Interim Results
Comino Group PLC
26 November 2002
COMINO GROUP PLC: INTERIM RESULTS
Results in line with expectations
Comino Group plc ('Comino'), the provider of software solutions for the social
housing, local government and occupational pensions sectors, announces Interim
Results for the six months ended 30 September 2002. The Group's return to
profitability commenced in the second half of last year has continued in the
first six months of the current year, with results for the period under review
in line with expectations.
Comino is an established leader in each of its three sectors. It owns its own
Workflow and Electronic Document Management software, increasingly regarded as
essential to organisations that require solutions based upon modern Business
Process Reengineering.
Financial Highlights
• Turnover of £11.8m (2001: £9.3m), up 27%
• Profit before tax excluding amortisation of goodwill and new product
development costs within Comino Techflow: £810,000 (2001: £1.1m loss)
• Profit before tax but after all other items: £420,000 (2001: £1.4m
loss)
• EPS excluding goodwill amortisation 3.4p (2001: 5.6p loss)
• Gross profit margin of 80% (2001: 75%)
• Cash of £5.2m (2001: £4.2m)
• Interim dividend of 1.9p (2001: 1.9p), to be paid on 29 January 2003
Operational Highights
• Orders, excluding recurring revenues and long term contracts, up 78%.
• Social Housing performed well over the period; contracts include wins
from Airways, Bedfordshire Pilgrims, Flagship, Hereward, Nucleus,
Shaftesbury and Vale.
• Local Government shows none of the uncertainty in the order pipeline
experienced in the same period last year. Order intake is on budget;
contract wins include Norwich Connect, Kennet, Chelmsford, Luton,
Hackney, Nuneaton & Bedworth, Wigan and Wirral.
• Occupational Pensions made a modest profit contribution. Contract wins
include South Tyneside, the Scottish Pensions Agency, the West
Yorkshire Pensions Fund and the Pensions Advisory Service
Commenting on the interim period and prospects Chairman David Quysner said:
'This first half performance is significantly better than the comparable
difficult period last year and Comino is now in an improved position to achieve
further progress in the second half.'
'The outlook for Comino is one of continuing recovery and improvement, with all
three divisions in a good position to meet their overall targets. This outlook
will further improve with time as all operations achieve critical mass.'
Enquiries
Comino plc Binns & Co PR Ltd
Garth Selvey, Chief Executive Tel: 020 7786 9600 on the day Peter Binns, Paul McManus
Paul Clifford, Finance Director Thereafter: 01628 525433 Tel: 020 7786 9600
The interim accounts will be posted to shareholders and copies will be available
on 27 November 2002, free of charge from the registered office.
Editor's notes:
Comino's operating companies are based near Maidenhead and in Leeds, Croydon and
the West Midlands.
Comino provides systems based on workflow and electronic document management to
over 400 organisations in Occupational Pensions, Social Housing and Local
Government at both the departmental and corporate level.
Comino serves some 50 organisations looking after more than 1.2 million
pensioners. Three of these organisations manage more than 170,000 pension
accounts each.
Comino serves some 250 Registered Social Landlords looking after more than
800,000 homes and some two million occupants. The largest organisation that
Comino's systems handle has 55,000 homes; the smallest just a few hundred.
Comino serves over 70 Local Authority Revenue and Benefit departments who look
after more than four million council tax payers, business rate payers and
benefit recipients.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that the return to profitability that commenced in the
second half of last year has continued in the six months ended 30 September
2002, with results for the period in line with expectations.
This first half performance is significantly better than in the comparable
difficult period last year and Comino is now in a good position to achieve
further progress in the second half.
Profits
Profit before tax for the half year to 30 September 2002 is £810,000 (2001: loss
of £1.1m) which is stated, for comparative purposes, before amortisation of
goodwill of £201,000 (2001: £148,000) and before charging costs of £189,000
(2001: £165,000) associated with new product development within Comino Techflow.
