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Autonomy Corp PLC (AU.)

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Thursday 22 July, 2010

Autonomy Corp PLC

H1 2010 Results

RNS Number : 7294P
Autonomy Corporation PLC
22 July 2010
 



AUTONOMY CORPORATION PLC ANNOUNCES INTERIM RESULTS FOR

THE SIX MONTHS ENDED JUNE 30, 2010

 

Record six month results in-line with analyst expectations, with revenue growth of 28%;

EPS (adj.) up 22%; Net profit (adj.) up 32%

 

Cambridge, England - July 22, 2010 - Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software, today reported financial results for the six months ended June 30, 2010.

 

QUARTERLY REPORT AND INTERIM RESULTS

 

Financial Highlights

§ Record six month revenues of $415.3 million (within the range of analyst expectations of $412-417m), up 28% from H1 2009 with overall organic growth at 14%

§ Six months organic IDOL revenue growth at 24%; organic growth excluding professional services at 18%

§ Gross profits (adj.) at $363.4 million, up 26% from H1 2009; gross margins (adj.) at 88%

§ H1 2010 operating margins (adj.) at 44%

§ Record H1 profit before tax (adj.) at $182.7 million, up 24% from H1 2009

§ Record H1 fully diluted EPS (adj.) of $0.53 (within the range of analyst expectations of $0.52-0.55), up 22% from H1 2009 (IFRS: $0.42, up 17%)

§ Q2 DSOs decreased to 82 days (Q1 2010: 93 days, Q4 2009: 88 days)

§ Cash conversion for the second quarter was 98% (Q2 2009: 66%), and for the first half of 2010 was 93% (H1 2009: 72%)

 

Commenting on the results, Dr Mike Lynch, Group CEO of Autonomy said today: "The first half of 2010 continued to show a gentle recovery with discretionary spend continuing.  In considering the macro environment our customers are positive but still cautious.  We saw continued positive moves in the 'Power' and OEM parts of our business.  The 'Promote' area is starting to convert its great promise into sales as a lot of pre-recovery work is being undertaken by our customers and the 'Protect' part of the business has seen a number of high profile corporate and regulatory events underpin its continuing strength.  The ability to understand the meaning of information and breadth of capabilities IDOL offers on a single platform meant that our competitive position remains strong and was recently  recognised by independent analysts at IDC, who acknowledged Autonomy to be the world's leading provider of archiving, search and discovery solutions."

 

Dr Lynch continued: "The OEM business continues to be our fastest growing revenue stream, and we see a powerful networking effect underway as IDOL further penetrates the entire spectrum of enterprise software applications.  The shift to new delivery models is ongoing and Autonomy continues to operate the world's largest private cloud computing platform, with SaaS contributing over a quarter of Group revenues in the first half of 2010.  We also continue to see a growing interest in our "Promote" solutions and we now see multi-million dollar deals in the pipeline for Meaning Based Marketing, where we believe there is pent-up demand.  The strategic success of the recent MicroLink acquisition has already become apparent with a multi-million dollar contract signed directly with a US federal customer during the second quarter. Our government business, which is mainly focused on national security, has proved robust in the current climate of curtailed government expenditure and we do not expect to see any deterioration in this area."

 

Dr Lynch concluded: "Given the continuation in the improvement of the macro environment, we took advantage of opportunities to improve the brand reach of the company by entering into new marketing arrangements.  The robust demand backdrop and solid execution led to record revenues and EPS in the second quarter and first half of 2010, with strong cash generation.  As in previous years, we expect to see the usual seasonality and unpredictability of the split of revenues between Q3 and Q4.  Overall we face the rest of the year with a strong balance sheet, and in light of the continuing macro recovery, we are confident in our ability to continue to deliver strong growth for the full year."

 

Six Month 2010 Highlights

§ Record revenue of $415.3 million, up 28% from H1 2009

§ Gross margins (adj.) in targeted range at 88%

§ Record profit before tax (adj.) of $182.7 million, up 24% from H1 2009 (IFRS: $136.3 million, up 12%)

§ Operating margins (adj.) stable at 44% (H1 2009: 46%)

§ Fully diluted EPS (adj.) of $0.53, up 22% from H1 2009 (IFRS: $0.42, up 17%)

§ Positive cash flow generated by operations of $190.8 million (H1 2009: $116.5 million), up 64%

§ Six month cash conversion at 93%, above our target range

 

Second Quarter 2010 Highlights

§ Record Q2 revenues of $221.1 million, up 13% from Q2 2009 despite negative FX effect of $0.8 million

§ At constant currency, overall organic growth at 13%; organic growth excluding professional services at 15%; and organic IDOL revenue growth at 19%;

§ Average selling price for meaning-based technologies at $876,000 (Q2 2009: $722,000)

§ Blue chip second quarter wins include Air Liquide, Amgen, BNP Paribas, BP, Charles Schwab, Fortis Bank, HBO, Kraft, LG, Liberty Mutual, Metlife, Michelin, Morgan Stanley, Precise, RWE, Sainsburys, Starwood Hotels, Talk Talk, Ubisoft and Verizon, as well as significant deals with multiple government, defence and intelligence agencies around the globe including in Australia, the UK, USA and the Netherlands

