ELECTRONIC DATA PROC
EDP is an IT solution provider to the UK wholesale distribution industry and a supplier of Sales
Intelligence software solutions more widely.
• Adjusted operating profit maintained at £202,000 (2014: £202,000)
• Hosting revenues represent 50% of total revenues (2014: 49%)
• Contracted recurring revenues represent 80% of total revenues (2014: 85%)
• R&D investment increased to £540,000 in first half (2014: £460,000)
• Strong, debt-free balance sheet with total cash balances and short-term investments of £5.2 million
• Interim dividend of 2p per share returns £252,000 to shareholders
• Expected final dividend of 3p per share making 5p for the full year, which would represent a
7.2% yield based on the share price at the date of the interim report
'Whilst we expect trading conditions to remain competitive, with our continued investment in our key products and robust business model, we remain confident about the outlook for the remainder of the year.'
-Ends- For further information please contact:Julian Wassell | James Storey | Toby Mountford |
Chief Executive | Finance Director | Citigate Dewe Rogerson |
0114 262 2010 | 0114 2622010 | 020 7638 9571 07710 356611 |
www.edp.co.uk
Chairman's Statement
Turnover for the six months to 31 March 2015 was £2.52 million compared with £2.62 million in the corresponding period last year. Adjusted operating profit was maintained at £202,000 (2014:
£202,000).
As previously reported, our turnover during the period has been impacted due to one of our customers acquiring a competitor software business and subsequently moving to that business's product. The effect of this on turnover during the period was approximately £150,000. Excluding the effect of this, total revenue from other sources was £50,000 higher than last year. We have simultaneously embarked on a cost reduction programme which will yield £200,000 of savings annually; £100,000 of these savings were recognised during the first half. The savings relate to property and personnel costs and a one-off charge of £56,000 in respect of the latter has been reflected in the current period's results. As a result of these savings our level of 'adjusted' operating profit has been maintained notwithstanding the reduction in turnover.
Statutory pre-tax profit for the 6 months was £179,000 (2014: £162,000). Interest income was £20,000 (2014: £26,000). A reconciliation of pre-tax profit to adjusted operating profit is shown in note 6.
Trading conditions remain competitive as described in our full year results to 30 September 2014. Our strategy of increasing the number of customers who receive their software through our hosting service means that we continue to see a gradual shift away from upfront revenue towards stronger ongoing subscription revenues; this trend is particularly apparent with our Vecta product.
Contracted recurring revenues, which relate to annual software licences and hosting fees, were 80% of total revenues (2014: 85%). Hosting revenues represented 50% of total revenue during the period (2014: 49%).
Expenditure on product R&D during the period amounted to £540,000 (2014: £460,000) as we continue to enhance the functionality of our key software products: Quantum VS and Vecta. The second half of the financial year will see the release of our new Quantum e-business module and a major new release of our Vecta CRM and business intelligence product.
It is particularly pleasing that Vecta won the 'Software as a Service' category at the industry renowned European IT and Software Excellence Awards for 2015, making us an award winner at this event for the second year running.
We have recently accepted an offer for our surplus freehold warehouse property in Sheffield. The sale is progressing and accordingly the property has been transferred to current assets and disclosed as an asset held for sale in the Balance Sheet at 31 March 2015. We will update shareholders with any further progress in due course.
Group net assets were £4.66 million at 31 March 2015 compared with £5.34 million at 30 September
2014. This reflects an increase of £594,000 (net of deferred tax) in the liability associated with the Group's defined benefit pension scheme. The IAS19 liability net of deferred tax amounts to £2.17 million. This is largely due to a further reduction in the interest rate used to discount the value of the scheme's liabilities under IAS 19. It is important to note that the last full actuarial valuation of the scheme at 31 July 2013 showed a small surplus. As noted in our accounts for the year to 30
September 2014, this difference arises principally because the IAS19 valuation does not take into account the guaranteed annuity rates which have been secured and which are included within the ongoing funding valuation. Furthermore the scheme is closed to further service accrual and we are not currently required to make any ongoing contributions to the scheme. Further details are provided in note 4 to this interim statement.
Cash and short-term investments (which represent fixed term deposits with maturity in excess of three months) amount to £5.22 million (2014: £5.50 million). Our policy is to use these cash balances for focussed acquisitions should suitable opportunities arise.
