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RNS
IDOX PLC  -  IDOX   

Final Results

Released 07:00 14-Dec-2016

RNS Number : 7739R
IDOX PLC
14 December 2016
 

 

14 December 2016

 

Idox plc

('Idox' or 'the Group' or 'the Company')

 

Final results for the year ended 31 October 2016

 

 

Financial highlights:

·      Revenues up 23% to £76.7m (2015: £62.6m)

·      Adjusted EBITDA* increased 18% to £21.5m (2015: £18.2m)

·      Adjusted EBITDA* margin 28.0% (2015: 29.1%)

·      Adjusted profit before tax** was £16.7m, up 15% (2015: £14.5m)

·      Adjusted EPS** 4.11p up 25% (2015: 3.28p)

·      Net debt as at 31 October 2016 stood at £25.0m (31 October 2015 £23.1m;  £4.7m net cash outflow on  two acquisitions in the second half of the financial year)

·      Proposed final dividend of 0.650p (2015: 0.525p) making a total of 1p (2015: 0.850p), an increase of 18% for the financial year

 

Operational highlights:

·      Recurring and repeating revenues represented 82% of revenues

·      Another strong performance from Public Sector Software (PSS):

Represented 53% of Group revenues

Organic revenue growth of 5% - strong election year and winning of market share

Won 90 new local authority customers - 92% of all local authorities now customers

·      Acquisitions:

Open Objects and Rippleffect enhanced the Group's capabilities in social care and digital services respectively

·      Board succession planning completed; Andrew Riley appointed Chief Executive in November 2016, Richard Kellett-Clarke becomes a non-Executive Director

 

Statutory Equivalents

The above highlights are based on adjusted results.  Reconciliations between adjusted and statutory results are contained within these financial statements.  The statutory equivalents of the above results are as follows:

·      Profit before tax was 33% higher at £13m (2015: £9.8m)

·      Basic EPS increased by 49% to 3.30p (2015: 2.21p)

 

* Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition, corporate finance and share option costs

** Adjusted profit before tax and adjusted EPS excludes amortisation on acquired intangibles, restructuring and acquisition costs

 

Andrew Riley, Chief Executive of Idox said:

 

"Idox has reported another year of strong progress, driven by organic growth complemented by contributions from acquisitions, underpinned by our strategy of positioning the Group as a key partner to enable its customers to achieve significant efficiencies through digital technologies.

 

"We have started the new financial year strongly building on this good performance, have integrated recent acquisitions and have had early successes winning contracts.  The Group is well positioned in its markets and has a strong revenue visibility, order book and pipeline.  We are on track to achieve our target of £100m of revenues at sustainable margins in the short to medium term, through a combination of organic growth and acquisitions.

 

"Overall, the outlook for Idox in the coming years is therefore very positive and our expectations for the Group's financial performance are unchanged."

 

 

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

For further information please contact:

 

Idox plc                                                                                                                                  +44 (0) 870 333 7101

Laurence Vaughan, Chairman

Andrew Riley, Chief Executive

Jane Mackie, Chief Financial Officer

 

N+1 Singer (NOMAD and Broker)                                                                                     +44 (0) 20 7496 3000

Shaun Dobson

Liz Yong

 

MHP (Financial PR)                                                                                                            +44 (0) 20 3128 8100

Reg Hoare/Andrew Leach/Charlie Barker

 

 

An analyst meeting will be held at the offices of N+1 Singer, 1 Bartholomew Lane, London, EC2N 2AX at 10.15 for 10.30am this morning. Please contact idox@mhpc.com to register. 
 

 

 

About Idox plc

 

Idox plc is a supplier of specialist information management solutions to the public sector and to highly regulated asset intensive industries around the world in the wider corporate sector.

 

Idox is the leading applications provider to UK local government for core functions relating to land, people and property, such as its market leading planning systems and election management software. Over 90% of UK local authorities are now customers. Idox provides public sector organisations with tools to manage information and knowledge, documents, content, business processes and workflow as well as connecting directly with the citizen via the web, and providing elections management solutions. It also supplies in the UK and internationally, decision support content such as grants and planning policy information and corporates compliance services. Idox delivers engineering document control, project collaboration and facility management applications to many leading companies in industries such as oil & gas, architecture and construction, mining, utilities, pharmaceuticals and transportation in North America and around the world.

 

The Group employs over 760 staff located in the UK, North America, Europe, India and Australia.


For more information see www.idoxplc.com.

 

 

 

 

CHAIRMAN'S STATEMENT

 

Overview

 

I am pleased to report a year of strong progress for Idox, driven by organic growth complemented by contributions from acquisitions. The success of Idox continued to be underpinned by its strategy of positioning itself as a key partner enabling customers to achieve significant efficiencies through digital technologies.

 

In generally stable markets, the Group continued to benefit from its diversified business model and sources of earnings which helped mitigate challenges in some of our smaller markets.

 

Results

 

Idox grew revenue by 23% to a record £76.7m and achieved an 18% increase in Adjusted EBITDA. The overall Group margin was slightly lower than the prior year due to the anticipated change in mix of election and digital services revenues.

 

As in previous years, a significant percentage (82%; 2015: 88%) of Idox's annual revenues were derived either from recurring contracts with customers or from repeat customers from whom the Group had derived revenues in the prior year; this gives the Group significant revenue visibility and is evidence of Idox's strong relationships and focus on customer service.

 

A summary of our financial key performance indicators is presented below:

 

 

 

2016

2015

Change

 

 

 

 

 

Revenue

 

£76.7m

£62.6m

23%

Adjusted EBITDA*

 

£21.5m

£18.2m

18%

Adjusted EBITDA* margin

 

28%

29%

-1%

Adjusted EPS**

 

4.11p

3.28p

25%

 

*Adjusted EBITDA is defined as earnings before depreciation, amortisation, restructuring, acquisition, corporate finance and share option costs

**Adjusted EPS excludes amortisation on acquired intangibles, restructuring and acquisition costs

 

Group strategy

 

Idox has a strong reputation and market leading positions principally in important segments of the public sector software market in the United Kingdom and Europe. The Group partners with its customers so they can achieve efficiency savings using digital technology.

 

The Group's strategy is to become a much larger business by establishing and building on its leading market positions by extending its public sector domains and expanding its delivery of digital services across all areas of local government. This will be achieved through a combination of organic and acquisitive growth. This is intended to deliver double digit annual revenue growth with a short to medium term objective of £100m of revenues at sustainable margins.