§ Nine OEM deals signed including new deals and extensions with Dassault Systèmes, IBM, OpenText and Oracle

§ Repeat business accounted for 49% of revenue in Q2 2010 (Q2 2009: 50%)

§ Record Q2 profit before tax (adj.) of $97.3 million, up 9% from Q2 2009

§ Operating margins (adj.) stable at 44% (Q2 2009: 47%)

§ Record Q2 fully diluted EPS (adj.) of $0.28, up 7% from Q2 2009 (IFRS: $0.21, up 2%)

§ Deferred revenue increased to $175.5 million (Q1 2010: $172.2 million, Q4 2009: $173.5 million)

§ DSOs decreased significantly to 82 days (Q1 2010: 93 days, Q4 2009: 88 days)

 

Revenues

Revenues for the six months ended June 30, 2010 totalled $415.3 million, up 28% from $325.0 million for the first six months of 2009 due to strong organic growth.  During the first half of 2010 there were 44 deals over $1.0 million.  In the first half of 2010, Americas revenues of $282.5 million represented 68% of total revenues, and Rest of World revenues of $132.8 million represented 32% of total revenues.  Revenues for the second quarter of 2010 totalled $221.1 million, up 13% from $195.2 million for the second quarter of 2009 also due to strong organic growth.

 

Gross Profits and Gross Margins

Gross profits (adj.) for the six months ended June 30, 2010 were $363.4 million, up 26% from $288.6 million for the first six months of 2009.  Gross margins (adj.) for the six months ended June 30, 2010 were 88%, compared to 89% for the first six months of 2009.  Gross profits (IFRS) for the first six months of 2010 were $334.0 million, up 25% from $268.1 million for the first six months of 2009.  Gross profits (adj.) for the second quarter of 2010 were $190.8 million, up 11% from $171.6 million for the second quarter of 2009.  Gross margins (adj.) for the second quarter of 2010 were 86%, compared to 88% for the second quarter of 2009.  Gross profits (IFRS) for the second quarter of 2010 were $175.9 million, up 12% from $156.5 million for the second quarter of 2009.  The small variation in gross margins in Q2 2010 was in line with our expectations due to the sales mix including appliances as discussed last quarter.

 

Profit from Operations and Operating Margins

Profit from operations (adj.) for the six months ended June 30, 2010 was $182.7 million, up 22% from $150.2 million for the six months ended June 30, 2009.  Operating margins (adj.) were 44% in the first half of 2010, compared to 46% in the first half of 2009.  Profit from operations (IFRS) for the six months ended June 30, 2010 was $150.1 million, up 20% from $124.7 million for the six months ended June 30, 2009.  Profit from operations (adj.) for the second quarter of 2010 was $96.5 million, up 5% from $92.2 million for the second quarter of 2009.  Operating margins (adj.) were 44% in the second quarter of 2010, compared to 47% in the second quarter of 2009.  Profit from operations (IFRS) for the second quarter of 2010 was $77.0 million, up 4% from $74.4 million for the second quarter of 2009. 

 

Interest payable

Interest payable for the six months ended June 30, 2010 was $16.2 million, up from $3.3 million for the six months ended June 30, 2009. The increase is a result of a charge of $13.1 million in relation to the convertible loan notes issued in March 2010. The convertible loan notes pay a cash interest rate of 3.25%. However, the income statement charge is based on a market rate of interest for corporate loan notes of similar term without a convertible element in accordance with IFRS. This charge is excluded from the calculation of EPS in accordance with IFRS.

 

Interest payable for the quarter ended June 30, 2010 was $11.4 million, up from $2.8 million for the quarter ended June 30, 2009. The increase is primarily a result of a charge of $10.0 million in relation to the convertible loan notes.

 

Taxation

The full year effective tax rate for 2010 is 25%, down from 28% for the full year in 2009.  The decrease follows the completion of the certain tax studies - as discussed last quarter - which has resulted in additional tax losses which will be utilised.  The effective tax rate for the second quarter has fallen to 22% as a result of the change in the full year rate. 

 

Foreign Exchange Impact

The effect on revenue in the first half of 2010 of movements in foreign exchange rates was negligible, a tailwind in the first quarter of 2010 was offset by a headwind in the second quarter of 2010. 

 

The effect on revenue in the second quarter of 2010 of movements in foreign exchange rates was a decrease of approximately $0.8 million compared to the second quarter of 2009.  In the second quarter of 2010 the U.S. Dollar strengthened slightly versus Sterling to an average of $1.49 versus $1.55 in the second quarter of 2009. 

 

Net Profits

Net profit (adj.) for the six months ended June 30, 2010 was $137.2 million, or $0.53 per diluted share, compared to net profit (adj.) of $103.7 million, or $0.43 per diluted share, for the six months ended June 30, 2009.  Net profit (IFRS) for the six months ended June 30, 2010 was $102.1 million, or $0.42 per diluted share, compared to net profit (IFRS) of $85.4 million, or $0.36 per diluted share, for the first half of 2009. 

