Final Results
|
Embargoed until 07.00 |
17th June 2008 |
Focus Solutions Group plc
("Focus" or "the Group")
Results for the year ended 31 March 2008
Focus Solutions Group plc (AIM: FSG), a leading provider of enterprise solutions to the financial services industry, is pleased to announce its Results for the year ended 31 March 2008.
Financial highlights
Operating highlights
* As a result of the deferred tax credit being recognised this year, the Directors consider that it is appropriate to provide information on a pre-deferred tax fully diluted Earnings per Share basis
Commenting on the results and prospects, Richard Stevenson, Chief Executive, said:
"We have taken a further step forward over the past year. These results are testament to the improvements made by the business and to the efforts of all our employees. The new financial year has started well and in line with management expectations. We look forward to continuing to execute the established strategy and to continue to develop a successful, consistently growing, profitable and cash generative business."
Enquiries:
Focus Solutions Group
Richard Stevenson Chief Executive 01926 468 300
Martin Clements Finance Director 077696 54527
Daniel Stewart
Chloe Ponsonby / Graham Webster 0207 776 6550
Smithfield
Miranda Good / Reg Hoare / Will Henderson 0207 360 4900
Notes to editors:
Focus Solutions is a leading supplier of enterprise solutions to the financial services industry, enabling the effective distribution of financial products across multiple sales channels.
Focus offers providers, lenders, bancassurers and major distributors an effective and efficient method to acquire and service customers with the most advanced front-office technology platform which can be fully integrated into our client's IT infrastructure to achieve the realisation of straight through processing, helping to drive down administration costs.
focus:360° is the modular whole office solution that provides financial advisers with an agile whole of market, multi-channel technology platform developed on the very latest Microsoft technology.
Focus has a proven track record for successfully delivering over 75 complex front office projects to an impressive customer base of blue chip organisations in the UK and Ireland typically as part of a larger programme of work.
For further information on Focus, please visit www.focus-solutions.co.uk
Chairman's Statement
Introduction
I am pleased to be able to report on another successful year for the group, with record sales revenues and operating profit. The group continues to make good progress towards executing its strategy and these results represent further evidence of the improving performance of the business.
During the year we started work on developing our new "whole of office" solution for the UK financial services market; focus:360°. This development programme is a significant investment for the group and when completed will give Focus the leading end-to-end solution in the market. We expect focus:360° to deliver further strong organic growth at attractive margins.
Operations
In the Chief Executive's Report there is a more detailed review of our activities in the year. However, I would like to draw your attention to the significant progress made in the year, with the development and delivery of new solutions to AEGON Scottish Equitable and substantial progress being made on Phase One of the HSBC Bank plc multi channel Point of Sale ("POS") solution. The significant investment in focus:360° is already beginning to deliver benefits, with market interest in the new product exceeding our expectations.
Uncertainty in the financial markets had an impact on demand for part of the year. However, the impact was short-lived and the underlying requirement for our customer base to comply with regulatory requirements at all times, irrespective of short term market conditions, ensured that there was no sustained impact on our performance. In the final quarter of the year, contracts were won with Home of Choice and TietoEnator and we have started work on a number of other projects with new customers since the year end.
Management and staff
As a technology-based company, with strong domain knowledge of the markets we serve, our success is very dependent upon retaining a highly skilled and motivated workforce. I would like to express my thanks to all our employees for their efforts over the past year. The enthusiasm, commitment and loyalty of our staff remain vital if the group is to deliver on its strategy.
Outlook
The new financial year has started strongly and trading remains in line with market expectations. We continue to focus our sales efforts on well defined opportunities within the wider UK financial services market. Following the launch of focus:360°, it is apparent that we are in a leading position in our market and it has helped to give the group its strongest ever pipeline of opportunities. With the delivery of Phase One of the HSBC Point of Sale solution due in the first half of the new financial year and with work on Phase Two having already started, we are confident that the group can continue to make progress and flourish during the new financial year.
As has been previously outlined, the group has a clear strategy for both organic and non-organic growth and the Board is looking to accelerate the development of its business by a combination of partnerships, joint ventures and acquisitions.
