RNS Number:3910U
Strategic Thought Group PLC
21 November 2005
STRATEGIC THOUGHT GROUP PLC
Announces Maiden Interim Results
for the Six Months ended 30 September 2005
Strategic Thought Group joined the Alternative Investment Market in July 2005.
The Group provides market leading risk management solutions for enterprises in
the US and Europe as well as integration solutions consultancy.
HIGHLIGHTS
*Revenues increased by 37% to #5.1m (2004: #3.7m)
*Profit before tax increased by 76% to #0.9m (2004: #0.5m)
*Earnings per share increased by 105% to 3.9p (2004: 1.9p)
*Cash balance of #5.9m (31 March 2005: #3.3m)
*Acquisition of complementary risk management business, Line International
Limited, in November 2005
*Outlook remains very encouraging
Richard Higgs, Chief Executive Officer, said
"We are delighted with the progress made by the Group during the six months. Our
admission to AIM, the results for the six months and the acquisition of Line,
post period end, all emphasize the Group's expanding presence in the emerging
Enterprise Risk Management market.
The Board views the future prospects of the Group with confidence."
For further information, please contact:
Strategic Thought Richard Higgs, Chief Executive ( Today: +44 (0)20 7448
Group plc Officer 1000
Paul Tuson, Chief Finance ( Thereafter: +44 (0)20
Officer 8410 4000
Biddicks Katie Tzouliadis +44 (0)20 7448 1000
CHAIRMAN'S STATEMENT
Introduction
In July 2005, Strategic Thought joined the Alternative Investment Market and at
the same time, raised #2.4m after flotation expenses via a placing of 2.5
million ordinary shares at 120p. The Board is now pleased to announce the
Group's first set of interim results since admission.
Interim results
The Group's results for the six months to 30 September 2005 came in ahead of
management forecasts. Turnover increased by 37% to #5.1m (2004: #3.7m) and
profit before tax increased by 76% to #0.9m (2004: #0.5m). Earnings per share
rose by 105% to 3.4p on a fully diluted basis (2004: 1.7p).
The balance sheet was strengthened by #2.4m cash from funds raised on the
initial public offering. In addition, the business generated a further #0.4m of
cash from operations (2004: #0.3m).
In line with the statement made in the Admission Document, it is not the
intention of the Directors to pay an interim dividend.
Operating review
Licence sales of Active Risk Manager ("ARM"), the web-based risk management
software system which we launched in 2001, continue to be very strong. The
product, which is currently used by over forty multi-national organisations,
remains a very compelling solution for enterprises and we are continuing to
target large organisations. Notable new business wins over the period included
the US Customs Office, Network Rail, AT&T and Flight Refuelling Limited.
We have also been successful in generating follow-on orders of additional
licences from existing customers. NASA, Rolls Royce and Raytheon all placed
material new orders with us over the period. As part of our growth plans for
ARM, we target in a controlled fashion new market sectors and we were pleased to
win our first customers in the important pharmaceutical and technology
industries.
As we increase licence sales of ARM, the value of annual support contracts
continues to grow. Currently the run rate of support contract revenue stands in
excess of #0.1m a month. We are continuing to invest in the development of
Active Risk Manager and issued Release 2.8 in July 2005 offering improved
functionality.
Our software integration solutions business performed steadily. We are seeking
to increase consulting capacity while maintaining our policy of only recruiting
highly skilled, high calibre personnel.
Acquisition
On 16 November 2005, we were delighted to announce the acquisition of Bristol
based Line International Limited ("Line"). Established in 1992, Line has
developed its own risk management software product, 'RisGen', which to date has
been predominantly targeted at small to medium sized enterprises. The total
initial consideration for Line was #1.2m, being #0.6m in cash paid on completion
and the assumption of net debt of #0.6m. A further consideration of up to #1.56m
is due, dependent on future results.
Line has over sixty customers across a range of sectors, including engineering,
electronics and leisure. It also has a significant presence within the local
government marketplace. The acquisition provides us with a wholly complementary
product to ARM.
We anticipate that Line will contribute at least #250,000 of additional earnings
in the year to March 2007 with no erosion of earnings in the current year.