 

Net profit (adj.) for the second quarter of 2010 was $75.5 million, or $0.28 per diluted share, compared to net profit (adj.) of $63.6 million, or $0.26 per diluted share, for the second quarter of 2009.  Net profit (IFRS) for the second quarter of 2010 was $52.4 million, or $0.21 per diluted share, compared to net profit (IFRS) of $50.9 million, or $0.21 per diluted share, for the second quarter of 2009. 

 

IAS 38 Charges and Capitalization

Under IAS 38 the company is required to capitalize certain aspects of its research and development activities.  R&D capitalization in the first half of 2010 was $16.3 million (H2 2009: $17.3 million) as a specific new product initiative moves towards launch earlier than anticipated.  R&D capitalization for the first half of 2010 is offset by amortization charges of $7.4 million (H2 2009: $5.4 million) arising from historical R&D capitalization.  The capitalization and offsetting charges resulted in a net credit (before tax) in the period of $8.9 million (H2 2009: $11.9 million), and a net margin impact of 2% (H2 2009: 3%).

 

Balance Sheet and Cash Flow

Cash balances were $962.0 million at June 30, 2010, an increase of $719.2 million from $242.8 million at December 31, 2009.  Movements in cash flow during the first half year of 2010 of note included:

 

§ Positive cash flow from operations of $190.8 million, up 64% from the same period last year

§ Tax payments of $36.8 million (H1 2009: $13.2 million), up sharply due to the increased profitability of the Group

§ Acquisition of MicroLink LLC and CA's Information Governance Business for combined consideration of $76.3 million;

§ Purchase of fixed assets of $30.6 million due to continued expansion of the Group's data centres;

§ Raising of $765.9 million from the convertible loan notes issue in March 2010; and

§ Repayment of $53.9 million of the Barclays term loan facility also in March 2010.

 

Cash conversion for the six months ended June 30, 2010 was 93% (H1 2009: 72%).  Trade receivables at June 30, 2010, were $211.6 million, compared to $230.2 million at December 31, 2010.  Accounts receivable days sales outstanding were 82 days at June 30, 2010, compared to 88 days at December 31, 2009.  $5.9 million of inventory from the beginning of the quarter was still to be delivered by the end of the quarter. Deferred revenues were $175.5 million at June 30, 2010, compared to $173.5 million at December 31, 2009 showing normal seasonality.  Despite the difficult economic climate, bad debt write off in the quarter was less than 1% of revenues.  Accrued income at June 30, 2010 was not material, at under 5% of revenues.

 

Supplemental Metrics

Autonomy is supplying supplemental metrics to assist in the understanding and analysis of Autonomy's business. 

 

Six Months Ended June 30, 2010

 

Cash conversion (H1 CFFO/H1 adj EBITDA**)

93%

Cash conversion (LTM CFFO/LTM adj EBITDA**)

89%

Product including hosted and OEM*

$268m

IDOL Product

$109m

IDOL Cloud

$92m

Service revenues*

$22m

Deferred revenue release (primarily maintenance)*

$125m

OEM derived revenues*

$67m

          OEM Dev

$6m

          OEM Ongoing

$61m

Deals over $1 million

44

Tax rate

25%

Available tax losses*

$148m

LTM revenue with terms >365 days in normal range (<2% of revenues)


Accrued income in normal range (<5% of revenues)


 

Three Months Ended June 30, 2010

 

Cash conversion (Q2 CFFO/Q2 adj EBITDA**)

98%

Cash conversion (Q2 CFFO/Q1 adj EBITDA**)

107%

Product including hosted and OEM*

$147m

IDOL Product

$62m

IDOL Cloud

$47m

Service revenues*

$11m

Deferred revenue release (primarily maintenance)*

$63m

OEM derived revenues*

$38m

          OEM Dev

$3m

          OEM Ongoing

$35m

Deals over $1 million

25

Tax rate

22%

LTM revenue with terms >365 days in normal range (<2% of revenues)


Accrued income in normal range (<5% of revenues)


--------

*       The above items are provided for background information and may include qualitative estimates..

**     Adj.  EBITDA is defined as operating cash flow before movements in working capital.

 

Q2 2010 Corporate Developments

During the second quarter of 2010 Autonomy continued to extend its market leadership with the introduction of key new and upgraded IDOL technologies, including the launches of:

 

§ World's first Social Media Governance platform, protecting organisations across all social media channels;

§ Industry's first Meaning Based Rich Media Management platform; and

§ Industry leading Meaning Based Multichannel Customer Interaction Analytics Platform.

 

During the second quarter Autonomy was recognised in multiple ways for its market leadership and unmatched technology, including:

 

§ Receiving Her Majesty The Queen's Award for Enterprise in the category of continuous achievement in international trade;

§ Sushovan Hussain, CFO, was presented with FTSE 100 FD of the Year Award at the FD's Excellence Awards supported by the CBI; and

§ Being rated by IDC as fastest-growing archiving software company and the leading provider of search and discovery software.

