RNS Number:5520S
Electronic Data Processing PLC
27 November 2003
27 November 2003
Electronic Data Processing PLC (EDP)
Preliminary results for the year ended 30 September 2003
EDP is the largest IT solution provider to the UK independent Builders and
Timber Merchants market place and a leading supplier to the wholesale
distribution industry.
Financial Highlights:
* Turnover #8.7 million (2002: #8.5 million).
* Revenue from software licences, professional services and hosting
services up 10%.
* Profit before exceptional items and goodwill amortisation #1.0 million
(2002: loss #297,000) after R & D expenditure of #1.74 million
(2002: #1.84 million).
* Research & Development tax credit of #628,000.
* Earnings per share 3.97p (2002: loss per share 5.03p).
* Cash balances as at 30 September of #5.7 million.
* Final dividend of 1.663p per share (2002: 1.594p).
* Overall dividend of 2.369p per share (2002: 2.300p), an increase of
3%.
Business Highlights:
* Some improvement in demand for Group software products and hosted
services despite tough trading conditions.
* Quantum VS XML Highway well received.
* Development of next generation software products well underway.
* New financial year has begun well with major new client for hosted
services.
Michael Heller, Chairman of EDP, said:
"Although there has been some improvement in demand, trading conditions in the
sector do remain tough. However, with the launch of our new products, I remain
optimistic about the medium-term prospects for the Group as we move to becoming
a higher margin software and services orientated organisation and anticipate we
will continue to achieve acceptable profitability in the year ahead."
For further information please contact:
Richard Jowitt Julian Wassell
Chief Executive Financial Director
0114 2622001 0114 2622007
www.edp.fastfreenet.com
Chairman's Statement
Group pre-tax profit for the year to 30 September 2003, before exceptional items
and goodwill amortisation, was #1.0 million compared with a loss of #297,000 in
2002. Turnover rose to #8.7 million and this compares with #8.5 million in the
prior year. These substantially improved results are to be welcomed at a time of
continuing difficult trading conditions in the computer services sector
generally.
Revenues from software licences, professional services and application hosting
services grew by 10% to #6.1 million. This growth was partially offset by the
continuing anticipated decline in the value of computer equipment maintenance
revenues. We have continued the process of managing down the Group cost base and
the benefits of this process are now showing through in these results as we
transition the business into that of being wholly a deliverer of software and
services.
The exceptional items relate to reorganisation and legal costs. These amount to
#88,000 and #475,000 respectively. The exceptional legal charge represents the
disposal of litigation, issued against a former BCT customer for copyright
infringement, which it finally admitted but against which we did not recover our
full costs. The goodwill charge of #159,000 is in respect of the acquisitions of
Disys and BCT, which is being amortised over five years. The final amortisation
charge will be taken in the year to 30 September 2005.
The Group has won certain important new contracts for its software products and
hosted services during the year, including orders for Quantum VS XML Highway,
which have produced significant initial fees when they closed in the last
quarter. These new contracts will steadily make an improving contribution to
profits as recurring revenues flow from completed customer implementations.
Recurring revenues in the year amounted to #5.6 million, 64% of turnover.
We have continued our commitment to Research and Development, spending #1.74
million, compared with #1.84 million last year. This expenditure, which is
essential to safeguard our future, has been written off to Profit and Loss. We
have now claimed an additional 50% tax deduction for novel and innovative
Research and Development, under the provisions of the Finance Act 2000, and this
has generated an additional tax credit of #628,000. This matter is dealt with
more fully in the Chief Executive's Statement.
The Group's balance sheet remains strong at #14.5 million, representing net
assets per share of 59.4p as at 30 September 2003. Cash balances were some #5.7
million and the Group's freehold property portfolio, at net book value, was #9.2
million. The Group continues to seek to use these cash balances for the
acquisition of similar software solution providing businesses.
Your Directors propose to pay a final dividend of 1.663p per share which,
together with the interim dividend of 0.706p per share paid on 1 August,
represents an overall increase of 3% for the year. The final dividend will be
paid on 7 April 2004 to shareholders on the register at 5 March 2004. The shares
will be ex-dividend on 3 March 2004.
Although there has been some improvement in demand, trading conditions in the
sector do remain tough. However, with the launch of our new products, I remain
optimistic about the medium-term prospects for the Group as we move to becoming
a higher margin software and services orientated organisation and anticipate we
will continue to achieve acceptable profitability in the year ahead.