Outlook
The primary source of the Group's future revenue growth will be the Risk
Management business and licence sales of Active Risk Manager continue to be
strong, with the pipeline developing well in both the USA and Europe.
Over the second half year we plan to expand ARM's sales resource, particularly
in the US and expect to issue Release 3.0 of ARM before the end of the financial
year.
The acquisition of Line offers us significant new opportunities. Its customer
base and market positioning are highly complementary to the Group's and we
expect significant synergies from the combination of the two businesses.
There is a discernible momentum in the markets addressed by the Group and the
Company is well positioned to benefit from the available opportunities. The
Board views the future prospects of the Group with confidence. The outlook for
the current year remains very encouraging.
Peter Morgan
Chairman
Consolidated profit and loss account
for the six months ended 30 September 2005
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
Note #000 #000 #000
Turnover 2 5,077 3,704 9,250
Cost of sales (3,063) (2,273) (5,253)
-------- -------- --------
Gross profit 2,014 1,431 3,997
Operating expenses (1,199) (941) (2,316)
-------- -------- --------
Total operating profit 815 490 1,681
Interest receivable and similar income 86 24 53
Interest payable and similar charges - (1) (3)
-------- -------- --------
Profit on ordinary activities before taxation 901 513 1,731
Taxation 3 - (127) (366)
-------- -------- --------
Profit on ordinary activities after taxation 901 386 1,365
Dividends 4 - - (248)
-------- -------- --------
Retained profit 901 386 1,117
======== ======== ========
Earnings per share
Basic 5 3.9p 1.9p 6.5p
Diluted 5 3.4p 1.7p 5.8p
All operations are classified as continuing.
There are no recognized gains or losses other than those shown in the
consolidated profit and loss account above.
Consolidated balance sheet
as at 30 September 2005
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
Note #000 #000 #000
Fixed assets
Tangible assets 118 77 92
Current assets
Debtors: amounts falling due within one year 3,114 1,479 5,506
Debtors: amounts falling due after more than
one year 450 - 647
Cash at bank and in hand 5,938 1,464 3,311
-------- -------- --------
9,502 2,943 9,464
Creditors: amounts falling due within one year (3,375) (1,300) (6,430)
-------- -------- --------
Net current assets 6,127 1,643 3,034
Total assets less current liabilities 6,245 1,720 3,126
Creditors:amounts falling due after more
than one year (470) (8) (683)
-------- -------- --------
Net assets 5,775 1,712 2,443
======== ======== ========
Capital and reserves
Called up share capital 250 22 22
Share premium 6 2,397 680 680
Other reserves 6 486 - -
Profit and loss account 2,642 1,010 1,741
-------- -------- --------
Total equity shareholders' funds 5,775 1,712 2,443
======== ======== ========
Consolidated cash flow statements
for the six months ended 30 September 2005
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
Note #000 #000 #000
Net cash inflow from operating activities 7 409 262 2,290
Returns on investments and servicing of
finance 7 86 23 50
Taxation 7 - - (126)
Capital expenditure and financial investment 7 (48) (15) (45)
Equity dividends paid to shareholders 7 (248) (61) (66)
-------- -------- --------
Net cash inflow before financing 199 209 2,103
Financing 7 2,430 693 654
-------- -------- --------
Increase in net cash 2,629 902 2,757
======== ======== ========
Reconciliation of movements in total shareholders' funds
for the six months ended 30 September 2005
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Opening equity shareholders' funds 2,443 642 642
Allocation of shares in lieu of options 65 - -
New share capital subscribed for cash 3,000 684 684
Costs associated with capital subscription (634) - -
Profit for financial period 901 386 1,365
Dividends - - (248)
-------- -------- --------
Closing equity shareholders' funds 5,775 1,712 2,443
======== ======== ========
Notes to the Accounts
1. Basis of preparation
The interim results, which have not been audited or reviewed by the Group's
auditors, were approved by the Board of Directors on 18 November 2005 and have
been prepared following the accounting policies set out in the 2005 annual
report and accounts of Strategic Thought Limited. The 2005 annual report and
accounts of Strategic Thought Limited received an unqualified auditors' report
and have been filed with the Registrar of Companies.