 

Scheduling of Conference Call and Further Information

Autonomy's results conference call will be available live at www.autonomy.com on July 22, 2010, at 9:30 a.m. BST/4:30 a.m. EST/1:30 a.m. PST. 

 

From time to time the company answers investors' questions on its website which may include information supplemental to that set forth above.  Questions and answers can be found at: www.autonomy.com/investors/questions. 

 

Risk Factors as Required by DTR 4.2.7(2)

As with all businesses, the Group is affected by certain risks, not wholly within our control, which could have a material impact on the Group's long term performance and could cause actual results to differ materially from forecast and historic results.

 

The principal risks and uncertainties facing the Group have not changed from those set out in the company's most recent prospectus, which does not form part of these interim statements.  These include:  dependence on our core technology; competition; levels of operational spending versus revenues; average selling price; economic and market conditions; reliance on value added resellers; continued service of our executive directors; hiring and retention of qualified personnel; product errors or defects; problems encountered in connection with potential acquisitions; and intellectual property claims. 

 

In addition to the foregoing, the primary risk and uncertainty related to the Group's performance for the remainder of the year is the continuing uncertain macro economic environment, which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.  This effect has been offset during the first six months of the year to some extent by emerging signs of economic stability and continuing legal, regulatory and compliance issues which have arisen for enterprises in connection with the current economic environment.

 

About Autonomy Corporation plc

Autonomy Corporation plc (LSE: AU.  or AU.L), a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement.  IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market.  Autonomy's technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video.  Autonomy's software powers the full spectrum of mission-critical enterprise applications including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis. 

 

Autonomy's customer base is comprised of more than 20,000 global companies, law firms and federal agencies including: AOL, BAE Systems, BBC, Bloomberg, Boeing, CitiGroup, Coca Cola, Daimler AG, Deutsche Bank, DLA Piper, Ericsson, FedEx, Ford, GlaxoSmithKline, Lloyds Bank, NASA, Nestlé, the New York Stock Exchange, Reuters, Shell, Tesco, T-Mobile, the U.S.  Department of Energy, the U.S.  Department of Homeland Security and the U.S.  Securities and Exchange Commission.  More than 400 companies OEM Autonomy technology, including Symantec, Citrix, HP, Novell, Oracle, Sybase and TIBCO.  The company has offices worldwide.  Please visit www.autonomy.com to find out more.

 

Autonomy and the Autonomy logo are registered trademarks or trademarks of Autonomy Corporation plc.  All other trademarks are the property of their respective owners.

 

Financial Media Contacts:

Analyst and Investor Contacts:

Edward Bridges / Haya Herbert-Burns

Financial Dynamics

+44 (0)20 7831 3113

Derek Brown, Head of IR

Autonomy Corporation plc

+44 (0)207 907 2300

 

 

AUTONOMY CORPORATION plc

CONDENSED CONSOLIDATED INCOME STATEMENT

(in thousands, except per share amounts)

 

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

Continuing operations

$'000

$'000

$'000

$'000

Revenues (see note 4)

221,125

195,192

415,305

324,971

Cost of revenues (excl.  amortization)

(30,323)

(23,628)

(51,865)

(36,417)

Amortization of purchased intangibles

(14,898)

(15,105)

(29,432)

(20,459)

Total cost of revenues

(45,221)

(38,733)

(81,297)

(56,876)

Gross profit

175,904

156,459

334,008

268,095

Operating expenses:





Research and development

(27,741)

(28,781)

(55,523)

(48,791)

Sales and marketing

(50,557)

(37,110)

(93,457)

(65,870)

General and administrative

(17,264)

(15,508)

(34,519)

(26,796)

Other costs





Post-acquisition restructuring costs

(558)

-

(558)

(846)

(Loss) profit on foreign exchange

(2,777)

(694)

184

(1,127)

Total operating expenses

(98,897)

(82,093)

(183,873)

(143,430)

Profit from operations

77,007

74,366

150,135

124,665

Share of  loss of associate

(333)

(85)

(671)

(526)

Interest receivable

2,178

168

2,985

791

Interest payable

(11,372)

(2,757)

(16,169)

(3,261)

Profit before income taxes

67,480

71,692

136,280

121,669

Income taxes (see note 5)

(15,129)

(20,817)

(34,215)

(36,278)

Net profit

52,351

50,875

102,065

85,391

Basic earnings per share (see note 7)

$ 0.22

$ 0.21

$ 0.42

$ 0.36

Diluted earnings per share  (see note 7)

$ 0.21

$ 0.21

$ 0.42

$ 0.36

 

Reconciliation of Adjusted Financial Measures

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

 

$'000

$'000

$'000

$'000

Gross profit

175,904

156,459

334,008

268,095

Amortization of purchased intangibles

14,898

15,105

29,432

20,459

Gross profit (adjusted)

190,802

171,564

363,440

288,554






Profit before income taxes

67,480

71,692

136,280

121,669

Amortization of purchased intangibles

14,898

15,105

29,432

20,459

Share-based compensation (see note 6)

1,273

2,007

2,767

3,131

Post-acquisition restructuring costs

558

-

558

846

Loss (profit) on foreign exchange

2,777

694

(184)