 

Acquisitions

 

During the financial year, two acquisitions were completed in line with our strategy, both of which contributed to the year's financial performance whilst expanding our capabilities and providing cross selling opportunities. The Group has a strong track record of acquisition integration and delivering earnings enhancing contributions from such transactions.  The recent acquisitions were:

 

·      Open Objects Software Limited ('Open Objects') in July 2016 broadened our capability in the important social care market where the Group has historically been under-represented

·      Rippleffect Studio Limited ('Rippleffect') in August 2016 added e-commerce consultancy expertise to add to our digital capabilities 

·      In addition, there was a strong contribution from the acquisition of Reading Room, completed just prior to the previous year end in October 2015.

 

Together these acquisitions have enhanced our capabilities, such that we can now deliver content, domain specific solutions, managed and hosted services and web services to improve processes, productivity and customer engagement in all of our chosen domains.

 

Dividends

 

The Board is pleased to propose, subject to shareholder approval at the Company's Annual General Meeting, a final dividend of 0.650p (2015: 0.525p), bringing the total for the year to 1p. This represents an increase of 18% over the previous year total of 0.850p, and is consistent with both our strong performance in the year and our progressive dividend policy to grow dividends in line with earnings growth.

 

The Board

 

On 10 November 2016, we announced some significant board changes as part of our succession planning. Richard Kellett-Clarke stepped down as Chief Executive and Andrew Riley, previously the Group's Chief Operating Officer (COO), was appointed Chief Executive. Andrew's appointment ensures continuity of both leadership and strategy and he takes over at a time when the business is in the best shape it has ever been. Andrew joined the Group in 2000 and was Managing Director of Idox's Public Sector Software Division from 2011 before becoming COO.  Richard will remain at Idox as a Non-Executive Director, until the end of the current financial year ending 31 October 2017 to ensure an orderly handover and to assist with the integration of recent acquisitions and the ongoing development of the Group's strategy.

 

Richard has played a key role in the transformation of Idox over the last ten years, first as Finance Director, then as Chief Operating Officer and most recently as Chief Executive.  From joining the Group in 2006 he has been instrumental in establishing and delivering the Group's organic and acquisition growth strategy, resulting in a near fifteen-fold increase in the share price and market capitalisation over that time. We thank him for his significant contribution to the Group. 

 

In January 2016, the Board was pleased to appoint Barbara Moorhouse as a non-Executive Director; she has more than 25 years of management experience across the private and public sectors and replaces Dame Wendy Hall who stepped down in December 2015. 

 

Outlook

 

The Group has started the new financial year strongly building on the good performance and organic and acquisitive growth of 2016. We also believe there is a relatively stable outlook in all our markets notwithstanding recent political developments. We have integrated recent acquisitions and have had early successes winning contracts in the new financial year in a number of our segments in both the UK and Europe.   The importance to our customers of achieving efficiency through the effective use of information technology should not be underestimated.

 

The encouraging adoption of the Government's digital services initiative by the public sector and local government especially, and the early success of blending this with our recently acquired digital capability, has encouraged us to accelerate our developments in this area. We believe this growth in digital engagement will benefit our Public Sector Software business as its products are focused on delivering savings and helping local authorities improve their consumer experiences.

 

The Board remains confident that the Group is well positioned in its markets and will continue to perform well in 2017 given its strong revenue visibility, order book and pipeline.  The Group remains on track to achieve its target of £100m of revenues at sustainable margins in the short to medium term, through a combination of organic growth and acquisitions.

 

Overall, the outlook for Idox in the coming years is therefore very positive and our expectations for the Group's financial performance are unchanged.

 

Laurence Vaughan

Chairman

 

 

CHIEF EXECUTIVE'S REVIEW

 

Overview of operational performance

 

We are pleased to report that the Group performed strongly during the year with double digit growth in both revenues and adjusted profits, including good contributions from organic growth and recent acquisitions.

 

The year saw the continued expansion of our digital services platform which, through a combination of internal development and technology acquisition,  is increasingly underpinning deliveries of new products and services across the Group in a more efficient and sustainable way. 

 

Management focus during the year has continued to be in accelerating the expansion of the digital services platform, completing and consolidating recent acquisitions, and in continuing the drive for further productivity improvements and performance across the Group.

 

 

 

 

Public Sector Software ('PSS')

 

The Public Sector Software business, which represented 53% of Group revenues for the year, had a particularly strong performance with revenues up 14%.  The year saw significant elections activity and we delivered services in support of Local Elections, the EU referendum and a new e-count solution for the Scottish Government to be used in the local elections in May 2017.

 

The digital service platform has been instrumental in delivering new solutions and add-on products to our existing customers with a combined value of £2.9m.  The platform has been used to provide integration for the new national online planning and building standards services for the Scottish Government, as well as providing the infrastructure for a new suite of platform independent mobile applications for use across our core back office software solutions.  The framework has also provided the capability to write new back office applications and underpins the long term upgrade strategy for our existing back office applications. The first of these new systems is a new national election system for Northern Ireland, on which we plan to build a next generation platform for the wider UK and future international expansion.

 

The iApply service, also based on the digital service platform, was launched earlier in the year to provide a national planning application service; it has been successfully extended to provide online licensing and building control applications, achieving a monthly transaction volume of over 10,000 applications by the end of the financial year.  The platform will be expanded during the current financial year to deliver further customer journeys with a vision of delivering a comprehensive suite of services for local government over the next three years.

 

We have continued to see further market share gains with 90 new local authority customers in the year, 19 new system sales and a further 11 managed service customers. 

 

The integration of the Facilities Management business within the public sector team during the prior year has continued to deliver benefits in terms of improved sales performance and cross selling opportunities.  Revenues within Facilities Management grew by 11%.  Key contracts wins included Carillion, SSS Managed Services and Pinsent Masons.

 

Our Transport business (formerly Cloud Amber) was held back in the first half of the year by the need to focus on completing the delivery of two complex sales contracted prior to acquisition.  One of these was a new integrated transport management system for a new bus station in Perth Australia.  This underground bus station is Australia's first  to work more like an airport, with buses departing from different stands for each trip to maximise efficiency with the flow of buses and passengers being fully controlled by our software solutions.

 

A significant milestone was achieved with our next generation adaptive control platform that has successfully completed field trials throughout a number of key road junctions in Southampton, enabling real time control of traffic lights. This development paves the way for our next generation of fully adaptive artificial intelligence algorithms enabling pioneering policy lead control of the road network.

 

The business finished the year strongly with a major project win either side of the year end.

