. The product is versatile and effective and is being widely
adopted by both existing and new customers, working as it does with back-office
systems from a range of suppliers.
The majority of Comino's back-office systems, installed in 175 locations, are '
Housing transactional'. Most of these are functionally rich, established
systems whilst some 25 are the new Universal Housing Transactional System
(UHTS). Contact Manager will work with either the established systems or the new
UHTS giving customers a choice of upgrade options. Replacing two decades of
functionality with a modern version is not a short term project and whilst
UHTS has achieved a level of functional and operating stability in a number of
sites, there remains much routine hard work to do to equip it for the longevity
enjoyed by its predecessors.
Contracts
Contract wins in Local Government increasingly reflect acceptance of our broader
strategy. The Shropshire IEG Partnership, comprising four local authorities,
chose Comino because of a strong combination of departmental and enterprise
benefits. Departmental successes, for example housing at Rochford, lead
naturally to enterprise-wide adoption of service delivery solutions. Other
enterprise wins include the two London Boroughs of Hackney and Hillingdon,
Wakefield and Castle Morpeth & Alnwick. The depth as well as the breadth of our
enterprise solutions continues to be improved, with the successful installation
at the Social Services department at Wakefield being a prime example.
At the Royal Borough of Kingston Upon Thames, Comino is working to help improve
efficiencies in Homelessness, Temporary Accommodation and Housing Advice
administration. At Minster General Housing Association in Peterborough, Comino
is installing a new Universal Housing Transactional System and a Contact Manager
package. So too at Pennaf Housing Group, where Comino is installing a full
Universal Housing Management Suite including EDM and financial ledgers.
In the Occupational Pensions arena, where Comino has a highly integrated modern
solution known as Universal Pensions Management, the company has recently
secured a major contract with Hymans Robertson, a leading UK consultancy and
actuary, to install a new third party pensions administration system. A new
Pensioner payroll system has also been installed at the Universities
Superannuation Scheme, one of the largest scheme administrators in the country.
It is worth recording that following this accounting period, in April 2004, the
company won projects with Edinburgh and Bradford councils worth a total of over
#1m. Both projects involve work with Benefits systems as part of government
sponsored national projects and testify to the work being done by Comino in
support of the Government's Modernising Agenda.
Other activity
Comino Techflow provides consultancy, business intelligence and systems to
control project costing on major undertakings. The consultancy covers
performance improvement using business process re-engineering and on-line
procedures manuals for activities such as benefit processing, homelessness and
housing development. The business intelligence product provides for high level
reporting using on-line analytical processing (OLAP) of business activities.
OLAP has, for example, been used for arrears recovery, repairs monitoring,
voids management and housing development cash flow.
Comino Techflow has signed an exclusive agreement with Workbench, a New Zealand
software company, to market its project costing system. The software can be
utilised in a number of market sectors and during the year we sold six systems
to Housing Associations specifically to help control housing development
projects. The company achieved its aim and has returned a small profit after
returning a loss of #234,000 last year and its activities will be increasingly
supportive of the Group's other operations.
Comino Connect hosts business applications (Application Service Provision),
provides telecommuting solutions, e-mail, internet and web hosting services. The
majority of its income is recurring. It has returned a profit of #185,000 (2003:
#58,000) and the figures demonstrate that the operation is becoming capable of
making a more significant contribution to the Group.
Contracts were signed for Application Hosting with Railway and Cherchefelle
Housing Associations. Additional business was won with Flagship Housing and
Aldwyck Housing for thin client deployment using terminal server software. Dart
Group signed with Comino Connect as part of the launch of their Jet2 low-cost
airline. Sales of Comino Connect Private ADSL and Virtual Private Networks, both
of which support remote access to large systems from home or small offices,
continue to grow. In addition to this, several contracts were signed with Comino
Group customers to provide Public Information Kiosks to give internet access to
public systems from convenient locations such as town halls and libraries.
Outlook
Comino has a firm base from which to develop further in each of its market
sectors. Local Government presents an enormous opportunity and some 25% of
existing sites are promoting Comino from a 'departmental' to an 'enterprise'
supplier. Our replacement Housing systems continue to improve on all fronts and
benefit in particular from work done initially for Local Government on Contact
Manager. The Occupational Pensions product awaits an upturn in demand for
replacement administration systems, something which we believe is overdue in a
sector which has been preoccupied with other issues. The potential for growth
and increased profitability is clearly present.