MICHAEL HELLER
Chairman 26 November 2003
Chief Executive's Statement
Although trading conditions remain tough we are seeing some improvement in
demand as the market begins to take on board the business benefits to be
achieved by trading electronically. The return to pre 2000 levels of activity is
still some way off and, in my opinion, will begin to accelerate when next
generation products become available.
The generational change in the technology used to engineer software application
solutions for the future, and about which I reported in my last statement, is
gathering pace around the world, coalescing around web services, software bus
and re-useable object component technologies.
These underlying technologies are something into which we have conducted
exhaustive research and they are being used in the delivery of our next
generation products, all branded Quantum VS. This is an important and exciting
time in computing history, which occurs once every twenty or twenty-five years.
As reported in my statement last year, our subsidiary BCT won a copyright
infringement case against a former customer. However, despite a legal appeal,
BCT did not recover its full costs and these have been fully reflected in the
exceptional charge. Most importantly, as a result of this action, the integrity
of BCT's copyright protection has been preserved.
Operational Review
The implementations of Quantum VS XML Highway have proceeded to plan and we
anticipate further orders for this important software technology in the months
and years ahead. Additional functionality has been incorporated, enhancing its
capability to send proofs of delivery, for example, from hand-held tablet
devices operated in the field, using bar code scanning and GPRS transmission
technologies. The Quantum VS XML Highway is a highly specialised, functional and
technically complex software product which utilises the Group ISP facility,
fastfreenet.com. Highway is being licensed to existing clients and other
independent software vendors who do not have the technical or financial
resources to develop their own equivalent product.
Some twenty users have now implemented the powerful Quantum VS myViewpoint
Business Intelligence and Decision Support solution. Users of myViewpoint are
achieving considerable benefit from the highly refined management information
extracted from their corporate data warehouses, which is automatically delivered
to them in a familiar 'point & click' environment. This information is generated
from comparisons with personal, pre-determined business metrics, highlighting
any and all anomalies through a multi-layer traffic light warning mechanism. The
results from myViewpoint are available to users at their desktops and over the
Internet, making the delivery of sophisticated Business Intelligence easily
accessible at any time from anywhere. Many more prospective clients are
evaluating Quantum VS myViewpoint and we expect further significant orders for
this product in the years ahead.
After an exhaustive research programme, completed by our Advanced Research &
Development organisation, our next generation software products are now in
development. The implementation of the Windows interface for our four existing
distribution applications will enable the tight integration of our products with
third-party 'best of breed' software, such as warehouse management systems. This
technology has been successfully proven through the implementation of two
important client third-party warehouse management systems. First delivery of the
Windows-enabled products is scheduled for May 2004. Other integration programmes
are underway and these include Customer Relationship Management systems.
In parallel with this work, the development of the underlying re-usable object
business components for our next generation distribution software product is
underway. This exciting development will bring together all the complex and
comprehensive functionality of our existing software products into a single
product set, delivered in a leading edge, flexible and extensible system
architecture, which will have a product life cycle of twenty to twenty-five
years. This product design enables existing clients to transition to the next
generation easily and without disruption.
Client Support Services
Once again, our client support groups have performed well in the delivery of
dependable services in an increasingly complex, multi-vendor IT environment. '
Making it work and keeping it working' is the primary function undertaken by our
exceptionally talented support services teams who are dedicated to our clients
and are highly regarded by them. Our support teams carry out their duties in a
professional manner and go to great lengths to solve problems irrespective as to
'whose fault it is', although we may not have supplied the particular product.
In today's service orientated businesses, too often, the 'it's not my problem'
approach, is the great difficulty experienced by many computer users who have
complex systems sourced from multiple vendors. Our support teams recognise the
need for our clients to keep their multi-user systems up and running and I pay
particular tribute to their performance and dedication.
Financial Review
The return to profitability, with pre-tax profits of #1.0 million before
exceptional items and goodwill amortisation, on turnover marginally ahead at
#8.7 million, is to be welcomed. This compares with a loss of #297,000 on
turnover of #8.5 million in the prior year. The increase of 10% in software
licences, professional services and application hosting services revenues is
significant. In the last quarter certain important transactions that we had been
working on throughout the year closed, enabling initial fees to be invoiced.
