RNS Number:8739P
CODASciSys PLC
18 September 2003
CODASciSys plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
CODASciSys plc ("CODASciSys") announces its unaudited results for the six months
ended 30 June 2003. Quoted on AIM (stock code: CSY), CODASciSys is
headquartered in Chippenham and is a supplier of specialist software,
consultancy and IT services.
Key points:
* Total revenue was #34.2m (2002: #33.6m).
* Profit before tax and goodwill amortisation was #2.6m (2002: #3.8m).
* Pre-tax profit was #1.3m (2002: #2.9m).
* Results are stated after providing for #0.9m redundancy costs (2002:
#0.1m).
* The CODA Division (financial intelligence and accounting software)
increased operating profits to #3.6m (2002: #2.8m).
* The SciSys Division (business consultancy and IT services) incurred an
operating loss of #0.8m (2002: profit of #1.1m).
* SquareSum, acquired in January 2003, made a maiden profit contribution
of #0.5m.
* Basic earnings per share were 3.3p (2002: 7.4p).
* Net cash was #1.3m after #10.8m expenditure on acquisitions during the
period.
* Interim dividend increased 10% to 1.1p per share (2002: 1.0p).
* Current order book is over #50m including one year's worth of
long-term support and maintenance amounting to over #21m.
On outlook, Chairman, Mike Love stated:
"We are pleased to report that since 30th June, market conditions appear to be
stabilising with improving visibility of forward revenues combining with a
strengthening in order pipelines and order intake across the business. Although
much still remains to be done in the fourth quarter, performance in the second
half is expected to be ahead of that in the first half."
FOR FURTHER INFORMATION, PLEASE CONTACT:
CODASciSys 01249-466466
Mike Love, Chairman, Today: 07715-159500
Graham Steinsberg, Chief Executive designate, CODASciSys Today: 07715-159400
Richard Anning, Group Marketing Manager, CODASciSys Today: 07715-750202
Barrie Newton, Rowan Dartington 0117-925-3377
DIRECTORS' INTERIM REPORT
The Directors present their interim report for the six months to 30 June 2003,
which was approved by the Board on 17 September 2003. Although the results for
the first half have been disappointing, the outlook is improving and the Board
remains particularly pleased with the continued strong performance of the CODA
Division.
OPERATIONS
The CODASciSys Group comprises two primary businesses, the CODA Division and the
SciSys Division. Both provide specialised software, consultancy and IT services
to meet the business requirements of medium to large private and public sector
organisations worldwide.
The CODA Division specialises in financial intelligence and accounting software
which it develops, sells and supports worldwide. The acquisition of the
SquareSum product (renamed CODA-Dream) in January 2003 has extended the market
reach of this Division into the Small & Medium Enterprise (SME) arena. The CODA
Division now accounts for two-thirds of total group revenue.
The SciSys Division provides business consultancy and IT services into specific
vertical sectors through discrete business units - Government & Utilities,
Commerce & Industry, Space & Defence and Commercial. The first two business
units have now been merged into a single entity called Government & Commerce.
Towards the end of the period the Group acquired 'Business Collaborator'. This
extended the range of offerings into the area of business collaboration and
knowledge management.
RESULTS OVERVIEW
The results for the half year have been achieved against a backdrop of
continuing difficult market conditions. Despite these general conditions and
the 'flat' market for traditional accounting systems, the CODA Division has
achieved organic growth for both revenue and profits well ahead of many of its
competitors. The newly acquired SquareSum business has also made a positive
contribution ahead of both its previous performance and our expectations.
As already reported, however, the SciSys Division has been affected by a slower
than expected conversion of new business prospects into firm orders within the
Government & Utilities business unit and has incurred a loss.
Total revenue for the Group for the six months to 30 June 2003 was #34.2m (2002:
#33.6m). This represents a 1.8% increase. Revenues from the existing CODA
business have increased by 3.0% from #20.1m to #20.7m. The acquisition of
SquareSum has provided additional revenues of #1.8m, bringing the total revenue
of the CODA Division to #22.5m. Turnover within SciSys has fallen back from
#13.4m to #11.6m, reflecting the problems primarily within the Government &
Utilities business.
Total operating profit (before goodwill amortisation) was #2.5m (2002: #3.7m),
after providing for redundancy costs of #0.9m (2002: #0.1m). Operating profit
for CODA was #3.6m (2002: #2.9m), including a maiden contribution of #0.5m from
SquareSum. SciSys has incurred an operating loss of #0.8m (2002: profit of
#1.1m). Whilst Space & Defence has performed ahead of expectations, achieving
an operating profit of #0.7m, Government & Utilities has underperformed
significantly with a loss of #1.0m before redundancy costs. Other activities
have contributed the remaining operating profit.