1,127

Interest payable on convertible loan notes

10,019

-

13,138

-

Share of loss of associate

333

85

671

526

Profit before income taxes (adjusted)

97,338

89,583

182,662

147,758

Income taxes (adjusted)

(21,823)

(26,012)

(45,493)

(44,009)

Net profit (adjusted)

75,515

63,571

137,169

103,749






Profit from operations

77,007

74,366

150,135

124,665

Amortization of purchased intangibles

14,898

15,105

29,432

20,459

Share-based compensation (see note 6)

1,273

2,007

2,767

3,131

Post-acquisition restructuring costs

558

-

558

846

Loss (profit) on foreign exchange

2,777

694

(184)

1,127

Profit from operations (adjusted)

96,513

92,172

182,708

150,228

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

AUTONOMY CORPORATION plc

CONDENSED CONSOLIDATED BALANCE SHEET

 

 

As at

 

(unaudited)

 

June 30,

2010

Dec. 31,

2009

 

$'000

$'000

ASSETS



Non-current assets:



Goodwill

1,358,397

1,287,042

Other intangible assets

407,475

399,277

Property and equipment, net

28,918

33,886

Equity and other investments

29,944

16,608

Deferred tax asset

19,705

24,015

Total non-current assets

1,844,439

1,760,828

Current assets:



Trade receivables, net

211,616

230,219

Other receivables

54,442

45,231

Total trade and other receivables

266,058

275,450

Inventory

5,908

486

Cash and cash equivalents

961,992

242,791

Total current assets

1,233,958

518,727

TOTAL ASSETS

3,078,397

2,279,555




CURRENT LIABILITIES



Trade payable

(22,643)

(14,926)

Other payables

(36,822)

(54,517)

Total trade and other payables

(59,465)

(69,443)

Bank loan

(78,358)

(52,375)

Tax liabilities

(44,901)

(43,338)

Deferred revenue

(170,718)

(164,931)

Provisions

(2,113)

(2,731)

Total current liabilities

(355,555)

(332,818)

Net current assets

878,403

185,909




NON-CURRENT LIABILITIES



Bank loan

(66,083)

(145,152)

Convertible loan notes

(654,954)

-

Deferred tax liabilities

(74,609)

(85,087)

Deferred revenue

(4,751)

(8,576)

Other payables

(1,693)

(1,020)

Provisions

(4,450)

(5,123)

Total non-current liabilities

(806,540)

(244,958)

Total liabilities

(1,162,095)

(577,776)

NET ASSETS

1,916,302

1,701,779




Shareholders' equity:



Ordinary shares (1)

1,339

1,333

Share premium account

1,241,809

1,130,767

Capital redemption reserve

135

135

Own shares

(788)

(845)

Merger reserve

27,589

27,589

Stock compensation reserve

24,669

21,959

Revaluation reserve

16,601

4,499

Translation reserve

(27,343)

(12,032)

Retained earnings

632,291

528,374

TOTAL EQUITY

1,916,302

1,701,779

------------

(1)   At June 30, 2010, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 241,833,190 issued and outstanding; as of December 31, 2009, 600,000,000 ordinary shares of nominal value 1/3 pence each authorized, 240,574,304 issued and outstanding.

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

AUTONOMY CORPORATION plc

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

 

$'000

$'000

$'000

$'000

Cash flows from operating activities:





Profit from operations

77,007

74,366

150,135

124,665

Adjustments for:





Depreciation and amortization

26,438

22,081

53,069

32,624

Share based compensation

1,273

2,007

2,767

3,131

Foreign currency movements

2,777

694

(184)

1,127

Post-acquisition restructuring costs

357

-

357

596

Other non-cash items

-

-

-

126

Operating cash flows before movements in working capital

107,852

99,148

206,144

162,269

Changes in operating assets and liabilities (net of impact of acquisitions):





Receivables

5,274

(36,349)

6,852

(44,841)

Inventories

4,342

(77)

(5,425)

170

Payables

(12,179)

2,671

(16,806)

(1,064)

Cash generated by operations

105,289

65,393

190,765

116,534

Income taxes paid

(13,039)

(2,370)

(36,819)

(13,151)

Net cash provided by operating activities

92,250

63,023

153,946

103,383






Cash flows from investment activities:





Interest received

2,095

168

2,316

791

Purchase of fixed assets

(12,960)

(291)

(30,583)

(4,364)

Purchase of investments

-

(1,172)

(2,500)

(2,152)

Expenditure on product development

(9,721)

(4,115)

(16,294)

(7,399)

Acquisition of subsidiaries, net of cash acquired

(21,977)

(10,160)

(77,929)

(620,923)

Net cash used in investing activities

(42,563)

(15,570)

(124,990)

(634,047)






Cash flows from financing activities:





Proceeds from issuance of shares, net of issuance costs

5,665

5,106

12,830

12,861

Proceeds from share placing, net of issuance costs

-

-

-

308,512

Proceeds from convertible loan notes, net of issuance costs

-

-

765,912


Interest on bank loan

(980)

