Final Results: Allocate Software Reports Record...

3 August 2009 Allocate Software plc ("the company") Allocate Software Reports Record Results for the Year Ended 31 May 2009 Allocate Software plc (AIM: ALL), the leading provider of workforce optimisation solutions, today announces its results for the year ended 31 May 2009. Financial Highlights - Revenue increased by 36% to £15.8m (2008: £11.6m) - Licence revenue increased by 32% to £7.6m (2008: £5.8m) - Services revenue increased by 37% to £8.0m (2008: £5.8m) - Healthcare revenue increased by 69% to £11.1m (2007: £6.6m) - Trading profit* increased by 37% to £2.53m (2008: £1.85m) - Trading profit* margin increased to 16.05% (2008: 15.98%) - Diluted adjusted EPS** increased by 31% to 5.36p (2008: 4.1p) - Cash balances at the year-end of £3.7m (after £2.1m cost of investment in Baum Hart & Partners) * Trading profit defined as profit before amortisation of intangible assets, share-based payments, interest and tax ** Excludes amortisation of intangibles, share-based payments and deferred tax adjustment Business Highlights - Total Healthcare customer base has now reached over 180 NHS Trusts in the UK and four Private Healthcare Providers - MAPS Healthroster gained 46 new NHS Trust customers, making 81 in total at the year-end (which represents 21% of the total number of Acute, Mental Health and Primary Care Trusts in England and Wales) - Successful integrations of Key Information Technology Services ("KITS") and Baum Hart & Partners("BHP") - NATO extended its use of MAPS to provide access by all NATO Allies; it is now the defined standard for all national contributions for Force Generation across NATO - MAPS Maritime selected by Maersk Oil Qatar for its shoreside and offshore operations - Directors confident of another successful year Post-period events - Name changed to Allocate Software plc on 28 May 2009 - Geographic expansion continues with second sale of MAPS Healthroster into Malaysia - Launched new Doctor Rostering module and the first sale of this module to an existing NHS Trust customer has already been made - Two additional sales of MAPS Healthroster in the UK - Launched Next Generation BSMS, temporary staffing solution to the market Ian Bowles, Chief Executive Officer of Allocate Software, commented: "FY09 was a significant year for Allocate Software, outperforming our original targets and achieving more consistent revenues. We continued to strengthen our position in the UK Healthcare market, winning considerable market share and securing our second private healthcare customer in Malaysia. In both Maritime and Defence we secured new orders, showing that even in difficult economic environments customers value the applications we deliver. We remain committed to improving the performance of all areas of the business as we focus on growth and delivering enhanced shareholder value." Enquiries: Allocate Software Ian Bowles - Chief Executive Officer Tel: +44 (0) 20 7355 5555 Simon Thorne - Chief Financial Officer Numis Securities Nominated adviser - Michael Meade / Brent Nabbs Tel: +44 (0) 20 7260 1000 Corporate Broking - James Black Hansard Group Justine James Tel: +44 (0) 20 7245 1100 John Bick Tel: +44 (0) 7525 324431 CHAIRMAN'S STATEMENT The 2008/9 financial year has been another year of considerable success for Allocate Software, as we continue to deliver on our strategy to be the leading supplier of workforce optimisation solutions in our chosen markets. Results Revenue in the financial year was £15.8m (2008: £11.6m), an increase over last year of 36%. Trading profit for the year, before adjustments for share-based payments and amortisation of intangible assets, was £2.53m (2008: £1.85m), an increase over last year of 37%. The resulting trading profit margin was 16.05% (2008: 15.98%), consistent with the previous year. However, this includes £0.4m costs incurred in the 2009 financial year on the projected two year development of our new product platform. This cost has been written off in full. Excluding this, the net operating margin would have been 18.25%, a significant improvement over last year. Diluted adjusted EPS (excluding amortisation of intangibles, share-based payments and the deferred tax adjustment) increased by 31% to 5.36p (2008: 4.1p). Licence revenue grew by 32% to £7.6m (2008: £5.8m), while Services revenue grew by 37% to £8.0m (2008: £5.8m). By sector, Healthcare revenue in the period increased by 69% to £11.1m (2008: £6.6m), reflecting the company's continued expansion within the NHS and its position as the supplier of choice for nurse rostering products. Defence revenues were flat at £3.0m (2008: £3.1m), reflecting a continued level of spend by existing customers in this market sector. Maritime revenues were 20% less than the prior year at £1.6m (2008: £1.9m). Shortly before the year-end, the company signed new licence agreements with three companies in the Maritime sector and the majority of licence fees from these will be recognised in 2010. Selling and operational expenses in the period increased from £7.7m to £10.7m. This planned increase reflected the continued development of the Services business, the expansion of our Sales capability and, in particular, investment in the development of our product platform. Administrative expenses in the period were £2.5m (2008: £2.0m), the increase reflecting additional costs arising as a result of the acquisitions of KITS in April 2008 and BHP in December 2008. Cash balances at the year-end were £3.7m (2008: £4.3m). This reflects: - an increase in debtors of £3.3m subsequent to increased sales activity in the second half of the year; - an increase in trade and other payables of £2.4m, reflecting new support contracts, consultancy services pre-paid by customers and monies owed as deferred consideration for the acquisition of BHP; and - £2.1m acquisition costs (£1.7m initial cost of investment and £0.4m professional fees) relating to the business and assets of BHP. Organic growth Excluding the acquisitions of KITS made in April 2008 and BHP in December 2008: - Revenue in the 2008/9 financial year was £14.2m (2008: £11.5m), an increase over the previous year of 23%; - Licence revenue grew 22%, in comparison to the prior year; - Services revenue grew by 20%, compared with the prior year; and - Healthcare revenue increased 48%, compared with the prior year. Both KITS and BHP are now an integral part of the company's business. As a result, the costs of KITS and BHP are not identified separately and it is not possible to state how much of the year's trading profit and margin were separately attributable to these businesses. Significant activity In addition to the company's best ever financial results, a number of significant milestones were also achieved during the year. - Allocate Software now has a customer base of more than 180 NHS Trusts across the UK. This is an important recognition by our customers of the strengths of our software and constitutes an under-recognised source of shareholder value. - 46 NHS Trusts became new MAPS Healthroster customers, up from 23 in the previous year. In addition five NHS Trusts became new customers for our Bank Staff Management Solution (BSMS). - Since the year-end, a further four contracts have been closed: two contracts for the sale of MAPS Healthroster to NHS Trusts, one for the first sale of our new Doctor Rostering module (part of MAPS Health Suite) to an existing NHS customer, and a second sale of MAPS Healthroster to a customer in