Garth Selvey
Group Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2004
2004 2003
#'000 #'000
Turnover 24,507 24,504
Cost of sales (5,176) (5,039)
Gross profit 19,331 19,465
Administrative expenses (17,787) (18,349)
Operating profit 1,544 1,116
Interest receivable 169 100
Interest payable - (7)
Profit on ordinary activities before taxation 1,713 1,209
Tax on profit on ordinary activities (692) 18
Profit on ordinary activities after taxation 1,021 1,227
Minority interest (40) 14
Profit for the financial year 981 1,241
Dividends (916) (819)
Profit retained for the financial year 65 422
Basic earnings per share 7.1p 8.9p
Diluted earnings per share 6.9p 8.9p
Adjusted earnings per share 9.6p 8.3p
There were no recognised gains or losses other than the profit for the year.
All transactions arise from continuing operations.
CONSOLIDATED BALANCE SHEET
As at 31 March 2004
2004 2003
#'000 #'000
Fixed assets
Intangible assets 2,765 2,814
Tangible assets 2,632 2,968
5,397 5,782
Current assets
Stocks 852 452
Debtors 7,602 8,058
Cash at bank and in hand 10,739 8,322
19,193 16,832
Creditors: amounts falling due within one year (6,777) (5,804)
Net current assets 12,416 11,028
Total assets less current liabilities 17,813 16,810
Deferred income (8,667) (7,670)
9,146 9,140
Capital and reserves
Called up share capital 694 694
Share premium account 4,796 4,796
Shares to be issued - 99
Profit and loss account 3,402 3,337
Shareholders' funds 8,892 8,926
Minority interest - equity 254 214
9,146 9,140
The financial statements were approved by the Board of Directors on 26 May,
2004.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2004
2004 2003
#'000 #'000
Net cash inflow from operating activities 4,130 3,923
Returns on investments and servicing of finance
Interest received 169 100
Interest paid - (7)
Net cash inflow from returns on investments and servicing of finance 169 93
Taxation (491) (202)
Capital expenditure and financial investment
Purchase of tangible fixed assets (362) (474)
Purchase of intangible fixed assets (187) -
Sale of tangible fixed assets 18 63
Net cash outflow from capital expenditure and financial investment (531) (411)
Acquisitions and disposals
Purchase of subsidiary undertaking - (131)
Cash and overdrafts acquired - 305
Net cash inflow from acquisitions and disposals - 174
Equity dividends paid (860) (416)
Increase in cash 2,417 3,161
Notes:-
1. The basic earnings per ordinary share of 7.1p has been calculated on
the earnings attributable to ordinary shareholders of #981,000 divided by
the weighted average number of shares in issue during the year of
13,885,802.
The calculation of diluted earnings of 6.9p per share is based on the basic
earnings per share, adjusted to allow for the issue of shares and the post
tax effect of dividends and interest, on the assumed conversion of all
dilutive options and other dilutive potential ordinary shares.
An adjusted earnings per share of 9.6p has been calculated to provide a
better understanding of the underlying trading performance of the Group. It
has been calculated excluding the amortisation of goodwill of #350,000
(2003: #402,000) and the effect of setting up a deferred tax asset
relating to prior periods of #nil (2003: #496,000) and based upon the
weighted average number of shares in issue during the year of 13,885,802
(2003: 13,883,302).
2. The financial information set out above does not constitute the statutory
accounts for the period ended 31 March 2004 within the meaning of Section
240 of the Companies Act 1985. Statutory accounts for the year will be
delivered to the Registrar of Companies following the Company's Annual
General Meeting.
3. The above results for the year ended 31 March 2004 have been abridged from
the full Group accounts for that year, which received an unqualified
auditors report. The results for the year ended 31 March 2003 have been
abridged from the full group accounts.
4. The annual report and accounts will be posted to shareholders on 4 June
2004 and will also be available on request from the company's registered
office, Comino House, Furlong Road, Bourne End, Buckinghamshire SL8 5AQ.
5. The directors are recommending a final dividend of 4.4p per share which, if
approved, will be paid on 23 July 2004 to shareholders on the register on 2
July 2004.
6. The Annual General Meeting will be held at Binns & Co., 9th Floor,
Citypoint, 1 Ropemaker Street, London, EC2Y 9HT on Friday 2 July, 2004 at
11.30 am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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