 

Digital

 

Reading Room has performed well in its first full year within the Group, delivering revenues of £9.1m and an improved EBITDA margin of 13%.  The business has been fully integrated and rebranded as Idox Digital and, with the acquisition of Rippleffect, has become a true full service digital agency. 

 

The business is working in collaboration with other parts of the Group, in support of delivering the digital service platform and combined product and service offerings.  The main successes have been in delivering Unified Travel Information Portals in in Cornwall and Northamptonshire that provide an end to end one stop shop in which all modes of transport, cars, taxis, buses, DRT, flights, trains including walking and cycling are included so that travellers can make informed choices.

 

Other significant contracts in the period included delivery of the new Royal Family website, and systems for the Ministry of Defence, NHS, British Cycling and Reynolds Porter Chamberlain.

 

Grants

 

The Grants business continued to increase its customer base, and deliver bigger grants on a success fee basis for larger customers.

 

We have seen acceleration in the adoption of the Research Connect platform within European Universities via our new pan-European sales team.

 

Compliance

 

Revenue in our compliance business declined by 28% to £4.4m, which was partly the result of aligning its year end to Idox's after a very strong prior year. This was further compounded by a decline in demand for our core compliance e-learning programmes.  Some R&D and sales issues were resolved in the second half of the year, which has resulted in significant new contract wins in the first month of the new financial year, including sales to a major German airline and a leading German tools provider.

 

Engineering Information Management ('EIM')

 

The EIM business returned to modest growth with revenues up 3% to £14.1m and a much improved EBITDA margin increasing to 23% from 16%.  It has benefited from early and decisive action taken in the prior year to realign the business following the global market decline in oil and gas capital projects activity.

 

EIM has achieved key contracts wins, including Odebrecht, BNP Paribas, Strabag, Weherhauser, PM Group and a reseller agreement with Amplexor.  It also continued to make further productivity gains, and is well poised to benefit from any improvement in its core markets, while continuing to invest in its new Cloud based services.

 

Acquisitions

 

The Group has made two acquisitions in the second half of the year: Rippleffect and Open Objects. Both acquisitions have been made to support our objectives of expanding our digital capability and extending our presence within the public sector. Both businesses will have been fully integrated into the Group, ahead of schedule, by the end of calendar year 2016.

 

Open Objects, acquired in July, provides digital services to the social care and health markets within the UK, enabling citizens and care providers to engage digitally in care provision.  In addition to providing significant penetration into the social care and health markets, the acquisition expands the digital service platform's capability, especially within data management. The business supplies solutions to Social Care departments within the UK and has expanded its presence since acquisition with new wins from Warrington and London Borough of Waltham Forest

 

Rippleffect, acquired in August, is a digital agency based in Liverpool that completes our skills and technical capability by providing with the Group with an e-commerce capability for use within the digital service platform under the Idox Digital Brand.   The business has a focus on sport and has 7 premiership football clubs as customers with wins since acquisition including Middlesbrough FC.

Markets

The Group continues to operate successfully and has grown in challenging markets despite continuing pressure on government expenditure and grant funding.  We see no change in outlook for our core markets, whilst the diversity of our offerings and tight integration of our businesses into a single management structure continues to allow us to take advantage of opportunities and respond to challenges.

We have seen minor delays in customer decision making as a consequence of the EU referendum, and we expect this to continue through the period of uncertainty around the nature of the UK's exit. The Board expects the Group to ultimately be a beneficiary due to our key role in implementing the required changes to legislation within our core systems.

Growth strategy

The Group has refocused on become a leading international supplier of software, services, managed services and content to the wider public sector, whilst continuing to deliver service to private sector customers as well. 

Following recent acquisitions, Idox has presence across all UK public sector markets and it is the Board's intention to accelerate the consolidation of the Group's presence within these markets in the same way it has done within the UK Local Government market space. In addition, we will also seek international expansion opportunities. 

The Group's investment strategy in the coming year is to continue the development of the digital service platform and to build the commercial teams to facilitate its growth.

The Board believes that channel shift and automation remain fundamental to the delivery of public services and that the Group remains well placed to support not only local government but the wider public sector to achieve this.

The business is on schedule to deliver its target of £100m revenues in the short to medium term.

 

Andrew Riley

Chief Executive Officer

 

 

 

FINANCIAL REVIEW

 

Group revenues grew by 23% to £76.7m (2015: £62.6m) driven by 2% organic growth and the impact of four acquisitions.  Cloud Amber Ltd and Reading Room Ltd were acquired during 2015 and had a full year impact for the first time in 2016.  Open Objects Software Ltd and Rippleffect Studio Ltd were acquired in 2016 and made a contribution in the current year.   27% of Group revenues were generated outside of the UK (2015: 34%) with a change in geographical mix due to the four acquisitions which have the majority of their customer base in the UK.  Gross profit earned was 19% higher at £66.6m (2015: £55.9m) and the Group saw a slight decrease in gross margin from 89% to 87% as a result of lower margin election print revenue related to May local elections and the EU Referendum.  Earnings before amortisation, depreciation, restructuring, acquisition, corporate finance and share option costs ("Adjusted EBITDA") increased by 18% to £21.5m (2015: £18.2m) with Adjusted EBITDA margins of 28% (2015: 29%).

 

Performance by segment

 

In previous periods, the Group was organised into two main operating segments.  Following an internal reorganisation the Group is now organised into five operating segments.

 

The Public Sector Software (PSS) segment, which accounted for 53% of Group revenues (2015: 57%), delivered revenues of £41.0m (2015: £35.8m) due to 5% organic growth and the contribution of Cloud Amber and Open Objects. Product and services revenue grew 13% to £19.0m (2015: £16.8m).  Election revenue accounted for £5.6m (2015: £2.6m) of PSS revenues with the segment delivering on the Scottish eCount project, May local elections and EU Referendum, in comparison to only the UK General Election in 2015.  Recurring revenues within the PSS segment were 42% (2015: 45%) decreasing due to the contribution of election revenue in the period.  Segmental Adjusted EBITDA increased by 16% to £16.3m (2015: £14.1m) delivering a 40% EBITDA margin (2015: 39%).   

 

The Engineering Information Management (EIM) segment accounted for 18% of Group revenues (2015: 22%) and reported a revenue increase of 4% to £14.1m (2015: £13.6m).  The proportion of recurring revenues in the EIM business from maintenance and Software-as-a-Service ("SaaS") were 57% (2015: 56%).  Segmental Adjusted EBITDA for the EIM segment increased 50% to £3.3m (2015: £2.2m).  EBITDA margin increased to 23% (2015: 16%) reflecting the restructuring in the segment carried out in 2015 and organic revenue growth in the period.