On 15 June 2005 the shareholding of Strategic Thought Limited transferred to
Strategic Thought Group plc and the combination was accounted for using merger
accounting.
Since July 2005, and the creation of Strategic Thought Group plc, the statements
presented are the consolidated financial statements of the Group. The directors
do not consider that this change in reporting policy has had a material effect
to the results and balances as disclosed in the 2005 annual report and accounts
of Strategic Thought Limited.
2. Segmental analyses
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Turnover analysis by geographical destination:
United Kingdom 3,774 3,118 6,622
Europe 10 107 130
USA 1,293 479 2,498
-------- -------- --------
5,077 3,704 9,250
======== ======== ========
Turnover analysis by business segment:
Enterprise risk management 2,133 1,182 3,941
Software integration solutions 2,944 2,522 5,309
-------- -------- --------
5,077 3,704 9,250
======== ======== ========
Profit before tax analysis by business segment:
Enterprise risk management 556 222 1,087
Software integration solutions 259 268 594
-------- -------- --------
815 490 1,681
Net interest 86 23 50
-------- -------- --------
901 513 1,731
======== ======== ========
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Net assets/(liabilities) analysis by business segment:
Enterprise risk software 824 368 256
Software integration solutions 131 (165) (96)
Group net assets 4,820 1,509 2,283
-------- -------- --------
5,775 1,712 2,443
======== ======== ========
Predominantly all the turnover, profit before tax and net assets by origin arise
in the UK.
3 Taxation
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Current taxation - 127 366
======== ======== ========
The anticipated effective rate of corporation tax for the year ending 31 March
2006 is 0%. Therefore the effective rate of corporation tax for the period is
lower (2004: lower) than the standard rate of corporation tax in the UK of 30%
(2004: 30%), which is primarily because of tax credits on the exercise of stock
options.
The Group has a deferred tax asset that is not significant and has not been
recognized for the six months ended 30 September 2005, six months ended 30
September 2004 nor the year ended 31 March 2005.
4 Dividends
The directors do not recommend the payment of an interim dividend.
The decision with regard to the payment of a final dividend in respect of the
year ending 31 March 2006 will be taken once the results for that period are
finalised.
5 Earnings per share
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Profit attributable to shareholders 901 386 1,365
Number Number Number
Weighted average number of shares in
issue 23,161,043 20,444,653 21,001,677
Dilution effect of share options 2,995,384 2,553,000 2,553,000
-------------- -------------- -------------
Diluted weighted average number of
shares in issue 26,156,427 22,997,653 23,554,677
Basic earnings per share 3.9p 1.9p 6.5p
Diluted earnings per share 3.4p 1.7p 5.8p
============== =============== ============
Basic earnings per share is calculated on the results attributable to ordinary
shareholders divided by the weighted average number of shares in issue during
the period.
Diluted earnings per share calculations reflect the dilutive effect of share
option schemes.
6 Reserves
Other reserve is a result of merger accounting being adopted as per note 1.
7 Cash flows
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Unaudited)
#000 #000 #000
Net cash flow from operating activities
Operating profit 815 490 1,681
Depreciation of tangible fixed assets 22 26 42
Decrease/(increase) in debtors 2,594 460 (2,686)
(Decrease)/increase in creditors (3,022) (714) 3,253
-------- -------- --------
409 262 2,290
======== ======== ========
Returns on investments and servicing of finance
Interest received 86 24 53
Interest paid - (1) (3)
-------- -------- --------
86 23 50
======== ======== ========
Taxation
Corporation tax paid - - (126)
======== ======== ========
Capital expenditure and financial investment
Purchase of tangible fixed assets (48) (15) (45)
======== ======== ========
Dividends (248) (61) (66)
======== ======== ========
Financing
Issue of ordinary shares 3,000 684 684
Less expenses (634) - -
Issue of shares in lieu of options 65 - -
Advance/(repayment) of long term loans - 12 (24)
Capital element of hire purchase contracts (1) (3) (6)
-------- -------- --------
2,430 693 654
======== ======== ========
8 Interim statement
A copy of this statement will be sent to shareholders. Additional copies are
available on request from the Group's registered office: The Old Town Hall, 4
Queens Road, Wimbledon, London SW19 8HY.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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