Malaysia. - We continue to introduce and invest in new products and therefore expand our addressable market within the NHS and overseas healthcare markets. - The acquisition of the business, goodwill and certain assets of BHP secured our position as the most commonly used temporary staffing solution in the NHS. - We have established the foundations for the next phase of our growth strategy, which we expect will include new product introductions that target both new customers and the existing installed base, further acquisitions and continued geographic expansion with the sales of MAPS Health Suite into Malaysia and other territories. Matching commercial and financial objectives We continue to combine a resolute focus on the four core financial and structural elements of a successful software business, with rapid commercial development: - Consistency of revenue growth through consecutive periods - Strong margins in services and support revenues - Investments directed only in high productivity activities - Diligent expense management Consistency of revenue growth through consecutive periods To achieve consistency of revenue through consecutive periods, management has focussed on eliminating lumpiness of Iicence revenues caused by a small number of very large contracts and the elapsed time between them. The high volume of Healthcare contracts smoothes the impact of the larger and less frequent Defence and Maritime contracts. This high volume of licence revenue contracts, combined with recurring support revenues and long term services revenue agreements, gives excellent visibility for future periods. A strong forward pipeline exists for the current financial year. Strong margins in service and support revenues Revenues from services and support account for approximately 50 per cent of total group revenues and grew by 37% in FY09, delivering strong operating margins across the financial year as well as significant recurring revenue. Investments in high productivity activities The close monitoring of performance and use of appropriate incentive structures throughout the company have helped drive investment that achieves customer satisfaction and secures revenue growth in areas that can support high operating margins. In addition, the acquisitions of KITS and BHP also provide an additional source of recurring revenue and growth prospects. Diligent expense management The company has established long-term targets for all categories of expenditure. Investments in sales and marketing, services and support, and research and development are carefully managed to enable revenue growth and margin improvements, whilst fulfilling the criteria which the Board believes are appropriate for a world class software company. We are currently undertaking an accelerated development programme to enhance our product platform. This will increase scalability, improve productivity and quality, and enable wider and faster product development to support higher potential growth. Additional development costs incurred in relation to this programme during the year amounted to £0.4m (2008: £nil). These costs have been written off in full in accordance with our accounting policies. We expect to incur further costs in this respect during 2010 amounting to £0.6m. These are one-time costs above our normal levels of expenditure on development. Achievements with each of these important structural aspects have ensured the company's profitability across all parts of its business, while also achieving exceptionally high levels of customer satisfaction. Acquisitions The company made its first acquisition in April 2008 when it purchased Key Information Technology Systems Ltd ("KITS"). The acquisition of KITS established our position in the NHS temporary staffing solutions market, bringing with it 90 new sites and enabling us to offer a fully integrated e-rostering and bank staffing solution to both our own customers and those of KITS. In December 2008, we made our second acquisition when we purchased the business, goodwill and certain assets of Baum Hart & Partners ("BHP"). The acquisition of BHP has consolidated our position in the NHS temporary staffing solutions market, given that we have acquired the technology platform StaffBank. While we remain focused on strong organic growth, further acquisition opportunities are being considered against well defined criteria that support our strategic objectives. Share buy-back and capital reduction At the company's last Annual General Meeting ("AGM") in December 2008 we received shareholder authority to make purchases from time to time of up to a maximum of 15% of the company's issued ordinary share capital. Any buy-back of shares and the timing of such purchases will depend, inter alia, on market conditions and when the Board determines that share repurchases are in the interests of the company and its shareholders as a whole. Under the Companies Act 1985, a company may only finance the purchase of its own shares out of distributable reserves or the proceeds of a fresh issue of shares made for the purpose. Consequently, at the AGM we also received shareholder authority to cancel the share premium account and an application has been made to the UK courts to confirm and approve a Capital Reduction to create distributable profits. Deferred tax The group has historical tax losses, which are available for offset against future trading profits, amounting to £4.3m. Under IAS 12, a deferred tax asset should be recognised in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably. In addition, a deferred tax asset should also be recognised on the IFRS 2 share-based payment charge. This is due to the fact that the accounting charge is made over the vesting period but the tax deduction is not received until the employee exercises his/her share options. Accordingly, in the financial statements this year we have recognised a deferred tax asset of £1.4m in respect of these items. Outlook The result for the 2008/9 financial year was excellent and the outlook for 2009/10 is for a further year of progress. Management has established firm foundations for continuing growth. There is a strong sales pipeline and we continue to expand our addressable markets both within the UK and overseas. In addition, following the successful integrations of KITS and BHP, we are looking to acquire further complementary businesses that are synergistic and earnings enhancing. Despite the global economic climate, the directors believe the company is well positioned for another successful year. I would like to thank our customers for their business, enthusiastic use of our workforce optimisation solutions and unstinting support for our growth strategies. Finally, I would like to recognise and thank Allocate Software's employees for their unbounded commitment, energy and enthusiasm for the company's success. Terry Osborne CHAIRMAN 3 August 2009 CHIEF EXECUTIVE OFFICER'S STATEMENT Operational review FY09 was a significant year for Allocate Software. We continued to strengthen our position in the UK Healthcare market, winning considerable market share. In Malaysia we secured our second Healthcare customer. In both Maritime and Defence we secured new orders, showing that even in difficult economic environments, customers value the applications we deliver. We remain committed to improving the performance of all areas of the business, as we focus on growth and delivering enhanced shareholder value. During the year, we achieved significant