 

The Digital segment had revenue of £10.9m (2015: £1.1m) which included a full year of Reading Room acquired in November 2015 and an initial revenue contribution of £1.2m from Rippleffect acquired in 2016.  

 

The Grants business in the UK and Netherlands saw 8% growth on the prior period with revenues of £6.4m (2015: £5.9m).  The Compliance business in Europe had a decrease in revenues from £6.1m to £4.4m. 

 

 

Profit before tax

 

Adjusted EBITDA increased 18% to £21.5m (2015: £18.2m), or organically by 6%.  Cost of sales increased 51% to £10.1m (2015: £6.7m).  Cost of sales increased 19% excluding acquisitions due to higher election print and postage costs on the prior year.  Administrative expenses increased 15% to £52.3m (2015: £45.3m), or excluding acquisitions in the year decreased by 4%.  Staff costs increased by 19% to £35.9m (2015; £30.3m), excluding acquisitions staff costs decreased by 6% due to a full year benefit of 2015 restructuring costs from EIM and higher R&D capitalisation.  Other overheads increased by 2% on a like-for-like basis.

 

Financing costs increased 17% to £1.4m (2015: £1.2m) and included interest payable of £0.8m (2015: £0.7m) and bank charges of £0.3m (2015: £0.4m).  Finance income decreased to £0.1m (2015: £0.4m) as the prior period included £0.3m of exchange gain on translation of intercompany balances.

 

Adjusted profit before tax and adjusted earnings per share are alternative performance measures, considered by the Board to be a better reflection of true business performance than looking at the Group's results on a statutory basis only.  These measures are widely used by research analysts covering the Company.  A full reconciliation between underlying profit and the profit attributable to shareholders is provided in the following table:

 

 

Adjusted profit before tax

 

12 months to

31 October 2016

(audited)

£000

12 months to

31 October 2015

(audited)

£000

 

 

 

Profit before tax for the year

12,983

9,763

Add back:

 

 

Amortisation on acquired intangibles

3,817

3,778

Acquisition credits

(404)

(34)

Restructuring costs

330

1,025

Adjusted profit for the year

16,726

14,532

 

Reported profit before tax was up 33% to £13.0m (2015: £9.8m).  Amortisation of intangibles remained flat at £3.8m (2015: £3.8m) due to intangibles from prior acquisitions becoming fully amortised offset by amortisation on new intangibles relating to acquisitions.  Amortisation on Research and Development was £1.3m (2015: £1.0m) and amortisation on software licences increased to £1.0m (2015: £0.7m).  Restructuring charges of £0.3m (2015: £1.0m) relates to the integration of Reading Room, Rippleffect and Open Objects.  Acquisition credits of £0.4m include acquisition costs of £0.3m and a £0.7m credit relating to a reduction of the contingent consideration for Cloud Amber as a result of the revenue target being missed as described in the Share Purchase Agreement. 

 

The Group continues to invest in developing innovative technology solutions and has incurred capitalised Research and Development costs of £2.8m (2015: £1.2m).  Research and Development costs expensed in the period were £4.5m (2015: £4.1m).

 

Taxation

 

The effective tax rate ('ETR') for the period was 9.06% (2015: 19.80%).  A significant tax repayment was processed in 2016, in respect of historic R&D claims covering FY13, FY14 and the Reading Room Group's 31 March 2014 year-end. The Reading Room Group had never previously made an R&D claim. Furthermore, the decrease in the deferred tax rate provided for, from 20% to 18%, in advance of decreases in the UK corporation tax main rate to 19% (01 April 2017) and 17% (01 April 2020), resulted in downward pressure on the ETR given the Group's net deferred tax liability position.

 

Other factors decreasing ETR in 2016 were share option exercises, the utilisation of pre-acquisition losses and a non-taxable write-off of deferred consideration. A factor mitigating the decrease in ETR was the decision not to recognise international losses incurred in the US and Germany during 2016 until potential utilisation becomes more certain.  

 

The higher effective tax rate in 2015 was due to a larger proportion of the overall tax charge being incurred in overseas jurisdictions with a higher rate of corporation tax than the UK. Another factor increasing the tax rate in 2015 was the derecognition of deferred tax assets in the US given uncertainty over the assets' future recoverability.

 

 

Earnings per share and dividends

 

Adjusted earnings per share increased by 25% to 4.11p (2015: 3.28p). Adjusted diluted earnings per share increased by 27% to 3.96p (2015: 3.13p).

 

Basic earnings per share increased by 49% to 3.30p (2015: 2.21p).  Diluted earnings per share increased by 51% to 3.18p (2015: 2.10p).

 

The Board proposes a final dividend 0.650p, an increase of 24% on the previous final dividend, giving a total dividend for the year of 1p and an 18% growth for the full year. This is in line with our progressive dividend policy for our dividends to track our earnings per share. Subject to shareholder approval at the forthcoming Annual General Meeting, the final dividend is expected to be paid on the 21 April 2017 to shareholders on the register at 31 March 2017.

 

Balance sheet and cashflows

 

The Group's balance sheet continued to strengthen during the period and at 31 October 2016 net assets were £65.2m compared to £53.6m at 31 October 2015.

 

Cash generated from operating activities before tax as a percentage of Adjusted EBITDA was 63%, up from 53% in the previous year. 

 

The Group ended the period with net debt of £25.0m (2015: £23.1m) after utilising the facility for the acquisition of Open Objects (£3.4m paid in cash and a further £1.6m which will be utilised in 2018) and Rippleffect (£2.0m). The Group's total signed debt facilities at 31 October 2016 stood at £35m, a combination of a £12m term loan and £23m revolving credit facility, split £21.9m with the Royal Bank of Scotland and £13.1m with the Silicon Valley Bank.

 

Deferred income, representing invoiced maintenance and SaaS contracts yet to be recognised in revenue, stood at £15.9m at 31 October 2016 (2015: £14.6m).  Accrued income, increased to £18.8m (2015: £13.2m).  £3.8m of the increase relates to a higher volume of longer term contracts with local authorities, £0.7m relates to an EIM contract closed in October 2016 and £0.9m relates to acquisitions.