Work is progressing on these implementations and recurring revenues will be
billed when live running commences. Recurring revenues in the year under review
were maintained at #5.6 million representing 64% of turnover.
These results include the benefit of the reduction that has been made in the
Group cost base, where we continue to focus our attention. This has been
achieved whilst maintaining the high level of service we provide to our clients.
The cost base reduction has primarily affected our computer engineering services
organisation as new computers now regularly come with up to three years
manufacturer's warranty.
Reorganisation costs in the year amounted to #88,000 and the exceptional legal
charge of #475,000 is in respect of the final costs incurred in the litigation
proceedings issued against a former BCT customer for copyright infringement,
which it finally admitted.
We have now claimed the additional tax allowance for small and medium sized
companies, introduced by Government from 1 April 2000, for expenditure on novel
and innovative Research and Development. This has resulted in a tax credit of
#628,000, of which #173,000 relates to the year under review.
Once our claims have been agreed by the Inland Revenue, we should obtain a tax
refund of #123,000. The balance of the allowances are included in our tax losses
carried forward of #1.9 million, which have a potential tax saving value of
#575,000.
Advantage was taken of the weakness in the Group share price when, on 30 May,
the Group bought back for cancellation 250,000 ordinary shares at a price of 53p
each, absorbing cash of #132,500.
The Group balance sheet remains strong with cash balances of some #5.7 million
and freehold property assets, at net book value, of some #9.2 million. Net
assets per share as at 30 September 2003 are 59.4p.
Outlook
The new financial year has begun well with the winning of a major new national
distributor client for the Group's hosted e-business product suite, including
the Quantum VS XML Highway managed service. A major marketing effort is now
underway to increase the number of new clients for this important service.
Activity levels in the sector remain subdued. However, the strength of the Group
product sets and our innovative Research & Development programmes, which are
delivering important new software products, aimed at our existing client base,
other Independent Software Vendors and the business market place generally,
ensure that the Group remains highly competitive.
Finally, I want to thank all our members of staff for their continued hard work
and dedication in providing high quality service levels to our clients, at a
time of great change and increased complexity in the information technology
services field.
RICHARD J. JOWITT
Chief Executive 26 November 2003
Consolidated Profit and Loss Account
for the year ended 30 September 2003
2003 2002
#'000 #'000
Turnover - continuing operations 8,686 8,480
Operating Costs - ongoing 8,064 9,171
- net exceptional items (note 6) 563 938
(8,627) (10,109)
Operating profit / (loss) - continuing operations 59 (1,629)
Interest receivable 229 239
Interest payable and other similar charges (4) (4)
Profit / (loss) on ordinary activities before taxation 284 (1,394)
Tax on profit / (loss) on ordinary activities 691 145
Profit / (loss) on ordinary activities after taxation 975 (1,249)
Dividends paid and proposed (578) (567)
Profit / (loss) for the financial year 397 (1,816)
Earnings / (loss) per share 3.97p (5.03p)
Earnings / (loss) per share before exceptional items and goodwill 6.22p (0.61p)
amortisation
Dividends per share 2.37p 2.30p
Net assets per share 59.4p 57.8p
Consolidated Balance Sheet
at 30 September 2003
2003 2003 2002 2002
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 454 720
Tangible assets 9,939 10,298
10,393 11,018
Current assets
Stocks 544 626
Debtors 2,637 2,581
Investments 23 40
Cash at bank and in hand 5,726 5,790
8,930 9,037
Creditors:
amounts falling due within one year (2,060) (2,643)
Net current assets 6,870 6,394
Total assets less current 17,263 17,412
liabilities
Provisions for liabilities (18) (302)
and charges
Deferred income (2,759) (2,871)
Net assets 14,486 14,239
Capital and reserves
Called up share capital 1,220 1,233
Share premium account 77 77
Revaluation reserve 933 944
Capital redemption reserve 88 75
Profit and loss account 12,168 11,910
Equity shareholders' funds 14,486 14,239
Consolidated Cash Flow Statement
for the year ended 30 September 2003
2003 2003 2002 2002
#'000 #'000 #'000 #'000
Net cash inflow from operating 445 454
activities
Returns on investments and servicing of
finance
Interest received 249 259
Interest paid (4) (3)
Interest element of finance lease - (1)
rentals
245 255
Taxation
Corporation tax (paid) / received (11) 192
Capital expenditure and financial
investment
Purchase of tangible fixed assets (79) (164)
Sale of tangible fixed assets 25 18
Sale of investments 17 17
(37) (129)
Equity dividends paid (565) (575)
Net cash inflow before use of liquid 77 197
resources and financing
Management of liquid resources
Decrease in short term deposits 59 403
Financing
Purchase of own shares (133) (518)
Repayment of capital element of finance (1) (4)
leases
(134) (522)
Increase in cash in the year 2 78
Statement of Total Recognised Gains and Losses
for the year ended 30 September 2003
2003 2002
#'000 #'000
Profit / (loss) for the financial year 975 (1,249)
Currency translation differences on foreign (17) (27)
currency net investments
Total recognised gains and losses 958 (1,276)
for the year
Notes
(1) The results to 30 September 2003 have been prepared in accordance
with the accounting policies to be adopted in the full financial
statements, and are the same as those policies used in the preparation of
the accounts for the year ended 30 September 2002. The Group's accounting
policy for turnover and revenue recognition is as follows:
Turnover represents the sales of goods and services at invoiced value less
amounts relating to future periods and excluding value added tax and
transactions between Group Companies. Revenues are recognised when there
are no significant vendor obligations remaining and the collection of
the resulting receivable is considered probable.