results in each of our three primary market sectors, although our operating results were tempered by planned high levels of investment in our core product capability. We have continued to strengthen the management and operational teams, attracting talented and experienced individuals to the company. We have now successfully integrated two acquired businesses and we are looking to acquire further complementary businesses that are synergistic with our existing capabilities and will be earnings enhancing. We will continue to invest in and grow those areas of the business which show the most positive momentum. With continued improvement in execution and a relentless expense management focus, we will continue the drive to improve shareholder value into FY10 and beyond. Everything is measured. Everyone contributes. Increasing customer satisfaction and improving shareholder value remain our goals. Markets Despite being in the middle of a severe worldwide economic recession, the company's performance in its chosen market sectors has been exceptional. Healthcare Healthcare is our largest market sector, accounting for 70% of total revenues. The ability of our rostering and temporary staffing applications to reduce healthcare costs and improve standards of care enabled considerable success in 2009 and underpins prospects for further expansion in the years ahead, both within the NHS and Private Healthcare internationally. In the UK we have now established a substantial customer base, which extends across over 180 NHS Trusts. We have further routes of expansion, both within those Trusts and throughout the NHS and Private Healthcare. This installed base and addressable market constitute a fundamental strength and a significant source of shareholder value. We continued to expand this base of NHS Trusts in the year, with the addition of 46 new NHS customers for MAPS Healthroster, five for our market leading Bank Staff Management Solution ("BSMS") and two private healthcare providers, one in the USA and one in Malaysia. Licence revenues grew strongly, both organically and overall. In addition, Allocate Software has entered the current financial year (ending 31 May 2010) with a strong pipeline of further opportunities within the NHS. Since the year-end, a further four contracts have been closed, including one sale to an existing customer of our new solution for Doctor Rostering and a second sale of MAPS Healthroster in Malaysia. Domestic NHS new licence sales will be increasingly supplemented by sales into international healthcare markets. MAPS Healthroster is now installed in 83 NHS Trusts in England and Wales. This is more than double the number of customers we had twelve months ago (2008: 35) and it represents 21% of the total number of Acute, Mental Health and Primary Care Trusts in England and Wales. There are also 15 Health Boards in Scotland and five Provider Trusts in Northern Ireland, each of which is a potential customer for MAPS Healthroster. BSMS, our temporary staffing solution which empowers NHS Trusts by automating the planning of bank and agency staff and reporting across hospitals, is now installed in 113 NHS Trusts. This level of penetration can expand still further with the launch of the Next Generation Bank/Temporary Staffing Solution. We have broadened the addressable market and now supply MAPS Healthroster to acute and primary care NHS Trusts for nurses, junior doctors and ancillary staff. Key to choosing MAPS Healthroster is its ability to provide a better understanding of demand versus supply of clinical staff, how this is balanced against efficient use of available budgets and how it helps reduce the administrative burden for HR, clinical and payroll staff. MAPS Healthroster reduces costs significantly and maintains Clinical Governance, thereby helping to improve patient care. As reported previously, two of our customers have been selected by the National Audit Office as examples of good practice in managing the use of temporary nursing staff. In October 2008 we announced the sale of MAPS Healthroster to our first customer in Malaysia, Sunway Medical Centre ("SMC"). This was a significant milestone in our efforts to extend our market reach for workforce optimisation and electronic rostering solutions into other markets. Since the period-end, we have now secured a second contract in Malaysia with Penang Adventist Hospital ("PAH"). PAH is an independent not for profit medical centre, one of 500 in the Adventist network, of which 160 centres are in the USA and 35 in SE Asia. During the year, we also extended our reach overseas with a sale to Boston University Radiology Associates in the USA. As well as being a first sale into a substantial overseas market, the USA, it is also a sale to a new workgroup, radiologists. Building on the successful development of interfaces between Healthroster and ESR (Electronic Staff Record - HR system for the NHS in England and Wales) we now have over 200,000 shifts being processed via this interface each month across our customer base. This delivers significant benefits for our users in terms of reduced administration and improved pay accuracy. It also offers opportunities for future modules to utilise this existing foundation. We are also increasing our coverage in the NHS as we move from nurse rostering into all medical staff groups. Our commitment to the NHS has been strengthened by the acquisition of Baum Hart & Partners. Allocate Software is now the leading provider of rostering solutions to both the permanent and temporary staff markets within the NHS. The company's combined Healthcare customer base has now reached over 180 NHS Trusts in the UK and four Private Healthcare providers, of which three are overseas. In the NHS, Healthroster and BSMS are the most commonly used systems for e-rostering and temporary staff management, where our customers are generating significant referenceable results. More Trusts are evaluating our rostering and temporary staffing solutions under contract. We have increased further the resources allocated to the Healthcare sector to take continuing advantage of the momentum in the market for MAPS Health Suite. There is a strong pipeline of opportunities for the current year. During the current fiscal year we will launch three additional applications, which will deliver additional value to our customers. The first of these, MAPS Doctor Rostering, has already been purchased by its first customer. We anticipate that the increasing spotlight on improving productivity throughout the NHS, controlling expenditure on the use of temporary staff and improving patient care, allied with new products and our increased geographical expansion will lead to continued growth in sales. Defence The Defence sector is our heritage and continues to be a major focus point for the company. During the year there were several significant developments in the use of MAPS Defence Suite by our British and overseas customers. HQ Land Forces now use enhanced MAPS products across their integrated business processes, from Distributed Individual Training for Reserves, through Collective Training with resource and cost data capture, feeding into the Operational Commitments Plot. Over 6,000 British Army personnel have been trained on the use of MAPS so far, through a comprehensive and continuing training and education activity. The Royal Navy is now using MAPS to underpin its "Global Squad Pooling Trial", which is designed to enhance efficiencies in manpower