(2,297)

(2,252)

(2,498)

Repayment of bank loan

-

(37,450)

(53,906)

(37,450)

Drawdown of bank loan

-

-

-

200,000

Payment of arrangement fee

-

(346)

-

(3,846)

Net cash provided by (used in) financing activities

4,685

(34,987)

722,584

477,579






Net increase (decrease) in cash and cash equivalents

54,372

12,466

751,540

(53,085)

Beginning cash and cash equivalents

910,876

132,315

242,791

199,218

Effect of foreign exchange on cash and cash equivalents

(3,256)

7,768

(32,339)

6,416

Ending cash and cash equivalents

961,992

152,549

961,992

152,549

 

AUTONOMY CORPORATION plc

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

 

$'000

$'000

$'000

$'000

Net profit

52,351

50,875

102,065

85,391






Revaluation of equity investment

14,913

(810)

12,102

584

Translation of overseas operations

(1,019)

14,272

(15,311)

14,334

Other comprehensive income

13,894

13,462

(3,209)

14,918

Total comprehensive income

66,245

64,337

98,856

100,309

 

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

AUTONOMY CORPORATION plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 


Ordinary

shares

Share

premium

Capital

Redemption

reserve

Own shares

Merger

reserve

Sub-total


$'000

$'000

$'000

$'000

$'000

$'000

At January 1, 2010

1,333

1,130,767

135

(845)

27,589

1,158,979

Retained profit

-

-

-

-

-

-

Other comprehensive income

-

-

-

-

-

-

Stock compensation

-

-

-

-

-

-

Share options exercised

6

13,227

-

-

-

13,233

EBT options exercised

-

-

-

57

-

57

Equity element of convertible loan notes

-

97,815

-

-

-

97,815

Deferred tax on stock options

-

-

-

-

-

-

At June 30, 2010

1,339

1,241,809

135

(788)

27,589

1,270,084

 


Sub-total

Forwarded

Stock comp'n

reserve

Revaluation

reserve

Translation

reserve

Retained

earnings

Total


$'000

$'000

$'000

$'000

$'000

$'000

At January 1, 2010

1,158,979

21,959

4,499

(12,032)

528,374

1,701,779

Retained profit

-

-

-

-

102,065

102,065

Other comprehensive income

-

-

12,102

(15,311)

-

(3,209)

Stock compensation

-

2,767

-

-

-

2,767

Share options exercised

13,233

-

-

-

-

13,233

EBT options exercised

57

(57)

-

-

-

-

Equity element of convertible loan notes

97,815

-

-

-

-

97,815

Deferred tax on stock options

-

-

-

-

1,852

1,852

At June 30, 2010

1,270,084

24,669

16,601

(27,343)

632,291

1,916,302

 


Ordinary

shares

Share

premium

Capital

Redemption

reserve

Own shares

Merger

reserve

Sub-total


$'000

$'000

$'000

$'000

$'000

$'000

At January 1, 2009

1,214

798,279

135

(905)

27,589

826,312

Retained profit

-

-

-

-

-

-

Other comprehensive income

-

-

-

-

-

-

Stock compensation

-

-

-

-

-

-

Issuance of shares

111

321,010

-

-

-

321,121

EBT options exercised

-

-

-

2

-

2

Deferred tax movement

-

-

-

-

-

-

At June 30, 2009

1,325

1,119,289

135

(903)

27,589

1,147,435

 


Sub-total

Forwarded

Stock comp'n

reserve

Revaluation

reserve

Translation

reserve

Retained

earnings

Total


$'000

$'000

$'000

$'000

$'000

$'000

At January 1, 2009

826,312

14,846

2,987

(18,261)

294,016

1,119,900

Retained profit

-

-

-

-

85,391

85,391

Other comprehensive income

-

-

584

14,334

-

14,918

Stock compensation

-

3,131

-

-

-

3,131

Issuance of shares

321,121

-

-

-

-

321,121

EBT options exercised

2

(2)

-

-

-

-

Deferred tax movement

-

-

-

-

18,291

18,291

At June 30, 2009

1,147,435

17,975

3,571

(3,927)

397,698

1,562,752

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

AUTONOMY CORPORATION plc

 

NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2010 - UNAUDITED

 

 

1.   General information

 

Interim information is unaudited, but reflects all normal adjustments which are, in the opinion of management, necessary to provide a fair statement of results and the company's financial position for and as at the periods presented.  The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the operating results for future operating periods.  The interim financial statements should be read in connection with the company's audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2009.  The information for the year ended December 31, 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

 

2.   Accounting policies

 

The annual financial statements of Autonomy Corporation plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

 

Basis of preparation

The same accounting policies, presentation and methods of computation are followed in the condensed set of consolidated financial statements as applied in the Group's 2009 Annual Report, except for certain reclassifications between cost categories to ensure consistency across the Group, and as described below.

 

Adoption of new and current standards

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2009, except for the adoption of new standards and interpretations.  In the current financial year, the Group has adopted International Financial Reporting Standard 3 (Revised 2008) "Business Combinations" and International Accounting Standard 27 (Revised 2008) "Consolidated and Separate Financial Statements" as required, and will apply these principles throughout the year.  Adoption of these standards did not have any significant effect on the financial position or performance of the Group.