 

 

Jane Mackie                       

Chief Financial Officer

 

Consolidated Statement of Comprehensive Income for the year ended 31 October 2016

 

 

 

 

Note

 

2016

 

2015

 

 

 

£000

 

£000

 

 

 

 

 

 

Revenue

2

 

76,739

 

62,575

Cost of sales

 

 

(10,138)

 

(6,684)

Gross profit

 

 

66,601

 

55,891

Administrative expenses

 

 

(52,316)

 

(45,347)

Operating profit

 

 

14,285

 

10,544

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

Earnings before depreciation, amortisation, restructuring, acquisition costs, corporate finance costs and share option costs

 

 

21,452

 

18,215

Depreciation

 

 

(584)

 

(785)

Amortisation

 

 

(6,052)

 

(5,480)

Restructuring costs

 

 

(330)

 

(1,025)

Acquisition credits

 

 

404

 

34

Corporate finance costs

 

 

(8)

 

-

Share option costs

 

 

(597)

 

(415)

 

 

 

 

 

 

Finance income

 

 

55

 

445

Finance costs

 

 

(1,357)

 

(1,226)

 

 

 

 

 

 

Profit before taxation

 

 

12,983

 

9,763

 

 

 

 

 

 

Income tax expense

3

 

(1,177)

 

(1,934)

 

 

 

 

 

 

Profit for the year

 

 

11,806

 

7,829

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income for the year

Items that will be reclassified subsequently to profit or loss:

Exchange losses on retranslation of foreign operations

 

 

295

 

(276)

Other comprehensive income for the year, net of tax

 

 

295

 

(276)

Total comprehensive income for the year attributable to owners of the parent

 

 

12,101

 

7,553

 

 

 

 

 

 

Earnings per share attributable to owners of the parent during the year

 

 

 

 

 

Basic

4

 

3.30p

 

2.21p

Diluted

4

 

3.18p

 

2.10p

 

 

 

 

Consolidated  Balance Sheet

At 31 October 2016

 

 

 

 

 

2016

 

2015

 

 

 

 

 

£000

 

£000

ASSETS

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

1,115

 

1,077

Intangible assets

 

 

 

 

82,519

 

74,812

Deferred tax assets

 

 

 

 

2,114

 

1,649

Other receivables

 

 

 

 

6,094

 

4,956

Total non-current assets

 

 

 

 

91,842

 

82,494

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

 

33,753

 

26,713

Cash and cash equivalents

 

 

 

 

3,787

 

4,084

Total current assets

 

 

 

 

37,540

 

30,797

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

129,382

 

113,291

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

 

 

7,643

 

7,109

Other liabilities

 

 

 

 

20,214

 

19,083

Provisions

 

 

 

 

39

 

29

Current tax

 

 

 

 

1,468

 

1,815

Borrowings

 

 

 

 

2,425

 

2,428

Total current liabilities

 

 

 

 

31,789

 

30,464

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

4,351

 

4,357

Deferred consideration

 

 

 

 

1,600

 

-

Borrowings

 

 

 

 

26,410

 

24,831

Total non-current liabilities

 

 

 

 

32,361

 

29,188

Total liabilities

 

 

 

 

64,150

 

59,652

Net assets

 

 

 

 

65,232

 

53,639

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Called up share capital

 

 

 

 

3,640

 

3,587

Capital redemption reserve

 

 

 

 

1,112

 

1,112

Share premium account

 

 

 

 

13,480

 

11,741

Treasury reserve

 

 

 

 

(1,244)

 

(1,271)

Share options reserve

 

 

 

 

2,222

 

1,900

Merger reserve

 

 

 

 

1,294

 

1,294

ESOP trust

 

 

 

 

(274)

 

(242)

Foreign currency retranslation reserve

 

 

 

 

57

 

(238)

Retained earnings

 

 

 

 

44,945

 

35,756

Total equity

 

 

 

 

65,232

 

53,639

 

 

 

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 October 2016

 

 

 

 

 

 

 

 

 

 

 

Called up share capital

 

£000

Capital redemption

reserve

 

£000

Share

premium

account

 

£000

Treasury reserve

 

 

£000

Share

options

reserve

 

£000

Merger reserve

 

 

£000

ESOP

trust

 

 

£000

Foreign currency retranslation reserve

£000

 

Retained earnings

 

 

£000

Total

 

 

 

£000

Balance at 1 November 2014

3,587

1,112

11,741

(1,001)

1,636

1,294

(213)

38

30,396

48,590

Share options charge

-

-

-

-

309

-

-

-

-

309

Exercise of share options

-

-

-

-

(45)

-

-

-

-

(45)

Purchase of treasury shares

-

-

-

(270)

-

-

-

-

-

(270)

Deferred tax movement on share options

-

-

-

-

-

-

-

-

199

199

ESOP trust

-

-

-

-

-

-

(29)

-

-

(29)

Equity dividends paid

-

-

-

-

-

-

-

-

(2,668)

(2,668)

Transactions with owners

-

-

-

(270)

264

-

(29)

-

(2,469)

(2,504)

Profit for the period

-

-

-

-

-

-

-

-

7,829

7,829

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

Exchange gains on retranslation of foreign operations

-

-

-

-

-

-

-

(276)

-

(276)

Total comprehensive income for the period

-

-

-

-

-

-

-

(276)

7,829

7,553

Balance at 31 October 2015

3,587

1,112

11,741

(1,271)

1,900

1,294

(242)

(238)

35,756

53,639

Issue of share capital

53

-

1,739

-

-

-

-

-

-

1,792

 

Share options charge

-

-

-

-

597

-

-

-

-

597

 

Purchase of treasury shares

-

-

-

27

-

-

-

-

-

27

 

Deferred tax movement on share options

-

-

-

-

-

-

-

-

272

272

 

ESOP trust

-

-

-

-

-

-

(32)

-

-

(32)

 

Equity dividends paid

-

-

-

-

-

-

-

-

(3,148)

(3,148)

 

Transactions with owners

53

-

1,739

27

322

-

(32)

-

(2,617)

(508)

 

Profit for the period

-

-

-

-

-

-

-

-

11,806

11,806

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Exchange gains on retranslation of  foreign operations

-

-

-

-

-

-

-

295

-

295

 

Total comprehensive income for the period

-

-

-

-

-

-

-

295

11,806

12,101

 

At 31 October 2016

3,640

1,112

13,480

(1,244)

2,222

1,294

(274)

57

44,945

65,232

 

                                         

 

 

Consolidated Cash Flow Statement for the year ended 31 October 2016

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Cash flows from operating activities

 

 

 

 

 

Profit for the period before taxation

 

 

12,983

 

9,763

Adjustments for:

 

 

 

 

 