utilisation across the Fleet. The Royal Fleet Auxiliary has recently completed a major and successful migration to the latest MAPS Defence Suite V6 product, working with Allocate Software to incorporate a number of unique features to support all their required ship and shore-side business processes. In Europe, NATO uses MAPS for its Force Generation process and this capability has recently been extended to provide access by all NATO Allies. MAPS is the single authoritative system that holds current data on all national contributions for NATO operations and the NATO Response Forces. Through MAPS, NATO Allies can monitor the assignment of all force offerings and manage their own contributions to ensure equitable, transparent burden sharing. NATO has also chosen MAPS Defence Suite V6 to manage operations and training at the NATO Special Forces Coordination Centre, based at SHAPE in Mons, Belgium. The system is now being used for Operations Planning and Training Management. After a successful pilot scheme, the Royal Australian Navy is in the process of rolling MAPS out across its entire Fleet. We are also pleased to report that, following the year end, we were selected after a long and competitive procurement process as the preferred supplier for a major Defence project, which we believe will lead to a contract being signed in FY10. We believe that this contract, if signed, could deliver significant services revenues over the following two years and will serve to reinforce our market leading position within the Defence community. Also, in July 2009 we commenced a funded pilot study with a Commonwealth army. We expect this pilot study to complete during the 2009 calendar year. Maritime During the year, Maersk Oil Qatar AS ("MOQ") selected MAPS Maritime Suite to manage its offshore personnel across all production operations including platforms, drilling rigs, offshore accommodation vessels, and storage vessels. The solution will improve effectiveness, streamline tasks and integrate personnel data to optimise performance of offshore operations ensuring compliance with health and safety policies. MAPS Maritime Suite will replace MOQ's multiple sources of personnel movement information with a single integrated system for both shoreside and offshore operations for the scheduling of personnel. It will allow managers to have a consolidated, real-time accurate view of personnel on board, accommodation and lifeboat availability on any offshore location. This is of major importance to MOQ in helping them to maintain the highest quality in health and safety compliance across the Al Shaheen oil field. We believe the offshore oil and gas sector provides the best opportunity to grow our maritime revenues and client base during the course of the next two years. One of the world's leading organisations in family entertainment has placed an order with Allocate Software for MAPS Maritime Suite and implementation services for its cruise line. The client made the choice of MAPS Maritime Suite after an open selection process and an exhaustive evaluation of potential suppliers and their product solutions. The requirements include a system to improve the productivity and efficacy of its shoreside crew planners and to provide an effective job scheduling solution for both current and future cruise liners. Key to this customer's choosing of MAPS Maritime Suite was its "out-of-the-box" functionality, the flexibility to customise the solution to meet precise requirements and the strength of Allocate Software as a reliable, professional and solid supplier. Also, our existing customer, Norwegian Cruise Line, has purchased new software licences and support for its ship, the Norwegian Epic. These will be delivered during FY10. Partnerships Our partner strategy again produced positive results during FY09. In our Healthcare sector, our partnership with PricewaterhouseCoopers has resulted in an increased pipeline and contracts with NHS Trust customers. In the USA and Canada, ACS Healthcare Solutions and Interbit Data have begun introducing Allocate Software into their respective client-lists for the MAPS Healthroster application. We have entered into an alliance partnership with NHS Shared Business Services ("SBS"), a leading provider of payroll, finance and accounting services to the NHS. The purpose of the agreement is to help NHS organisations realise financial benefits through reduced administration and automatic entry of data to the Electronic Staff Record system, thereby improving payroll accuracy. SBS works with over 100 NHS organisations to provide outsourced payroll services, which reduce management overheads and allow Trusts to focus on the delivery of quality patient care. We believe the ability to combine payroll services with the scheduling and employment of staff using MAPS Healthroster will create an additional revenue opportunity for the company. In Defence, we signed a worldwide partnership agreement with a renowned, blue chip software integrator. Initially, the agreement is focussing on opportunities for the company's defence products in the Asia- Pacific region. The partner is already working with us on the pilot project for the Commonwealth army, as mentioned above. We anticipate that these partnerships will deliver significant benefits to the company over the coming years. We will continue to select important partnerships to deliver our MAPS software suites into new geographical territories. Client Services Client Services continues to be a fast growing and profitable part of our business. We expect continued growth in the current fiscal year as there is a strong pipeline of work to be delivered across all three market sectors. The Healthcare installed base provides a significant source of on-going services work. There are now 83 NHS Trusts which have signed contracts for MAPS Healthroster implementations in wards, theatres and intensive care areas. We also have successfully deployed MAPS into other disciplines, with particular reference to Doctor Rostering, with excellent results as our location based rostering gives us greater flexibility to cover a plethora of healthcare disciplines and specialties. The Defence sector has many installations throughout the British Armed Forces, where there are over 6,000 users of MAPS Defence Suite. Other worldwide installations include NATO and the Royal Australian Navy, which is now in the process of rolling out MAPS to its entire Fleet and supported from our new office in Sydney. The MAPS Maritime Suite continues to be used by some of the world's largest shipping and cruise lines to manage the workforce planning and associated costs of over 100,000 personnel operating on over 500 vessels throughout the world. The sector has expanded into Offshore Oil and Gas Exploration with new clients Acergy and Maersk Oil Qatar. At the same time as managing the expansion of our client base, we have maintained high levels of client satisfaction with regards to our staff, products and effective approach to implementation. Local Government & Education As a result of the acquisition of BHP, we are in a position to focus on a fourth vertical sector, Local Government & Education. As we progress through FY10 we will invest in the sector to capitalise on our current position. We believe this market has the opportunity to benefit from all our applications and a small dedicated team has been established as of 1 June 2009. In Education we have 53 customers, the most recent being University of