Profit before tax for the period was #1.3m (2002: #2.9m) and basic earnings per
share were 3.3p (2002: 7.4p).
The difficulties experienced in Government & Utilities were largely as a result
of significant delays in orders from key customers. A redundancy programme was
announced in May 2003 to align the SciSys cost base with the anticipated level
of business for the remainder of the year and into 2004. A total of 17 staff,
including some senior management, were made redundant and 6 were transferred to
other parts of the Group.
Cash
The Group continues to be cash generative. At 30 June 2003, net cash was #1.3m
(31 December 2002: #9.4m; 30 June 2002 #7.7m), after payments of #7.9m and #2.9m
associated with the SquareSum and Business Collaborator acquisitions
respectively.
Taxation
The effective tax rate for the Group, excluding goodwill amortisation, reduced
from 22.3% for the year ended 31 December 2002 to 20.8%. This rate assumes a
full year of Research & Development (R&D) tax credits (31 December 2002: 9
months). The Group is in the process of preparing the 2002 R&D claim for
submission to the Inland Revenue.
Deferred income
At 30 June 2003, deferred income was #15.1m (31 December 2002: #14.8m). This
comprised deferred maintenance of #10.0m (31 December 2002: #10.6m), licence
fees of #3.9m (31 December 2002: #3.2m) and projects and consultancy payments on
account of #1.2m (31 December 2002: #1.0m).
Within the #10.0m of deferred maintenance is #1.1m which relates to SquareSum
and Business Collaborator. The underlying deferred maintenance balance is lower
than at 31 December 2002 because some CODA territories invoice their maintenance
by calendar year and, therefore, have a full year's worth of maintenance
deferred within the 31 December figure rather than six month's worth of deferred
maintenance as at 30 June.
The level of deferred licence fees remained stable over the period, with #0.6m
of the 30 June 2003 balance relating to SquareSum.
Interim Dividend Payment
An interim dividend for the year ending 31 December 2003 of 1.1p per share will
be paid on 5 January 2004 to shareholders on the register on 26 September 2003.
CODA DIVISION
During the period the Division has delivered a good performance whilst
continuing to increase its overall investment in product development.
Licence fees
Licence fees were #4.9m (2002: #4.9m), with #0.4m attributable to sales of
CODA-Dream (the renamed SquareSum product range). The volume of licence sales
for financial intelligence applications has increased during the period. CODA
has continued to receive plaudits from Industry Analysts for its Corporate
Performance Management (CPM) strategy and has an increasing number of clients in
this area.
Some significant successes in the period include sales of CODA-Financials to
European Metal Recycling and Vitafoam in the UK, to Gemeente Vlaardingen and
Provincie Utrecht (further strengthening our leadership position in the Public
Sector in Holland), Vos Logistics (in Holland), and the sale of CODA-Dream to
Psion in the UK.
Consultancy
Consultancy revenues were #7.6m (2002: #6.5m), with #0.5m attributable to
CODA-Dream. The improvement reflects strong sales of both financial
intelligence and accounting solutions. Financial intelligence solutions
typically generate up to three times as much consulting revenue per pound of
licence sold compared to the industry average standard for transactional licence
sales.
Maintenance
Maintenance revenues have increased to #10.0m (2002: #8.7m), with #0.9m
attributable to CODA-Dream. Maintenance has continued to grow in line with
expectations, confirming the stability of the CODA and CODA-Dream products and
client bases.
Product Investment
CODA has continued to invest significantly in the ongoing development and
improvement of all its product lines. New releases of CODA-Financials and
CODA-Dream will be made during 2003 providing significant new functions and
releases for 2004 are already in development. The CODA offering has been
substantially extended by the CODA-Intelligence and Planning products which
address the CPM market and the early adoption of these products by clients has
been encouraging. CODA is working to expand these products during 2004
addressing the corporate performance requirements of CODA-Financials and
CODA-Dream clients as well as developing further products to increase CODA's
breadth of offerings.
SquareSum
The successful integration and positive contribution from the SquareSum business
during the first half of 2003 has confirmed the Board's judgement that the
acquisition was an outstanding opportunity to acquire a cash-generative business
complementary to existing operations. The major cost savings identified at the
time of acquisition have now been realised and the former SquareSum premises are
being actively marketed. The SquareSum management team has been successfully
integrated into the CODA business at a time when increasing demands were being
placed on the existing CODA management. Early progress has been made in
improving the indirect channel to market, with new Channel Partners coming on
board in the period.