When goodwill and Comino Techflow are included, the profit before tax is
£420,000 compared to a loss in the same period last year of £1.4m. The business
of Comino Techflow is changing, as described later, and this is the last time
that it will be reported separately as in the previous paragraph.
Operational Review
Progress to the half year was largely as expected. The greater part of the
profit element in the first half has arisen from Social Housing which is
underpinned by more mature annual support revenues. However, Local Government
has met its target for order intake in the first half and has seen a good
recovery from the poor trading experienced during the same period last year. It
is therefore in a good position to meet its overall targets for the year.
Occupational Pensions returned a modest profit contribution and has managed its
development and installation load to the point where it will shortly be able to
address greater volumes of new business effectively.
All divisions have made commendable progress with both product and market
positioning. Orders received in the six months to September 2002, excluding
recurring revenues and long term contracts, are up 78% compared to the same
period last year.
Turnover and Overheads
Compared to the same period last year, turnover at £11.8m is up 27% from £9.3m
and gross profit margin remains firm at 80% (2001: 75%). Overheads in the
period, excluding amortisation of goodwill, are up by £500,000 from £8.3m to
£8.8m but £303,000 of this relates to the consolidation of Comino Connect for
the first time.
Cash and Dividend
At 30 September 2002 our cash balances stood at £5.2m compared to £4.2m at the
end of the same period last year. An interim dividend of 1.9 (2001: 1.9) pence
per share will be paid on 29 January 2003.
Social Housing
The Social Housing Division has performed well over this period and secured a
number of wins for its Universal Housing product with customers such as Airways,
Bedfordshire Pilgrims, Flagship, Hereward, Nucleus, Shaftesbury and Vale.
These wins prove that Universal Housing, a strategy as well as a product, has
gained the all important confidence of our customers and the division has nearly
completed the transformation from legacy product maintainer to revitalised
market leader. The use of Workflow and Electronic Document Management is
producing the improvements required by these customers in their business process
management and customer service delivery.
Local Government
The Local Government Division continues to build its reputation as a leading
supplier of departmental and corporate-wide, e-Government compliant, Workflow &
Electronic Document Management solutions. Last year's uncertainty in the order
pipeline has not been repeated and the order intake is on budget.
Key corporate wins include Norwich Connect, Kennet, Chelmsford and Luton. Sales
of departmental solutions, including a new offering for Planning Departments,
remain strong with wins including Hackney, Nuneaton & Bedworth, Wigan and
Wirral. Customers already using departmental solutions, such as Cardiff, Woking
and Warrington are committing to 'rolling-out' this proven approach to other
departments. The division also works successfully with a number of partners who
provide facilities management and our products can bring significant value to
these contracts.
Work continues successfully on Norwich Connect. No revenues are contractually
due against this major project until next year and stock and work in progress
includes £236,000 relating to this contract.
Local Government is making significant progress as a division. Nevertheless, its
business ratios are not yet where they need to be. In particular, growth in
recurring revenue was damaged by poor orders last year and new recurring revenue
associated with the recent improvement in order levels has yet to come through.
All of these factors will improve and strengthen with time.
Occupational Pensions
Occupational Pensions won South Tyneside, the second Local Government contract,
at the end of the last financial year. Since that time, it has also won the
Scottish Pensions Agency, the West Yorkshire Pensions Fund and the Pensions
Advisory Service. It continues to make progress with version two of Universal
Pensions Management, the main aspects of this being greater ease of
implementation and further support for a huge range of pension scheme types as
the market shift from Defined Benefit to Defined Contribution continues. The
Pensioner Payroll product has also now been completed and sold to three
organisations.
Occupational Pensions is the smallest of the Comino Divisions. However, its
products have a sound reputation and the division should benefit from the
continuing changes in the Pensions industry.