Sussex which selected our Higher Education Solution, pFACT and became the 38th University to select the fEC (full economic costing) project management costing and financial appraisal solution for higher education research establishments. We expect to secure additional customers for our Education products in FY10. In Local Government our MESaLS application is used by 14 local authorities in conjunction with the NHS to manage their Community Equipment Stores. Research & Development The MAPS software platform continues to provide the foundation for our product portfolio, with MAPS Health Suite, MAPS Defence Suite and MAPS Maritime Suite customised and branded for their particular market sector. In each core sector, enhanced releases of the MAPS software platform have been developed, with an increasing focus on delivering functionality to users via the web. We have begun to redesign our software platform fully on web technology, a programme of investment which will continue into FY10. This new state-of-the art platform will enable us to provide the rich graphical user interface experience that our customers value across a fully web-enabled environment, as well as enter new geographical territories with localised language versions of the applications. As we seek to accelerate the transition of our product portfolio onto this new software architecture, we continue to satisfy the demands of our current markets by continued development of our current product portfolio. Acquisitions During the year, we completed the integration of KITS. The acquisition significantly increased our existing customer base, and expanded our recurring revenues. It has also enabled us to improve the quality of support we provide to our core NHS customer base and reduce costs, since we have relocated our Healthcare support function out of the London head office. In December 2008, we made our second acquisition when we purchased the business, goodwill and certain assets of BHP. As a result of the acquisition of BHP, we have acquired the following key benefits: - A significant, recurring revenue stream in the form of support and maintenance fees, hosting and transaction-based services, together approximately £1m; - The technology platform (StaffBank) that is used by NHS Professionals; - The opportunity to expand Allocate Software's MAPS Health Suite through further development of certain products of BHP; and - The acquisition of BHP was immediately earnings enhancing to the company. The staff of BHP are now contributing to the development of the enlarged organisation and its product offerings. Outlook As we begin the new financial year FY10, which will be my third year as CEO of Allocate Software, I am more confident than ever that we are well positioned to continue to deliver increasing shareholder value. The company is well balanced with revenues no longer dependent on a small number of high value licence fee transactions. Our growing and referenceable customer base enjoys a significant and rapid return on its investment in our applications and services. This demonstrable ROI helps reduce costs and improve both efficiency and standards of service at a time when the global economic outlook remains uncertain. Allocate Software has established a track record of premium growth rates and financial ratios, has a significant installed base of over 180 NHS and overseas healthcare customers, and a base of recurring revenues and increasing visibility therefor from its market leading position in e-rostering. The opportunity for increasing sales in our Healthcare business and the continued engagement in the Defence and Maritime market sectors will together maintain our growth momentum. We believe these strengths will continue to deliver further growth for the company and lead to enhanced shareholder value. We will continue to attract and retain the very best talent as we deliver against our objective of being a world class software company, respected by our shareholders and admired by our customers. Ian Bowles CHIEF EXECUTIVE OFFICER 3 August 2009 CONSOLIDATED INCOME STATEMENT Year to Year to 31 May 31 May 2009 2008 £'000 £'000 Note Revenue 4 15,774 11,578 Selling and operational expenses (10,702) (7,700) -------- ------- Gross profit 5,072 3,878 ------------------------------------------------------------------------------------------- Administrative expenses (2,541) (2,028) -------- ------- Profit before amortisation, 2,531 1,850 share-based payment, interest and tax Amortisation of intangible assets (678) (50) Share-based payment (97) (104) ------------------------------------------------------------------------------------------- Total administrative expenses (3,316) (2,182) -------- ------- Operating profit 1,756 1,696 Finance income 80 132 Finance charge (6) - -------- ------- Net finance income 74 132 -------- ------- Profit for the year before 1,830 1,828 taxation Tax on profit for the year 9 1,217 (44) -------- ------- Profit for the year 3,047 1,784 -------- ------- -------- ------- Earnings per share 5 Basic (pence per share) 6.8p 4.0p Diluted (pence per share) 6.5p 3.8p ----------------------- CONSOLIDATED BALANCE SHEET 31 May 31 May 2009 2008 £'000 £'000 Note Non-current assets Intangible assets 2,723 795 Property, plant and equipment 673 521 Trade and other receivables 8 - 102 Deferred tax asset 1,386 - ------- ------- Total non-current assets 4,782 1,418 Current assets Trade and other receivables 5,939 2,566 Cash and cash equivalents 3,664 4,317 ------- ------- Total current assets 9,603 6,883 ------- ------- Total assets 14,385 8,301 ------- ------- ------- ------- Equity and liabilities Equity Share capital 2,235 2,235 Share premium account 6,493 6,493 Shares to be issued 213 159 Share-based payment reserve 328 314 Foreign exchange reserve 84 63 Retained earnings (1,885) (5,099) ------- ------- Total equity 7,468 4,165 Non-current liabilities Borrowings 180 196 ------- ------- Total non-current liabilities 180 196 Current liabilities Trade and other payables 6,690 3,893 Corporation tax 47 47 ------- ------- Total current liabilities 6,737 3,940 ------- ------- Total liabilities 6,917 4,136 ------- ------- Total equity and liabilities 14,385 8,301 ------- ------- ------- ------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Shares to Share-based Foreign Retained Total capital premium be issued payment exchange earnings equity reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 June 2007 2,227 6,465 - 210 75 (6,883) 2,094 Exchange differences on opening reserves - - - - (12) - (12) ---------- ---------- ----------- ----------- ----------- ----------- ---------- Net income recognised - - - - (12) - (12) directly in equity Result for the period - - - - - 1,784 1,784 ---------- ---------- ----------- ----------- ----------- ----------- ---------- Total recognised income - - - - (12) 1,784 1,772 and expense Issue of shares 8 28 159 - - - 195 Equity settled share options - - - 104 - - 104 ---------- ---------- ----------- ----------- ----------- ----------- ---------- At 31 May 2008 2,235 6,493 159 314 63 (5,099) 4,165 Exchange differences on opening reserves - - - - 21 - 21 ---------- ---------- ----------- ----------- ----------- ----------- ---------- Net income recognised - - - - 21 - 21 directly in equity Result for the period - - - - - 3,047 3,047 ---------- ---------- ----------- ----------- ----------- ----------- ---------- Total recognised income - - - - 21 3,047 3,068 and expense Options transfer - - - (83) - 83 - Deferred consideration - - 54 - - - 54 Share based payment - - - - - 84 84 deferred tax excess recognised in equity Equity settled share - - - 97 - 97 ---------- ---------- ----------- ----------- ----------- ----------- ---------- options At 31 May 2009 2,235 6,493 213 328 84 (1,885) 7,468 ---------- ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ----------- ----------- ---------- CONSOLIDATED CASHFLOW STATEMENT Year to Year to 31 May 31 May 2009 2008 £'000 £'000 Cash flow from operating activities Profit for the period 3,047 1,784 Adjustments for: Finance charges (74) (132) Income tax 85 44 Deferred tax (1,302) - Depreciation 169 99 Amortisation 678 50 Share-based payment 97 104 Increase in trade and other receivables (3,271) (614) Increase in trade and other payables 2,381 957 ------- ------- Net cash generated from operations 1,810 2,292 Interest expense (6) - Income tax (expense) / refund (85) 3 ------- ------- Net cash generated by operating activities 1,719 2,295 Cash flows from investing activities Interest received 80 132 Payments for intangible assets (2,136) - Investment to acquire subsidiary (net) - (386) Payments for property, plant and equipment (net of (321) (154) ------- ------- capital contribution) Net cash used in investing activities (2,377) (408) Cash flows from financing activities Repayment of borrowings (16) (4) Proceeds from the issue of equity shares - 36 ------- ------- Net cash generated by financing activities (16) 32 Net increase in cash and cash equivalents (674) 1,919 Foreign exchange differences 21 (11) Cash and cash equivalents at the start of the year 4,317 2,409 ------- ------- Cash and cash equivalents at the end of the year 3,664 4,317 ------- ------- ------- ------- NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year to 31 May 2009 1 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information, which compromises the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes, does not constitute full accounts within the meaning of s435 of the Companies Act 2006. The auditors have reported on the group's statutory accounts for the year ended 31 May 2009 under s495 of the Companies Act 2006. The auditor's reports does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified. The statutory accounts for the year ended 31 May 2009 will be filed with the Registrar of Companies, sent to shareholders and published on the Company's website at www.allocatesoftware.com in due course. The auditors have reported on the group's statutory accounts for the year ended 31 May 2008 under s235 of the Companies Act 1985. The auditor's report does not contain statements under s237(2) or s237(3) of the Companies Act 1985 and is unqualified. The statutory accounts for the year ended 31 May 2008 have been delivered to the Registrar of Companies. 2 BASIS OF PREPARATION The consolidated financial information has been prepared in accordance with IFRS as adopted for use in the European Union (including International Accounting Standards ("IAS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted for use in the European Union. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of over one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated on the date control ceases. The group uses the purchase method of accounting for the acquisition of a subsidiary. The cost of an acquisition is measured by the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Investments Investments held as non-current assets comprise investments in subsidiary undertakings and are stated at cost less any provision for any impairment. Revenue recognition General Revenue is the fair value of the total amount receivable by the group for supplies of services which are provided in the normal course of business. VAT or similar local taxes and trade discounts are excluded. Revenue from the provision of services is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the entity; (c) the stage of completion of the transaction at the balance sheet date can be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Licensing The group licenses software under non-cancellable licence agreements. Licence fee revenues are generally recognised when a non-cancellable licence agreement has been signed, there are no uncertainties surrounding product acceptance, there are no significant vendor obligations, the fees are fixed and determinable and collection is considered probable. Where licence fees are attributable to contracts extending over more than one period, revenue is taken based upon the stage of completion when the outcome of the contract can be foreseen with reasonable certainty and after allowing for costs to completion. Where appropriate, the group allocates a portion of contracted fees to post-contract activities covered under the contract, which may include installation assistance, training services and first year maintenance. Support services The group provides support services which include installation, consulting, training and product support. Revenues for training or consulting services are recognised as the services are performed. Revenues from support agreements are recognised rateably over the support period. Segmental reporting A business segment is a group of assets and operations engaged in production that is subject to risks and returns that are different from those of other business segments. A geographical segment is also a group of assets and operations engaged in production but in a particular economic environment that is different from those of other economic environments. The group's primary reporting analysis is by business stream. The group's principal activities are: a) the provision of software under a licence agreement; and b) the provision of services such as installation, consulting, training and product support. The group's secondary reporting analysis is geographical. As the activities of the group are predominantly all within the UK, the directors do not provide additional analysis. Foreign currency translation a) Functional and presentational currency Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The company's functional currency and the group's presentational currency is Sterling. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at reporting period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. c) Group companies The results and financial position of all group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: - assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet; - income and expenses for each income statement are translated at actual rates, the average exchange rate is an acceptable approximation; and - on consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to a separate component of equity. Intangible assets Internally generated intangibles An internally generated intangible asset arising from the development of software is recognised only if all of the following conditions are met: - it is probable that the asset will create future economic benefits; - the development costs can be measured reliably; - the technical feasibility of completing the intangible asset can be demonstrated; - there is the intention to complete the asset and use or sell it; - there is the ability to use or sell the asset; and - adequate technical, financial and other resources to complete the development and to use or sell the asset are available. Intangible assets are amortised over their estimated useful lives, which is between 3-6 years. Where no intangible asset can be recognised, development expenditure is charged to the income statement in the period in which it is incurred. Research expenditure is recognised as an expense in the period in which it is incurred. Intangibles acquired as part of a business combination In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the group. Where an intangible asset might be separable, but only together with a related tangible or intangible asset, the group of assets is recognised as a single asset separately from goodwill where the individual fair values of the assets in the group are not reliably measurable. Where the individual fair value of the complementary assets are reliably measurable, the group recognises them as a single asset provided the individual assets have similar useful lives. Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is provided to write off the cost of each intangible asset over its useful economic life. Goodwill Goodwill arising from business combinations is the difference between the fair value of the consideration paid and the fair value of the assets acquired and liabilities and contingent liabilities assumed. It is recognised initially as an intangible asset at cost and is subject to impairment testing on an annual basis or more frequently if circumstances indicate that the asset may have been impaired. Details of impairment testing are described in the accounting policies. Property, plant and equipment Property, plant and equipment are recorded at cost net of accumulated depreciation and any provision for impairment. Depreciation is provided using the straight line method to write off the cost of the asset less any residual value over its useful economic life as follows: Computer equipment 33% Short leasehold improvements 25% Other assets 25% Impairment The group's goodwill, other intangible assets and property, plant and equipment are subject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Goodwill is allocated to those cash generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the group at which management controls the related cash flows. Individual assets or cash generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cash generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Impairment losses recognised for cash generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Leases Finance leases are recognised as being those that transfer substantially all the risks and rewards of ownership. Assets held under finance leases are capitalised and the outstanding future lease obligations are shown in payables at the present value of the lease payments. They are depreciated over the term of the lease or their useful economic lives, whichever is the shorter. The interest element (finance charge) of lease payments is charged to the income statement over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to the income statement in the period in which they are incurred. The company does not act as a lessor. Financial assets Financial assets consist of cash and financial instruments. Financial instruments consist of trade and other receivables. Financial assets are assigned to their different categories by management on initial recognition, depending on the purpose for which the investment was acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. Derecognition of financial instruments occurs when the rights to receive cash flows from the investments expire, or are transferred, and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each balance sheet date, whether or not there is objective evidence that a financial asset or a group of financial assets is impaired. Financial liabilities The group's financial liabilities include trade and other payables and borrowings (bank overdraft). Financial liabilities are recognised when the group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in the income statement. Trade payables are recognised initially at their nominal value and subsequently measured at amortised costs less settlement payments. Income taxes Current income tax assets and liabilities comprise those obligations to fiscal authorities in the countries in which the group carries out its operations. They are calculated according to the tax rates and tax laws applicable to the fiscal period and the country to which they relate. All changes to current tax liabilities are recognised as a component of tax expense in the income statement. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amount of assets and liabilities in the consolidated financial statements with their respective tax bases. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short term bank deposits. Share-based employee compensation The group operates equity settled share-based compensation plans for remuneration of its employees. All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share option awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or sales growth targets). All share-based compensation is ultimately recognised as an expense in the income statement with a corresponding credit to additional paid in capital, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of shares options expected to vest. Non market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expenses recognised in prior periods is made if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up to the nominal value of the shares issued are reallocated to share capital with any excess being recorded as additional share premium. Equity Equity comprises the following: - "Issued capital" represents the nominal value of equity shares. - "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. - "Shares to be issued" represents both the nominal value and premium of shares still to be issued at the balance sheet date. - "Share-based payment reserve" represents equity-settled share-based employee and non-employee remuneration until such share options are exercised. - "Retained earnings" represents retained profits and losses. Use of accounting estimates and judgements Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below. Judgements in applying accounting policies: The acquisition of Key Information Technology Systems Limited has required the directors to make judgements regarding the value of the net assets that have been acquired. Specifically, to value the amount of future service revenues that are likely to flow from the current customer base. The directors have judged that a litigation arising against Key Information Technology Systems Limited after its acquisition by the company, in respect of an event occurring prior to the acquisition is fully indemnified in the sale and purchase agreement and, therefore, they have not made a provision to cover any possible resulting loss. The directors have decided that, due to the uncertainty of quantifying probable future profitability, they will not recognise a deferred tax asset in these accounts. Sources of estimation uncertainty: Depreciation rates are based on estimates of the useful lives and residual values of the assets involved. Estimates are required as to asset carrying values and impairment charges. The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. The model used by the group is a Black-Scholes valuation model. 