Revenue from the sale of initial licences for software products is
recognised upon delivery of the product to customers. Recurring licence
fees are recognised evenly over the period to which they relate. Revenue
from the provision of professional services, including training,
implementation and consultancy, is recognised when the services have
been performed and invoiced. Computer equipment sales are recognised on
delivery to customers. Equipment maintenance charges are recognised evenly
over the period to which they relate.
(2) The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2003 or 2002. Statutory
accounts for 30 September 2002 have been delivered to the registrar of
companies, and those for 2003 will be delivered following the Company's
annual general meeting. The auditor has reported on those accounts; its
reports were unqualified and did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.
(3) In the opinion of the Directors, the Group has only one class of trade. For
further information, the following analysis of turnover is given:
2003 2002
#'000 #'000
Software licences, professional 6,118 5,543
services & application hosting services
Computer equipment, engineering 2,568 2,937
maintenance & network services
8,686 8,480
Notes (continued)
(4) Earnings / (loss) per share is calculated by dividing the profit for the
year after taxation of #975,000 (2002: loss of #1,249,000) by 24,568,115
(2002: 24,829,074) being the weighted average number of shares in issue
during the year. Basic and diluted earnings per share are the same.
Earnings / (loss) per share before exceptional items and goodwill
amortisation is calculated by dividing the profit for the year after
taxation, but before exceptional items and goodwill amortisation, of
#1,697,000 (2002: loss of #152,000) by 24,568,115 (2002: 24,829,074) being
the weighted average number of shares in issue during the year, and is
reconciled to basic earnings per share as follows:
2003 2002
Basic earnings / (loss) per 3.97p (5.03p)
share
Exceptional items 2.29p 3.78p
Tax effect of exceptional (0.69p) -
items
Goodwill amortisation 0.65p 0.64p
Adjusted earnings / (loss) 6.22p (0.61p)
per share
(5) Goodwill amortisation of #159,000 (2002: #159,000) has been charged to the
profit and loss account during the year. This relates to goodwill arising
from the acquisitions of Disys Associates Limited and BCT Software
Solutions Limited.
(6) Operating costs includes the 2003 2002
following exceptional items:
#'000 #'000
Legal costs 475 629
Costs relating to potential - 254
acquisitions
Reorganisation & redundancy 88 55
costs
563 938
(7) Reconciliation of operating result to net cash
inflow from operating activities
2003 2002
#'000 #'000
Operating profit / (loss) 59 (1,629)
Depreciation and 676 774
amortisation
Changes in working capital (290) 1,309
and other non-cash items
Cash inflow from operating 445 454
activities
Notes (continued)
(8) Reconciliation of net cash flow to movement in net funds
2003 2002
#'000 #'000
Increase in cash in the year 2 78
Repayment of capital element of 1 4
finance leases and hire
purchase contracts
Cash inflow from short term (59) (403)
deposits
Change in net funds from cash (56) (321)
flows
Exchange differences (7) (12)
Movement in net funds (63) (333)
Net funds at 1 October 5,789 6,122
Net funds at 30 September 5,726 5,789
(9) This preliminary announcement was approved by the Board of Directors on
26 November 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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