 

Going Concern

The Group has considerable financial resources together with a significant number of customers across different geographic areas and industries.  At June 30, 2010 the Group had cash balances of $962 million and total debt of $799 million.  The Group has no net debt.  As a consequence, the directors believe that the Group is well placed to manage business risks successfully despite the current uncertain economic outlook.

After making enquiries and considering the cash flow forecasts of the Group the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the six month and quarterly consolidated financial statements

 

Adjusted Results

Although IFRS disclosure provides investors and management with an overall view of the company's financial performance, Autonomy believes that it is important for investors to also understand the performance of the company's fundamental business without giving effect to certain specific, non-recurring and non-cash charges.  Consequently, the non-IFRS (adj.) results exclude share of profit/loss of associates, post-acquisition restructuring costs and non-cash charges for the amortization of purchased intangibles, share-based compensation, interest on convertible loan notes, non-cash translational foreign exchange gains and losses and associated tax effects.  Management uses the adjusted results to assess the financial performance of the company's operational business activities. 

 

See reconciliations on page 7.

 

 

3.   Acquisitions of MicroLink and Information Governance business

 

During the first half of 2010 we have completed the acquisitions of MicroLink LLC (100% of share capital acquired) and CA's Information Governance business (asset purchase). The acquisition of MicroLink LLC is intended to accelerate the adoption of Autonomy technology in the important and growing area of US government expenditure. The acquisition of CA's Information Governance business strengthens Autonomy's position of the leader in Meaning Based Governance.

 

Total consideration paid was $76 million, all of which was paid in cash.  Net assets acquired were $1 million, giving rise to goodwill of $75 million. Acquisition costs for each acquisition have been included as costs in the income statement in accordance with IFRS 3 Revised.

 

The purchase price allocation has not yet been finalised although we expect the independent valuation reports to be completed during the second half of 2010. Management's provisional purchase price allocation has attributed a value of $12 million to purchased intangibles based on comparable transactions. It is not practicable to determine the effect of the acquisitions for the period from acquisition to the end of the financial period. The company's core products and those of the acquired entities have been integrated and the operations merged such that it is not practicable to determine the portion of the result that specifically relates to the acquired entities on a stand-alone basis.

 

 

4.   Segmental information

 

The Company is organized internally along Group function lines with each line reporting to the Group's chief operating decision maker, the Chief Executive Officer.  The primary Group function lines include:  finance; operations, including legal, HR and operations; marketing; sales; and technology.   Each of these functions supports the overall business activities, however they do not engage in activities from which they earn revenues or incur expenditure in their operations with each other.  No discrete financial information is produced for these function lines.  The company integrates acquired businesses and products into the Autonomy model such that separate financial data on these entities is not maintained post acquisition.

 

The Group has operations in various geographic locations however no discrete financial information is maintained on a regional basis.  Decisions around the allocation of resources are not determined on a regional basis and the chief operating decision maker does not assess the Group's performance on a geographic basis.

 

The Group is a software business that utilises its single technology in a set of standard products to address unique business problems associated with unstructured data.  The Group offers over 500 different functions and connectors to over 400 different data repositories as part of its product suite.  Each customer selects from a list of options, but underneath from a single unit of the proprietary core technology platform.  As a result, no analysis of revenues by product type can be provided.

 

Each of the Group's virtual brands is founded on the Group's unique Intelligent Data Operating Layer (IDOL), the Group's core infrastructure for automating the handling of all forms of unstructured information.  Separate financial information is not prepared for each virtual brand to assess its performance for the purpose of resource allocation decisions.  The pervasive nature of the Group's technology across each brand requires decisions to be taken at the Group level and financial information is prepared on that basis.

 

A significant proportion of the Group's cost base is fixed and represents payroll and property costs which relate to the multiple function lines of the Group.  As a result the business model drives enhanced performance though growing sales and accordingly Group wide revenue generation is the key performance metric that is monitored by the chief operating decision maker.  The revenue financial data used to monitor performance is prepared and compiled on a Group wide basis.  No separate revenue financial analysis is maintained on revenues from any of the virtual brands.

 

The Company's chief operating decision maker is the Group's Chief Executive Officer, who evaluates the performance of the Company on a Group wide basis and any elements within it on the basis of information from junior executives and Group financial information and is ultimately responsible for entity-wide resource allocation decisions. 

 

As a consequence of the above factors the Group has one operating segment in accordance with IFRS 8 "Operating Segments".  IFRS 8 also requires information on a geographic basis and that information is shown below. The Group's operations are located primarily in the United Kingdom, the US and Canada.  The company also has a significant presence in a number of other European countries as well as China, Japan, Singapore and Australia.  The following tables provide an analysis of the Group's sales and net assets by geographical market based upon the location of the Group's customers. 