4 SEGMENTAL REPORTING The group's primary reporting analysis is by business stream based on products, as follows: 2009 2008 £'000 £'000 Licences 7,599 5,756 Services 7,984 5,822 Hardware and consumables 191 - ------ ------ 15,774 11,578 ------ ------ ------ ------ Under IAS 14 there is a requirement to show operating profit for the primary segmental analysis on the basis of the business stream as above. However, attributable expenses cannot be allocated on a reasonable basis and, as a result, the segmental analysis is limited to the group revenue. In addition to the requirements of IAS 14 the directors present a schedule of revenue analysed by vertical business sector: 2009 2008 £'000 £'000 Defence 3,007 3,082 Healthcare 11,073 6,551 Maritime 1,555 1,945 Local Government and Education 139 - ------ ------ 15,774 11,578 ------ ------ ------ ------ THE INTERNAL REPORTING OF THE GROUP'S PERFORMANCE DOES NOT REQUIRE THAT BALANCE SHEET INFORMATION IS GATHERED ON THE BASIS OF THE BUSINESS STREAMS 'LICENCES' AND 'SERVICES' REPORTED ABOVE. THIS INFORMATION IS THEREFORE NOT ACCESSIBLE AND AS A RESULT THE SEGMENTAL ANALYSIS DOES NOT INCLUDE BALANCE SHEET DETAILS. 5 EARNINGS PER SHARE 31 May 31 May 2009 2008 £'000 £'000 Profit for the year 3,047 1,784 ----------- ------------ ----------- ------------ Earnings per share Basic (pence per share) 6.8p 4.0p Diluted (pence per share) 6.5p 3.8p Weighted average number of shares Number Number of shares of shares Shares in issue at opening 44,702,625 44,539,813 Shares issued during the period - 162,812 ---------------------------- Shares at closing 44,702,625 44,702,625 ---------------------------- ---------------------------- Weighted average shares for basic earnings per share 44,702,625 44,621,541 Effect of dilutive potential ordinary shares 2,348,181 2,859,416 ---------------------------- Weighted average shares for diluted earnings per share 47,050,806 47,480,957 ---------------------------- ---------------------------- Adjusted earnings per ordinary share An adjusted earnings per share has been calculated in addition to the post tax earnings per share which eliminates the effects of amortisation of intangibles, share-based payments and the deferred tax adjustment. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the group. The basis of the calculation of the basic and adjusted profit per share is set out below: 2009 2008 £'000 £'000 Profit for the year attributable to shareholders 3,047 1,784 Amortisation of intangibles 678 50 Share-based payment 97 104 Deferred tax adjustment (1,302) - ------- ------- Adjusted profit for the year attributable to shareholders 2,520 1,938 ------- ------- ------- ------- Basic adjusted earnings per share 5.64p 4.3p Diluted adjusted earnings per share 5.36p 4.1p 6 BUSINESS COMBINATION On 4 April 2008 the Group acquired 100% of the issued share capital of Key Information Technology Systems Ltd ("KITS") for a maximum consideration of £798,000. However, the sellers of KITS indemnified the company that, should the net assets of KITS at the date of the transaction when valued under UK GAAP be below £29,395, the consideration should be reduced by the amount of the shortfall. During the year, the company and the Sellers of KITS have agreed that the shortfall in net assets acquired amounted to £240,000. Accordingly, the maximum consideration payable is £558,000 plus allowable costs of £46,155, giving a total consideration for the purposes of the acquisition of £604,155. The consideration is to be settled as follows: (a) an initial payment in cash of £345,000; and (b) contingent consideration to be paid in shares up to a maximum value of £213,000 should certain targets for the renewal of customer support contracts be met. Subsequent to the acquisition of KITS, this company is being sued by a competitor company based on a dispute of an agreement entered into prior to the acquisition date. The likelihood of litigation arising was not made known to the directors prior to the acquisition date. As a result the costs incurred in defending the litigation will be subject to the terms of the sale and purchase agreement between the company and the sellers of KITS which include a full indemnity in respect of the claim arising. As a result the directors do not consider that any provision in respect of the litigation is required. The net assets acquired and the resultant fair value adjustments are shown below: 2008 2008 Total 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 Book value Estimated FV Updated FV Fair value adjustment adjustment Cash with subsidiary 5 - 5 5 Intangibles - identified at - 845 845 (30) 815 acquisition ** Property, plant and equipment 28 - 28 28 Long leasehold property 285 - 285 285 Receivables 315 - 315 315 Trade payables and other (928) - (928) 84 (844) payables -------------------------------------------------------------------------- Net assets (295) 845 550 54 604 Goodwill on this acquisition - - - ---------------------------------- Consideration 550 54 604 ---------------------------------- ---------------------------------- Net consideration satisfied by: Share issue 159 (159) - Cash 345 - 345 Shares to be issued - 213 213 Professional fees paid 46 - 46 ---------------------------------- 550 54 604 ---------------------------------- ---------------------------------- **The intangibles identified at acquisition comprised those contractual relationships which, in future periods from 2009 to 2013, would generate service revenues. The group has estimated the attrition rate for the service revenues and amortisation is provided in line with this attrition rate. 7 PURCHASE OF ASSETS On 17 December 2008 the company acquired the business and certain of the assets of Baum Hart & Partners Limited ("BHP"). The net assets acquired and the allocation of costs are as follows: 2009 2009 2009 £'000 £'000 £'000 Book value Adjustments Fair Value Assets acquired: Intangibles - 2,636 2,636 --------------------------------------------------------- Net assets - 2,636 2,636 --------------------------------------------------------- --------------------------------------------------------- Consideration: Paid in cash 1,700 Contingent consideration payable in cash 500 Professional fees 436 ------------ Total consideration 2,636 ------------ ------------ Contingent consideration payable in cash There are two contingent payments, payable dependent upon a former partner of BHP remaining in employment with the company. The first payment is due 62 days after the first anniversary of the acquisition and is for £200,000 payable in cash plus an additional amount of £50,000 payable in cash or shares at the company's option. The second payment is due 62 days after the second anniversary of the acquisition and is also for £200,000 payable in cash plus an additional amount of £50,000 payable in cash or shares at the company's option. 8 DEFERRED TAX Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% for UK differences. The movements in deferred tax assets and liabilities during the period are shown below. Accelerated Losses Share capital carried forward based payments allowances £'000 £'000 Total £'000 £'000 At 1 June 2007 and 31 May 2008 - - - - Recognised in the income statement 156 1,054 92 1,302 Excess recognised in equity - - 84 84 --------------------------------------------------------------------------------------------------------------- At 31 May 2009 156 1,054 176 1,386 --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- 9 TAX 2009 2008 £'000 £'000 Corporation tax on profit for the year (85) (44) Deferred tax 1,302 - ------- ------- 1,217 (44) ------- ------- ------- ------- Allocate Software plc

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