Comino Techflow
Comino Techflow was originally established as a company to develop a new
Professional Services Automation ('PSA') product, and the costs attributable to
this activity have to date been reported separately. During the course of last
year, Techflow personnel also contributed to the development of the pensioner
payroll product. In the current year, in order to make best use of the skills
available in Techflow, the company has taken on additional responsibility for
sector-independent consultancy, primarily to the Group's existing customers.
This includes the development of high level management reporting ('OLAP').
Activity on PSA continues but with more emphasis on third party products and
their integration and less on pure internal development. As a result of these
changes, Techflow now has a range of business activity that should allow it to
produce a profit next year. PSA will make up only a small proportion of its
total costs and it is therefore proposed that the costs of PSA will no longer be
recorded as a separate line item.
Comino Connect
On 8 May 2002, Comino acquired a further 23% of the equity of Comino Connect to
take its holding to 72%. This company is now consolidated within the results
including an increase in amortisation of goodwill.
Comino Connect continues to provide network infrastructure, network and server
management for the group, the group's customer base and third party customers.
Its present task is to continue building infrastructure whilst maintaining a
neutral profit and loss account. It has achieved this to the half year. This is
a small business which is developing its services effectively in a difficult
market and is an asset to the group.
Outlook
Any comment on outlook must be tempered by reference to present economic
conditions. Whilst Comino's markets have some insulation from these, no company
can be entirely immune from further changes in this climate.
Growth in pure technology has been curtailed but pressure for business
efficiency solutions will continue. Comino has skills in Business Process
Reengineering together with the Workflow and Electronic Document Management
which support its implementation. These assets, combined with sector expertise,
ensure that Comino remains well placed to service its target markets.
The outlook for Comino is one of continuing recovery and improvement, with all
three divisions in a good position to meet their overall targets. This outlook
will further improve with time as all operations achieve critical mass.
Staff & customers
I would like to thank all of our employees for their continuing efforts and all
our customers for their much appreciated business and support.
David Quysner
CHAIRMAN
26 November 2002
Consolidated Profit and Loss Account
6 months to 6 months to Year to
30 September 30 September 31 March
2002 2001 2002
£000 £000 £000
Turnover
Continuing operations 11,426 9,310 20,560
Acquisitions 377 - -
11,803 9,310 20,560
Cost of sales (2,394) (2,369) (4,692)
Gross profit 9,409 6,941 15,868
Administrative expenses (9,044) (8,487) (16,566)
Operating profit/(loss)
Continuing operations 383 (1,546) (698)
Acquisitions (18) - -
365 (1,546) (698)
Share of (loss) from associate - (24) (34)
Net interest receivable 55 129 156
Profit/(loss) on ordinary activities before taxation 420 (1,441) (576)
Profit/(loss) on ordinary activities before taxation analysed between
Profit/(loss) on ordinary activities before taxation, amortisation of
goodwill and costs of Comino Techflow 810 (1,128) 37
Amortisation of goodwill (201) (148) (299)
Development costs of Comino Techflow (189) (165) (314)
420 (1,441) (576)
Tax on profit on ordinary activities (145) 521 55
Profit/(loss) on ordinary activities after taxation 275 (920) (521)
Minority interest - equity 16 22 30
Profit/(loss) for the financial period 291 (898) (491)
Dividends (264) (266) (418)
Retained profit/(loss) for the period 27 (1,164) (909)
Earnings per share 2.0p (6.6p) (3.8p)
Diluted earnings per share 2.0p (6.5p) (3.8p)
Earnings per share excluding goodwill amortisation 3.4p (5.6p) (1.6p)
Dividend per share 1.90p 1.90p 3.0p
The dividend of 1.90 pence per share will be paid on 29 January 2003. The
dividend record date is 6 January 2003.