Depreciation

 

 

584

 

785

Amortisation

 

 

6,052

 

5,480

Acquisition credits

 

 

(722)

 

(156)

Finance income

 

 

(55)

 

(135)

Finance costs

 

 

873

 

892

Debt issue costs amortisation

 

 

100

 

100

Research and development tax credit

 

 

(301)

 

-

Share option costs

 

 

597

 

309

Movement in receivables

 

 

(6,292)

 

(7,070)

Movement in payables

 

 

(271)

 

(225)

Cash generated by operations

 

 

13,548

 

9,743

 

 

 

 

 

 

Tax on profit paid

 

 

(2,456)

 

(1,670)

Net cash from operating activities

 

 

11,092

 

8,073

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of subsidiaries

 

 

(4,701)

 

(8,917)

Purchase of property, plant and equipment

 

 

(639)

 

(559)

Purchase of intangible assets

 

 

(4,168)

 

(1,826)

Finance income

 

 

55

 

135

Net cash used in investing activities

 

 

(9,453)

 

(11,167)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Interest paid

 

 

(827)

 

(579)

New loans

 

 

13,000

 

13,000

Loan related costs

 

 

(96)

 

(178)

Loan repayments

 

 

(11,524)

 

(7,538)

Equity dividends paid

 

 

(3,148)

 

(2,668)

Purchase of own shares

 

 

-

 

(344)

Sale of own shares

 

 

570

 

-

Net cash flows from financing activities

 

 

(2,025)

 

1,693

 

 

 

 

 

 

Net movement on cash and cash equivalents

 

 

(386)

 

(1,401)

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

 

4,084

 

5,855

Exchange gains on cash and cash equivalents

 

 

89

 

(370)

Cash and cash equivalents at the end of the period

 

 

3,787

 

4,084

 

 

 

 

 

 

 

 

 

  

 

 

Notes to the announcement for the year ended 31 October 2016

1 ACCOUNTING POLICIES

Basis of preparation

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS. 

 

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities, being derivatives at fair value through profit or loss.

 

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 October 2016 within the meaning of section 434 of the Companies Act 2006.  The financial information for the year ended 31 October 2015 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  The financial information for the year ended 31 October 2016 is derived from the statutory accounts for that year which were approved by the Directors on 13 December 2016.  The statutory accounts for the year ended 31 October 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.  

 

Restatement of comparative figures

 

In previous periods, the Group was organised into two main operating segments. Following the acquisition and integration of Cloud Amber Limited and Reading Room Limited, and an internal reorganisation, the operating segments were revised. As at 31 October 2016, the Group is primarily organised into five operating segments.  The segmental analysis for the comparative period to 31 October 2015 has been restated to show results for all five business segments.

 

 

2 SEGMENTAL ANALYSIS

In previous periods, the Group was organised into two main operating segments. Following the acquisition and integration of Cloud Amber Limited and Reading Room Limited, and an internal reorganisation, the operating segments were revised. As at 31 October 2016, the Group is primarily organised into five operating segments, which are detailed below. The segmental analysis for the comparative period to 31 October 2015 has been restated to show results for all five business segments.

 

Financial information is reported to the chief operating decision maker, which in the year ended 31 October 2016 comprised the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, monthly on a business unit basis with revenue and operating profits split by business unit.  Each business unit is deemed an operating segment as each offers different products and services.

 

·      Public Sector Software (PSS) - delivering specialist information management solutions and services to the public sector

·      Engineering Information Management (EIM) - delivering engineering document management and control solutions to asset intensive industry sectors

·      Grants (GRS) - delivering funding solutions to private and third sector customers

·      Compliance (COMP) - delivering compliance solutions to corporate, public and commercial customers

·      Digital (DIG) - delivering digital consultancy services to public, private and third sector customers

 

Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before the allocation of taxation, Group interest payments and Group acquisition costs.  The assets and liabilities of the Group are not reviewed by the chief operating decision maker on a segment basis.

 

 

The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.

 

The segment revenues by geographic location are as follows:

 

 

 

 

 

 

2016

£000

 

2015

 £000

Revenues from external customers

 

 

 

 

 

 

 

United Kingdom

 

 

 

55,739

 

41,463

USA

 

 

 

6,361

 

6,987

Europe

 

 

 

12,271

 

12,804

Australia

 

 

 

1,008

 

617

Rest of World

 

 

 

1,360

 

704

 

 

 

 

 

76,739

 

62,575

 

Revenues are attributed to individual countries on the basis of the location of the customer. 

 

 

 

 

 

 

2016

£000

 

2015

 £000

Revenues by type

 

 

 

 

 

 

 

Recurring revenues

 

 

 

32,861

 

27,613

Non-recurring revenues

 

 

 

43,878

 

34,962

 

 

 

 

 

76,739

 

62,575

 

 

The segment results by business unit for the year ended 31 October 2016:

 

 

 

 

 

PSS

£000

 

 

 

EIM

£000

 

 

GRS

£000

 

 

COMP

£000

 

 

DIG

£000

 

 

Total

£000

 

Revenue

40,966

 

14,059

 

6,433

 

4,371

 

10,910

76,739

 

Profit before interest, tax, depreciation,

amortisation, share option costs,

acquisition costs and restructuring costs

16,310

 

 

 

3,300

 

 

 

689

 

 

 

135

 

 

 

1,018

21,452

 

Adjusted segment operating profit

11,961

 

2,113

 

309

 

(277)

 

179

14,285

Finance income

 

 

 

 

 

55

Finance costs

 

 

 

 

 

(1,357)

Profit before Tax

 

 

 

 

 

12,983

 

 

 

 

 

The segment results by business unit for the year ended 31 October 2015:

 

 

 

 

PSS

£000

 

 

 

EIM

£000

 

 

GRS

£000

 

 

COMP

£000

 

 

DIG

£000

 

 

Total

£000

 

Revenue

35,803

 

13,606

 

5,919

 

6,101

 

1,146

62,575

 

Profit before interest, tax, depreciation,

amortisation, share option costs,

acquisition costs and restructuring costs

14,127

 

 

 

2,242

 

 

 

571

 

 

 

985

 

 

 

290

18,215

 

Adjusted segment operating profit

9,540

 

347

 

(65)

 

537

 

185

10,544

Finance income

 

 

 

 

 

445

Finance costs

 

 

 

 

 

(1,226)

Profit before Tax

 

 

 

 

 

9,763

 

 

3 INCOME TAX

 

The tax charge is made up as follows:

 

 

 

 

 