 

 

 

Three Months Ended

Six Months Ended


(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

Revenue by region:

$'000

$'000

$'000

$'000

Americas

146,874

133,928

282,469

219,111

Rest of World

74,251

61,264

132,836

105,860

          Total

221,125

195,192

415,305

324,971

 

Information about these geographical regions is presented below:

 


Three Months Ended


(unaudited)


June 30, 2010

June 30, 2009


Americas

ROW

Total

Americas

ROW

Total


$'000

$'000

$'000

$'000

$'000

$'000

Result by region

56,738

23,604

80,342

57,930

17,130

75,060

Post-acq'n restr.  costs.

 


(558)

 


-

Profit (loss) on foreign exch.

 


(2,777)

 


(694)

Operating profit

 


77,007

 


74,366

Share of  loss of associate



(333)



(85)

Interest receivable



2,178



168

Interest payable



(11,372)



(2,757)

Profit before tax



67,480



71,692

Tax



(15,129)



(20,817)

Profit for the period



52,351



50,875

 


Six Months Ended


(unaudited)


June 30, 2010

June 30, 2009


Americas

ROW

Total

Americas

ROW

Total


$'000

$'000

$'000

$'000

$'000

$'000

Result by region

112,222

38,287

150,509

96,459

30,179

126,638

Post-acq'n restr.  costs.

 


(558)

 


(846)

Profit (loss) on foreign exch.

 


184

 


(1,127)

Operating profit

 


150,135

 


124,665

Share of  loss of associate



(671)



(526)

Interest receivable



2,985



791

Interest payable



(16,169)



(3,261)

Profit before tax



136,280



121,669

Tax



(34,215)



(36,278)

Profit for the period



102,065



85,391

 

 

5.   Income taxes

 

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

Tax charge by region:

$'000

$'000

$'000

$'000

UK

9,901

12,901

23,300

20,344

Foreign

5,228

7,916

10,915

15,934

          Total

15,129

20,817

34,215

36,278

 

 

6.   Share based compensation

 

Share based compensation charges have been charged in the consolidated income statement within the following functional areas:

 

 

Three Months Ended

Six Months Ended


(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

 

$'000

$'000

$'000

$'000

Research and development

342

539

743

841

Sales and marketing

624

984

1,357

1,535

General and administrative

307

484

667

755

Total share based compensation charge

1,273

2,007

2,767

3,131

 

 

7.   Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

Three Months Ended

Six Months Ended

 

(unaudited)

(unaudited)

 

June 30,

2010

June 30,

2009

June 30,

2010

June 30,

2009

 

$'000

$'000

$'000

$'000

Earnings for purpose of basic and diluted earnings per share, being net profit (IFRS)

52,351

50,875

102,065

85,391






Earnings for the purposes of diluted earnings per share (adjusted - see page 7)

75,515

63,571

137,169

103,749






Number of shares (in thousands)





Weighted average number of ordinary shares for the purposes of basic earnings per share

241,587

238,815

241,239

235,279






          Share options

3,308

4,094

3,114

3,707

Weighted average number of ordinary shares for the purposes of diluted earnings per share (IFRS)

244,895

242,909

244,353

238,986






          Convertible loan notes

24,082

-

15,700

-

Weighted average number of ordinary shares for the purposes of diluted earnings per share (adjusted)

268,977

242,909

260,053

238,986






IFRS





Earnings per share - basic

$ 0.22

$ 0.21

$ 0.42

$ 0.36

Earnings per share - fully diluted

$ 0.21

$ 0.21

$ 0.42

$ 0.36






Adjusted





Earnings per share adj. - basic (IFRS)

$ 0.31

$ 0.27

$ 0.57

$ 0.44

Earnings per share adj.- fully diluted (IFRS)

$ 0.31

$ 0.26

$ 0.56

$ 0.43

Earnings per share adj. - fully diluted (adjusted for conversion of loan notes)

$ 0.28

$ 0.26

$ 0.53

$ 0.43

 

Because in our adjusted measure of profits, we exclude the interest payable on the convertible loan notes, the inclusion of the potential shares for the convertible loan notes does cause dilution.  In order to give a fair presentation of our adjusted diluted earnings per share, we have elected to reflect the impact of the convertible shares within our adjusted diluted earnings per share measures.

 

 

8.   Related Party Transactions

 

There have been no related party transactions, or changes in related party transactions described in the latest annual report, that could have a material effect on the financial position or performance of the Group in the financial period.

 

 

------------------------------------------------

 

Statement of Directors' Responsibility

 

We confirm that to the best of our knowledge:

 

(a)

the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";



(b)

the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and



(c)

the interim management report includes a fair review of the information required by DTR 4.2.8 (disclosure of related parties' transactions and changes therein). 

 

 

By order of the Board

 

 

Dr Michael R Lynch

Sushovan T Hussain

Chief Executive Officer

Chief Financial Officer

July 22, 2010

July 22, 2010

 

 

INDEPENDENT REVIEW REPORT TO AUTONOMY CORPORATION PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the three and six months ended June 30, 2010 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flow and related notes 1 to 8. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and six months ended June 30, 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

Deloitte LLP

Chartered Accountants and Statutory Auditors

Cambridge, UK

July 22, 2010

 


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