SCISYS DIVISION
There have been mixed results in this Division during the period, with some
significant project and sales successes.
Space & Defence
This business has performed ahead of expectations during the period and can be
expected to deliver a continued good performance going into 2004. Importantly,
a number of successful project completions and deliveries on key milestones for
major on-going projects have been achieved.
Following on from the development of a Bowman training simulator, SciSys has had
major contract wins on the NBC, Makefast and JETTS Battlefield Information
System Application (BISA) projects, and we are currently bidding for additional
BISA related work. Work on the Cryosat and Mars Beagle 2 Lander projects has
led us into a number of new projects for 2004. Significant work has also been
awarded on the Galileo project (the new European satellite based global
positioning system).
Government & Commerce
The difficulties experienced in the former Government & Utilities business unit
were largely as a result of significant delays in orders from key customers. At
the start of the year a promising pipeline of opportunities led the Directors to
the judgement that a weak performance in the first half of the year could be
recovered by a stronger performance in the second half of the year. Although
this pipeline has remained strong throughout the period, it became increasingly
apparent that the orders would not be received in time to recover the first half
shortfall, and that staff numbers would have to be reduced.
The Government & Utilities and Commerce & Industry businesses have been merged
into a single business unit (called Government & Commerce) beneath a single
sales and operations management team. Some of the orders delayed from the first
half have now been secured and the newly formed business should move back into
profit during the second half of 2003.
Despite the problems experienced during the period, there have been some notable
project wins. These include: a project for the London Electricity Group to
migrate all of their supply businesses onto a common Distribution Use of Systems
(DUoS) platform; a project for the Environment Agency for the next phase of the
National Flood and Coastal Defence Database; and a major extension to the
Environmental Data Reporting system for Thames Water.
In addition, the position of SciSys as a leading player in the Geographic
Information System ('GIS') marketplace has been reinforced with projects for The
National Trust, The Countryside Agency and Thames Water.
Commercial
This business has performed well in the period, continuing to provide services
to the Chartered Insurance Institute.
BUSINESS COLLABORATOR
In April 2003 we announced the acquisition of the activities of Business
Collaborator ('BC'). Based in Reading, BC provides business collaboration and
knowledge management solutions to a range of blue chip clients in a number of
sectors, with particular success in the engineering and construction sectors.
Although not expected to make more than a nominal contribution to the Group
results for 2003, BC is, nevertheless, seen as a strategically important
acquisition. There is a need for collaboration products within the Group's
existing customer base and there is good potential for selling knowledge
management, content management and collaborative solutions to a wide range of
customers in both the public and private sectors.
BOARD
At the AGM on 21 May 2003 Cliff Preddy stood down as Chairman and Mike Love was
appointed as his replacement. At the same time Cliff accepted the appointment
as Senior Non-Executive Director and has continued to serve the Group in this
capacity. On 10 June 2003 we announced that Graham Steinsberg, Chairman of the
CODA Division, had accepted the offer to take over as Group Chief Executive from
Mike Love with effect from 1 October 2003. The transfer of responsibilities
associated with these changes is well advanced.
OUTLOOK
The Directors are pleased to report that since 30th June, market conditions
appear to be stabilising with improving visibility of forward revenues combining
with a strengthening in sales pipelines and order intake across the business.
Although much still remains to be done in the fourth quarter, performance in the
second half is expected to be ahead of that in the first half.