2016

2015

 

 

£000

£000

Current tax

 

 

 

UK corporation tax on profits for the period

 

2,634

2,310

Foreign tax on overseas companies

 

508

498

Over provision in respect of prior periods

 

(754)

(259)

Total current tax

 

2,388

2,549

 

 

 

 

Deferred tax

 

 

 

Origination and reversal of temporary differences

 

(961)

(555)

Adjustment for rate change

 

(252)

-

Adjustments in respect of prior periods

 

2

(60)

Total deferred tax

 

(1,211)

(615)

 

 

 

 

Total tax charge

 

1,177

1,934

 

 

The differences between the total tax charge above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax, together with the impact on the effective tax rate, are as follows:

 

 

 

 

 

 

2016

% ETR

2015

% ETR

 

£000

movement

£000

Movement

 

 

 

 

 

Profit before taxation on continuing operations

12,983

 

9,763

 

 

 

 

 

 

Profit on ordinary activities multiplied by the standard

 

 

 

 

rate of corporation tax in the UK of 20% (2015: 20%)

2,597

20.00

1,953

20.00

 

 

 

 

 

Effects of:

 

 

 

 

Share option deduction

(216)

(1.66)

84

0.86

Tax losses arising (utilised) in year

(113)

(0.87)

0

0.00

International losses not recognised

172

1.32

3

0.03

Other timing differences

5

0.04

150

1.54

Expenses not deductible for tax purposes

118

0.91

103

1.06

Prior year over-provision

(751)

(5.78)

(330)

(3.38)

Non-taxable income

(152)

(1.17)

(46)

(0.47)

Adjustment for tax rate differences

(374)

(2.88)

85

0.86

R&D enhanced relief

(139)

(1.07)

(99)

(1.01)

Foreign tax suffered

30

0.22

31

0.31

 

1,177

9.06

1,934

19.80

 

The effective tax rate ('ETR') for the period was 9.06% (2015: 19.80%).  A significant tax repayment was processed in 2016, in respect of historic R&D claims covering FY13, FY14 and the Reading Room Group's 31 March 2014 year-end. Furthermore, the decrease in the deferred tax rate provided for, from 20% to 18%, in advance of decreases in the UK corporation tax main rate to 19% (1 April 2017) and 17% (1 April 2020), resulted in downward pressure on the ETR given the Group's net deferred tax liability position. 

 

The higher effective tax rate in 2015 was due to a larger proportion of the overall tax charge being incurred in overseas jurisdictions with a higher rate of corporation tax than the UK. Another factor increasing the tax rate in 2015 was the derecognition of deferred tax assets in the US given uncertainty over the assets' future recoverability.

 

 

 

 

Movement on trading losses during 2016 are as follows:

 

 

 

UK unrelieved trading losses

Foreign unrelieved trading losses

Total unrelieved trading losses

Tax effect

Recognised trading losses

 

£000

£000

£000

£000

 

 

 

 

 

 

As at 1 November 2015

 

-

2,281    

2,281

456

Impact of decrease in deferred tax rate

 

-

-    

-

(45)

Recognised during the year

 

-   

41    

41   

7   

Utilised during the year

 

-   

76    

76   

14   

 

 

-

2,398    

2,398

432

 

 

 

 

 

 

Unrecognised trading losses

 

 

 

 

 

 

 

 

 

 

 

Losses not recognised

 

-   

(880)    

(880)   

(158)   

 

 

 

 

 

 

 

 

-   

(880)    

(880)   

(158)   

 

As noted above, no UK trading losses were brought forward to 2016. Foreign losses of £310,000 were utilised during the year in the US, however, the sterling value of the losses increased to the extent that the closing sterling value of these US losses is higher than at Oct 15, notwithstanding the utilisation during 2016. This explains the positive utilisation contribution above. The closing derecognised overseas losses of £880,000 relate to the US and Germany. The decision was made to derecognise these assets until there is more certainty over their future utilisation. Across the year the total deferred tax asset in respect of unrelieved trading losses has decreased from £456,000 to £432,000.

 

 

4 EARninGS per share

 

The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:

 

 

 

 

2016

2015

 

 

£000

£000

 

 

 

 

Profit for the year

 

11,806

7,829

 

 

 

 

Basic earnings per share

 

 

 

Weighted average number of shares in issue

 

357,989,177

354,730,817

 

 

 

 

Basic earnings per share

 

3.30p

2.21p

 

 

 

 

Weighted average number of shares in issue

 

357,989,177

354,730,817

Add back:

 

 

 

Treasury shares

 

3,023,469

2,863,552

ESOP shares

 

875,044

1,139,245

Weighted average allotted, called up and fully paid share capital

 

361,887,690

358,733,614

 

 

 

 

Diluted earnings per share

 

 

 

Weighted average number of shares in issue used in basic earnings per share calculation

 

357,989,177

354,730,817

Dilutive share options

 

13,579,022

17,234,828

Weighted average number of shares in issue used in dilutive earnings per share calculation

 

371,568,199

371,965,645

 

 

 

 

Diluted earnings per share

 

3.18p

2.10p

 

 

 

 

 

         

 

 

Adjusted earnings per share

 

 

2016

£000

 

2015

£000

 

 

 

 

Profit for the year

 

11,806

7,829

Add back:

 

 

 

Amortisation on acquired intangibles

 

3,817

3,778

Acquisition credits

 

(404)

(34)

Restructuring costs

 

330

1,025

Tax effect

 

(829)

(961)

Adjusted profit for year

 

14,720

11,637

Weighted average number of shares in issue - basic

 

357,989,177

 

354,730,817

Weighted average number of shares in issue - diluted

 

371,568,199

371,965,645

 

 

 

 

Adjusted earnings per share

 

4.11p

3.28p

 

 

 

 

Adjusted diluted earnings per share

 

3.96p

3.13p

 

 

 

 

5 ACQUISITIONS

Open Objects Software Limited

On 25 July 2016, the Group acquired the entire share capital of Open Objects Software Limited for a total consideration of £6.24m, being £5.04m in cash and £1.20m in shares. Open Objects offer managed cloud services to the public sector, specialising in social care and health. It is a UK market leader in the provision of Adult Social Care and Family Services software and services to local authorities. The acquisition supports the Group's strategy of extending its Public Sector domains. 

 

Goodwill arising on the acquisition of Open Objects has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of Open Objects with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Open Objects has been accounted for using the acquisition method of accounting.