Consolidated Balance Sheet
30 September 30 September 31 March
2002 2001 2002
£000 £000 £000
Fixed assets
Tangible assets 3,199 2,556 3,077
Intangible assets - goodwill 3,253 2,439 2,441
Investment in associate - 999 987
6,452 5,994 6,505
Current assets
Stocks and work in progress 485 121 130
Debtors & prepayments 7,509 6,329 7,787
Cash at bank and in hand 5,208 4,236 5,161
13,202 10,686 13,078
Creditors falling due within one year (4,980) (3,343) (4,424)
Net current assets 8,222 7,343 8,654
Total assets less current liabilities 14,674 13,337 15,159
Deferred income (5,698) (4,867) (6,447)
8,976 8,470 8,712
Capital and reserves
Share capital 694 694 694
Share premium reserve 4,796 4,773 4,773
Shares to be issued 337 360 360
Profit and loss account 2,942 2,660 2,915
Equity shareholders' funds 8,769 8,487 8,742
Minority interest - equity 207 (17) (30)
8,976 8,470 8,712
Consolidated Cash Flow Statement
6 months to 6 months to Year to
30 September 30 September 31 March
2002 2001 2002
£000 £000 £000
Net cash inflow/(outflow) from operating activities 245 (2,006) 324
Net returns on investments and servicing
of finance
Net interest received 55 129 156
55 129 156
Tax paid 7 (129) (347)
Capital expenditure
Purchase of tangible fixed assets (282) (1,414) (2,325)
Sale of tangible fixed assets - 48 43
Net cash outflow from capital expenditure (282) (1,366) (2,282)
Acquisitions & disposals
Purchase of subsidiary undertaking (131) - (29)
Cash and overdrafts acquired 305 - -
174 - (29)
Equity dividends paid (152) (528) (791)
Financing
Issue of shares - - -
Repayment of borrowings - - (6)
Net cash (outflow)/inflow from financing - - (6)
Increase/(decrease) in cash 47 (3,900) (2,975)
Net cash inflow/(outflow) from operating activities
Operating profit/(loss) 365 (1,546) (698)
Depreciation 387 246 652
Amortisation of goodwill 201 148 299
Profit on sale of fixed assets - (15) (27)
(Increase) in stocks (352) (54) (63)
Decrease in debtors 699 3,206 1,748
Increase/(decrease) in creditors 106 (2,095) (1,271)
(Decrease) in deferred income (1,161) (1,896) (316)
Net cash inflow/(outflow) from operating activities 245 (2,006) 324
Notes to the Interim Accounts
1. The charge for taxation is based on the expected rate for the financial
year.
2. The calculation of earnings per share for the six months ended 30
September 2002 is based on the profit for the financial period of £275,000 (2001
- loss £920,000) and on 13,875,802 (2001 - 13,855,802) ordinary shares being the
average number of shares in issue during the period.
3. The interim statement has been prepared on the same accounting basis as
set out in the financial statements for the year ended 31 March 2002 and was
approved by the board on 25 November 2002. The foregoing financial information
does not represent full accounts within S240 of the Companies Act 1985 and has
not been reported on by the auditors or delivered to the Registrar of Companies.
4. Following the adoption of FRS 10 (Goodwill and intangible fixed
assets), goodwill arising on acquisitions has been capitalised and will be
depreciated over its estimated useful economic life. Goodwill previously
eliminated against reserves has not been reinstated.
5. The above results for the year ended 31 March 2002 have been abridged
from the full Group accounts for that year, which received an unqualified
auditors' report and which have been delivered to the Registrar of Companies.
Independent Review Report to Comino Group plc
Introduction
We have been instructed by the company to review the interim financial
information set out on pages 4 to 7 and we have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applies in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance in Bulletin 1999/4 'Review
of Interim Financial Information' issued by the Auditing Practices Board. A
review consists principally of making enquiries of management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether accounting policies and presentation have
been consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of control and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than audit. Accordingly, we do not express an opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the interim financial information as presented for the six
months ended 30 September 2002.
Grant Thornton
Registered Auditors
Chartered Accountants
London
26 November 2002
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