Your Directors have resolved to pay an interim dividend of 2p per share and, under our dividend policy announced last year, we currently expect to pay a final dividend of 3p (2014: 3p interim and 2p final). This level of dividend represents a yield of 7.2% based on the share price at the date of this report. The interim dividend will be paid on 3 August 2015 to those shareholders on the register on 3 July
2015. The shares will be ex-dividend on 2 July 2015.
As ever I would like to thank our staff for their hard work and commitment.
Whilst we expect trading conditions to remain competitive, with our continued investment in our key products and robust business model, we remain confident about the outlook for the remainder of the year.
Sir Michael Heller 22 May 2015
Chairman
We operate in a changing economic and technological environment that presents risks, many of which are driven by factors that we cannot control or predict. The key risks and uncertainties facing EDP and the measures taken to mitigate these risks are as follows:
Systems and networksRisk
EDP's business operations rely significantly on the efficient and uninterrupted operation of its
information technology systems and networks.
Our computer network may be vulnerable to unauthorised access, viruses and other disruptive problems.
Potential impact
Any damage or interruption to EDP's networks, however caused, could have a material adverse effect
on the delivery of our products and services.
A party that is able to override security measures could misappropriate proprietary information or cause disruption to our operations.
Mitigation
We continually review and test the security of internal systems and networks and have developed recovery plans in the event of systems disruption.
Where reliance is placed upon externally provided systems and networks we undertake regular performance ability reviews and ensure that contracts provide for an appropriate level of service maintenance.
Risk
The markets in which EDP operates are characterised by evolving technology, market practices and industry standards.
Potential impact
Competitors could develop superior products or more cost-effective techniques which could render our products uncompetitive or less acceptable to the market. This could result in the loss of new revenue opportunities or the non-renewal of contracts by existing customers.
Mitigation
We have an ongoing commitment to research and development along with product management which allows us to identify and adapt to any technological and market changes that do occur thereby ensuring that our products continue to meet the demands of our customers.
External economic factorsRisk
As with most other businesses in the UK, our operations can be adversely affected by a significant downturn in the economy.
Potential impact
Restricted availability of finance for businesses and a stagnant or recessionary economy could have an adverse effect on the prospects for EDP, as potential customers, particularly in the builders and timber merchants sectors may scale back their IT plans in response to funding difficulties and/or reduced prospects for their businesses.
Mitigation
We seek to ensure that a significant proportion of our revenues are derived from long-term contracts with our customers, that our products appeal to businesses operating in a range of business sectors and that payments for our recurring fees are received annually in advance.
Competitor activityRisk
EDP operates in a competitive environment.
Potential impact
New entrants to our marketplace and actions taken by existing competitors could have an impact on our levels of business activity and product pricing in the market generally.
Mitigation
We endeavour to provide excellent customer support together with high quality products at a competitive price in order to develop and protect strong customer relationships.
Key employeesRisk
In common with all people-based businesses, our success will, to a significant extent, be dependent on the experience of the Board and senior management. The retention of the services of EDP's key employees cannot be guaranteed.
Potential impact
The loss of key employees could have a material adverse effect on EDP.
The failure to retain and develop key technical skills and product knowledge could hinder EDP's future prospects.
Mitigation
We are continually focused on the need to recruit, retain, reward and motivate staff with the appropriate skills.