 

 

 

Book value

£000

Provisional

fair value adjustments

£000

 

 

Fair value

£000

Intangible assets

1

3,646

3,647

Property, plant and equipment

54

(11)

43

Trade receivables

954

-

954

Other receivables

86

-

86

Cash at bank

1,040

-

1,040

TOTAL ASSETS

2,135

3,635

5,770

 

 

 

 

Trade payables

(73)

-

(73)

Other liabilities

(144)

-

(144)

Deferred income

(1,101)

-

(1,101)

Social security and other taxes

(2)

-

(2)

Deferred tax liability

-

(656)

(656)

TOTAL LIABILITIES

(1,320)

(656)

(1,976)

NET ASSETS

 

 

3,794

Purchased goodwill capitalised

 

 

2,443

Total consideration

 

 

6,237

 

Satisfied by:

Cash to vendor

 

 

3,437

Issue of share capital

 

 

1,200

Earn out consideration

 

 

1,600

Total consideration

 

 

6,237

 

Due to the timing of the acquisition, the fair values stated above are provisional based on management's best estimate.  The fair value adjustment for the intangible assets includes £3,645,000 in relation to customer relationships, trade names and software. A related deferred tax liability has also been recorded as a fair value adjustment. Adjustments were also processed to align company policies with Idox Group policies. These included £1,000 in respect of intangible assets and £11,000 in relation to property, plant and equipment.

 

The revenue included in the consolidated statement of comprehensive income since 25 July 2016, contributed by Open Objects was £825,000. Open Objects also made a profit of £159,000 for the same period.   If Open Objects had been included from 1 November 2015, it would have contributed £3,078,000 to Group revenue and a profit after tax of £423,000.

 

The earn out period is 1 April 2017 to 31 March 2018. The earn out arrangement requires the Group to pay the former owners of Open Objects an amount to be determined by revenue in the earn out period, up to a maximum of £1,600,000 in cash. £1,600,000 has been recognised at the date of acquisition, which represents the fair value of

the contingent consideration. At the reporting date, management's best estimate, based on forecast revenues, is that the full contingent consideration will be payable.

 

Acquisition costs of £75,000 have been written off in the consolidated statement of comprehensive income.

 

Rippleffect Studio Limited

On 22 August 2016, the Group acquired the entire share capital of Rippleffect Studio Limited for a total consideration of £2.039m in cash.  Rippleffect is a digital consultancy agency with expertise in the delivery of digital solutions for the sports, leisure and public sector markets including the provision of e-commerce platforms. The acquisition is complementary to Idox's Digital segment and provides new technology. The acquisition also supports the Group's strategy of expansion into sector neutral content and digital platforms.

Goodwill arising on the acquisition of Rippleffect has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of Rippleffect with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Rippleffect has been accounted for using the acquisition method of accounting.

 

 

 

 

Book value

£000

Provisional

fair value adjustments

£000

 

 

Fair value

£000

Intangible assets

-

2,492

2,492

Property, plant and equipment

17

(8)

9

Trade receivables

609

-

609

Accrued Income

1,277

(879)

398

Other receivables

45

-

45

Cash at bank

(265)

-

(265)

TOTAL ASSETS

1,683

1,605

3,288

 

 

 

 

Trade payables

(280)

-

(280)

Other liabilities

(54)

(186)

(240)

Deferred Income

-

(603)

(603)

Social security and other taxes

(159)

-

(159)

Deferred tax liability

-

(449)

(449)

TOTAL LIABILITIES

(493)

(1,238)

(1,731)

NET ASSETS

 

 

1,557

Purchased goodwill capitalised

 

 

482

Total consideration

 

 

2,039

 

Satisfied by:

Cash to vendor

 

 

2,039

Earn out consideration

 

 

-

Total consideration

 

 

2,039

 

 

Due to the timing of the acquisition, the fair values stated above are provisional, based on management's best estimate.  The fair value adjustment for the intangible assets relates to customer relationships and trade names.  A related deferred tax liability has also been recorded as a fair value adjustment. Adjustments were also processed to align company policies with Idox Group policies. These included £8,000 in respect of fixed assets, £879,000 in relation to accrued income, £186,000 in relation to accruals and £603,000 in relation to deferred income.

 

The fair value of trade receivables is equal to the gross contractual amounts receivable. An initial review of trade receivables has not indicated any recoverability issues.

 

The revenue included in the consolidated statement of comprehensive income since 22 August 2016, contributed by Rippleffect, was £1,151,000.  Rippleffect also made a loss of £82,000 for the same period.   If Rippleffect had been included from 1 November 2015, it would have contributed £6,000,000 to Group revenue and a loss after tax of £312,000.

 

There is no earn out period for Rippleffect.

 

Acquisition costs of £48,000 have been written off in the consolidated statement of comprehensive income.

 

Had the above acquisitions occurred at the beginning of the financial year, the revenue of the Group would be £85.8m and the profit before tax of the Group would be £13.1m.

 

Cloud Amber Limited

 

During the period, a fair value adjustment was made in respect of the acquisition of Cloud Amber Limited on the 7 July 2016. The adjustment totalled £215,000 and was in relation to the release of a bad debt provision not utilised.

 

During the period the contingent consideration was adjusted from £1,200,000 to £478,000. The reduction was a result of missing the revenue target as set out in the Share Purchase Agreement. At the reporting date, management's best estimate is that the adjusted contingent consideration will be payable.  The adjustment of £722,000 is included in 'Acquisition credits' in the Consolidated Interim Statement of Comprehensive Income.

 

Reading Room Limited

 

During the period, there have been several fair value adjustments in respect of the acquisition of Reading Room Limited on 8 October 2015. The adjustments totalled £414,000. 

 

A number of adjustments were processed to align company policies with Idox Group policies. These included £238,000 in respect of intangible assets, £71,000 in respect of property, plant and equipment, £12,000 in respect of the bad debt provision, £193,000 in respect of deferred income and £74,000 in respect of accruals.

 

 

 

Acquisition cash flows

 

Acquisition cash flows in the year are as follows:

Subsidiaries acquired during the year:

Net cash outflow

£000

Open Objects Software Limited

Rippleffect Studio Limited

2,397

2,304

 

4,701

 

No additional fair value adjustments have been made in the year in respect of prior year acquisitions.

 

6 FURTHER COPIES

Copies of this announcement and the full annual report and accounts will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker N+1 Singer, 1 Bartholomew Lane, London, EC2N 2AX, Tel: 020 7496 3000 or from IDOX plc, 2nd floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA. Copies of the full financial statements will be made available to shareholders in due course.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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