Group Profit and Loss Account
for the six months to 30 June 2003
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Turnover
Existing operations 32,284 33,566 66,378
Acquisitions 1,939 - -
Total Turnover 34,223 33,566 66,378
Operating profit
Existing operations 2,067 3,712 7,363
Acquisitions 462 - -
Amortisation of goodwill (1,246) (888) (1,776)
Total Operating profit 1,283 2,824 5,587
Net interest 36 45 139
Profit on ordinary activities before 1,319 2,869 5,726
taxation
Tax on profit on ordinary activities (534) (1,131) (1,675)
Profit on ordinary activities after 785 1,738 4,051
taxation
Dividends paid and proposed (259) (234) (798)
Retained profit for the period 526 1,504 3,253
Earnings per share
Basic 3.3p 7.4p 17.3p
Diluted 3.1p 6.9p 16.2p
Adjusted earnings per share
Basic 8.6p 11.2p 24.9p
Diluted 8.0p 10.4p 23.3p
Group Balance Sheet
At 30 June 2003
Unaudited Unaudited Audited
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Fixed assets
Intangible assets 41,292 31,510 30,622
Tangible assets 10,250 9,547 9,650
Investments 7,102 6,722 7,145
58,644 47,779 47,417
Current assets
Debtors 20,755 20,149 21,879
Cash at bank and in hand 1,274 7,755 9,449
22,029 27,904 31,328
Creditors: amounts falling due within (10,087) (10,110) (10,227)
one year
Net current assets 11,942 17,794 21,101
Total assets less current liabilities 70,586 65,573 68,518
Deferred income (15,138) (12,921) (14,810)
Net assets 55,448 52,652 53,708
#000 #000 #000
Capital and reserves
Called up share capital 6,350 6,296 6,219
Share premium account 42,980 41,758 41,827
Other reserves 83 - 83
Profit and loss account 6,035 4,598 5,579
Total equity shareholders' funds 55,448 52,652 53,708
Group Cash Flow Statement
for the six months to 30 June 2003
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Operating profit 1,283 2,824 5,587
Depreciation charge 961 989 1,922
Amortisation of goodwill 1,246 888 1,776
Decrease in working capital 983 1,308 2,582
Other items (8) (169) (325)
Net cash inflow from operating activities 4,465 5,840 11,542
Returns on investments and servicing of 36 45 139
finance
Taxation (900) (689) (2,029)
Capital expenditure and financial (619) (769) (2,247)
investment
Acquisitions and disposals (10,818) - -
Equity dividends paid (233) (212) (706)
Net cash (outflow) / inflow before (8,069) 4,215 6,699
financing and liquid resources
Financing (33) (605) (1,376)
(Decrease) / Increase in cash (8,102) 3,610 5,323
Reconciliation of Net Cash Flow to movement in Net Debt
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
(Decrease) / Increase in cash (8,102) 3,610 5,323
Cash outflow from decrease in debt and 33 605 639
lease financing
Changes in net debt arising from cash (8,069) 4,215 5,962
flows
Exchange adjustment (73) 147 129
Movement in net debt (8,142) 4,362 6,091
Net cash 1 January 9,412 3,321 3,321
Net cash at 30 June / 31 December 1,270 7,683 9,412
Notes to the Unaudited Interim Report
1 Basis of Preparation of Interim Financial Information
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's Annual Report and Accounts for the
year ended 31 December 2002.
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
figures for the year ended 31 December 2002 are extracted from the statutory
accounts of CODASciSys plc for that year. The statutory accounts for that year,
upon which the auditors issued an unqualified opinion, have been delivered to
the Registrar of Companies.
2 Turnover
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Existing operations
CODA 20,708 20,133 40,332
SciSys 11,576 13,433 26,046
Total existing operations 32,284 33,566 66,378
Acquisitions
SquareSum 1,771 - -
Business Collaborator 168 - -
Total acquisitions 1,939 - -
3 Operating Profit (Excluding Goodwill Amortisation)
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Existing operations
CODA 3,076 2,851 5,988
SciSys (764) 1,102 1,718
Other / group (245) (241) (343)
Total existing operations 2,067 3,712 7,363
Acquisitions
SquareSum 493 - -
Business Collaborator (31) - -
Total acquisitions 462 - -
4 Taxation
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
UK and overseas corporation tax 616 1,340 1,958
Adjustment relating to an earlier year 6 - (147)
UK income tax - - 9
Deferred taxation (88) (209) (145)
534 1,131 1,675
The charge for taxation for the six months ended 30 June 2003 reflects the
anticipated effective rate for the period.
5 Basis of Earnings per Share Calculation
The calculation of basic earnings per share is based upon the profit
attributable to shareholders of #785,000 (30 June 2002 #1,738,000; 31 December
2002 #4,051,000) divided by 23,497,180 ordinary shares (30 June 2002 23,507,198;
31 December 2002 23,364,551). The number of shares is based upon the weighted
average number of shares in issue during the period less the shares owned by the
Company Employee Share Trust. The number of shares in issue at 30 June 2003 was
25,399,570 (30 June 2002 25,185,395; 31 December 2002 24,875,534).
The calculation of diluted earnings per share (basic and adjusted) is based upon
25,290,653 ordinary shares (30 June 2002 25,169,666; 31 December 2002
25,024,331). The calculation of adjusted earnings (basic and diluted) is based
upon the profit attributable to shareholders excluding goodwill amortisation of
#2,031,000 (30 June 2002 #2,626,000; 31 December 2002 #5,827,000).
6 Statement of Total Recognised Gains and Losses
Unaudited Unaudited Audited
Six months to Six months to Twelve months to
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Profit for the financial period 785 1,738 4,051
Exchange adjustments (71) (13) 31
Total recognised gains and losses 714 1,725 4,082
relating to the period
Prior period adjustment - FRS 19 273 273
deferred taxation
Total recognised gains and losses since 1,998 4,355
last annual report
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