Responsibility Statement of the Directors in Respect of the Half-Yearly Financial Report
We confirm that, to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union;
• the half-yearly management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board
J M Storey
Secretary
22 May 2015
The Directors at the date of this half-yearly financial report are:
Sir Michael Heller | Chairman (Non-Executive) |
J.H. Wassell | Chief Executive |
A.R. Heller | Non-Executive Director |
C.R. Spicer | Network Services Director |
J.M. Storey | Finance Director |
Unaudited six
months Audited full year
to 31 March 2015 to 31 March 2014 to 30 September 2014 £'000 £'000 £'000Administrative expenses (2,177) (2,319) (4,719)
Operating profit 159 136 355
Finance income 20 26 46
Profit before tax | 179 | 162 | 401 |
Income tax expense | (37) | (1) | 3 |
Profit for the period attributable to equity holders of the parent | 142 | 161 | 404 |
Earnings per share - Basic | 1.13p | 1.28p | 3.21p |
- Diluted | 1.11p | 1.26p | 3.16p |
30 September
31 March 2015 31 March 20142014
£'000 £'000 £'000 Profit for the period 142 161 404 Other comprehensive income: Items that will not be reclassified to profit or loss:
Remeasurement (losses)/gains on defined benefit pension
scheme (705) 37 (774)
Income tax on other comprehensive income 141 (7) 155
Unaudited at 31 March 2015 | Unaudited at 31 March 2014 | Audited at 30 September 2014 | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Property, plant and equipment | 2,722 | 1,718 | 3,097 |
Deferred tax asset | 544 | 212 | 395 |
Intangible assets | 420 | 344 | 356 |
3,686 | 2,274 | 3,848 | |
Current assets | |||
Inventories | 79 | 70 | 67 |
Trade and other receivables | 1,390 | 1,441 | 1,546 |
Investments | 2,000 | - | - |
Cash and cash equivalents | 3,220 | 5,497 | 4,984 |
Assets held for sale | 301 | 1,423 | - |
6,990 | 8,431 | 6,597 |
Current liabilities | |||
Deferred income | (1,859) | (1,986) | (1,914) |
Income tax payable | (118) | (209) | (16) |
Trade and other payables | (1,175) | (1,214) | (1,068) |
(3,152) | (3,409) | (2,998) |
Non-current liabilities | |||
Deferred income | (13) | (34) | (17) |
Employee benefits | (2,718) | (1,058) | (1,975) |
Deferred tax liability | (130) | (69) | (113) |
(2,861) | (1,161) | (2,105) |
Equity Share capital | 689 | 689 | 689 |
Share premium | 119 | 119 | 119 |
Capital redemption reserve | 625 | 625 | 625 |
Treasury shares | (587) | (587) | (587) |
Retained earnings | 3,817 | 5,289 | 4,496 |
Total equity attributable to equity holders of the parent | 4,663 | 6,135 | 5,342 |
Unaudited six months to 31 March 2015 | Unaudited six months to 31 March 2014 | Audited full year to 30 September 2014 | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Profit for the period | 142 | 161 | 404 |
Adjustments for: Depreciation | 116 | 102 | 248 |
Amortisation | 44 | 85 | 126 |
Net profit on disposal of property, plant and equipment | (4) | (1) | - |
Transfer of inventory to property, plant and equipment | - | (11) | (10) |
Defined benefit pension charge net of employer contributions | 38 | 51 | 157 |
Finance income | (20) | (26) | (46) |
Income tax expense | 37 | 1 | (3) |
Change in inventories | (12) | 11 | 14 |
Change in receivables | 165 | 95 | (11) |
Change in payables | (145) | (233) | (127) |
Change in deferred income | (59) | (328) | (417) |
Equity settled share-based payment transactions | 1 | 1 | 1 |
Cash received from/(used in) operations | 303 | (92) | 336 |
Interest received | 11 | 27 | 48 |
Income taxes received/(paid) | 68 | 30 | (144) |
Net cash from operating activities | 382 | (35) | 240 |
Cash flows from investing activities | |||
Purchase of property, plant and equipment | (45) | (72) | (176) |
Purchase of intangible assets | (17) | (57) | (81) |
Development expenditure | (91) | (50) | (79) |
Net proceeds from sale of property, plant and equipment | 7 | 7 | 7 |
Net cash used in investing activities | (146) | (172) | (329) |
Cash flows from financing activities | |||
Transfers to fixed-term deposit investments | (2,000) | - | - |
Issue of shares out of treasury | - | 37 | 37 |
Dividends paid | - | - | (631) |
Net cash (used in)/generated by financing activities | (2,000) | 37 | (594) |
Net decrease in cash and cash equivalents | (1,764) | (170) | (683) |
Cash and cash equivalents at beginning of period | 4,984 | 5,667 | 5,667 |
Cash and cash equivalents at end of period | 3,220 | 5,497 | 4,984 |
Capital | |||||
Share | Share | redemption | Treasury | Retained | |
capital | premium | reserve | shares | earnings | Total |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 October 2014 (audited) 689 119 625 (587) 4,496 5,342
Profit for the period - - - - 142 142 Other comprehensive income:
- remeasurement loss on defined benefit
pension scheme net of tax - - - - (564) (564)
- share-based payment transactions - - - - (5) (5)
- dividends approved - - - - (252) (252)
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