Last year, we stated our intention to pay an initial dividend this year. We have started the process of applying to the court for the cancellation of share premium account which will in turn make it possible to pay a dividend. It remains our intention to pay a dividend once this process is completed.
Alastair M Taylor
Chairman
Chief Executive's Report
Overview
The group continues to develop and execute on its stated strategy. Its reputation with its key customers is outstanding and the quality, expertise and commitment of its employees has been the foundation upon which the improved trading has been built. With the launch of focus:360°, the opportunities available to us within our market should grow, allowing us to build a highly successful and sustainable business. However, there is much more to be done to bring direction and momentum to all parts of the group's business and to build upon the progress made last year. It is important that we remain ambitious and focused on achieving our goals.
Business performance
The group again achieved record sales and profits in FY2008. Turnover increased by 9% from £7.91 million in FY2007 to £8.60 million in FY2008. This growth was driven principally through services provided to HSBC Bank plc, but also by a combination of new projects for both new clients and our established customer base. At the trading level, operating profits before exceptional costs increased from £1.20 million to £1.46 million.
Basic and diluted earnings per share for the year ended 31 March 2008 were 6.71 pence per share and 5.99 pence per share, compared with 5.46 pence for basic and 5.22 pence for fully diluted earnings per share for the year ended 31 March 2007. Our preferred measure of earnings per share, which excludes the impact of the recognition of tax losses which arose in the initial stages of the company's development, is pre-deferred tax adjusted EPS. Using this measure, "adjusted" basic EPS have increased to 4.88 pence from 3.82 pence last year and "adjusted" fully diluted EPS has increased to 4.36 pence from 3.72 pence.
As at 31 March 2008, cash deposits totalled £1.03 million (FY2007: £3.01 million) reflecting both the anticipated reversal of advanced payments from a customer noted in our FY2007 results and the timing of sales in FY2008 which were particularly strong in the final quarter. The group also has unused bank facilities totalling £0.5 million should we require them. The balance sheet remains debt free.
Markets
The uncertainty in the financial markets during the second half of the financial year made market conditions more difficult for a period. However, the impact appears to have been short-lived and we believe that a combination of our new focus:360° product suite and the overriding requirement of our customers to remain compliant with ever more regulation will continue to ensure that the markets in which we operate (predominantly the supply of front office solutions to the UK life and pensions and mortgage markets) will continue to be strong.
To succeed, we must continue to invest in development and to integrate new technologies into our applications in order to extend our product offering. Accordingly, in early FY2008, work began on the development of the next generation of software solutions, with the development of focus:360°, providing a whole of office solution for financial services distributors, lenders, bancassurers and providers. focus:360° covers the key processes of Point of Sale and Extranet technology through to Sales Support and Back Office functionality.
The development of focus:360°, together with the development of successful partnerships with other suppliers to the UK financial services industry ensures that Focus offers a unique and innovative whole of office solution supporting all sales processes from High Net Worth to Execution only. It would be impractical for Focus to seek to develop every element of a possible whole of office solution itself; it is important to be able to offer a "best of breed" option. To this end we have formed partnership relationships with Redland Business Solutions, Towers Perrin, Trigold and Assureweb amongst others.
The majority of our revenue during the year has again been generated by delivering online and offline POS solutions and Extranets to UK financial services companies to help them comply with regulatory requirements, improve their efficiency and reduce the cost of the sales process. Our solutions support the customer facing, front office elements of the sales process, as well as the sales support tools and back office functionality for advisers and administrators, providing management information, compliance checking and utilising reporting tools to comply with FSA regulation. The leading bancassurers, distributors, lenders and providers continue to look to deliver new products ever more quickly and with greater cost efficiency. In recent years, changes in regulation have driven investment in technology to support the new distribution models that have begun to evolve. We see no reason for this to change; compliance is not an optional choice for the financial services industry.
FY2008 was essentially a year of consolidation for Focus; with progress on the development and delivery of Phase One of HSBC's multi-tie distribution channel for life, pensions and investment products, accompanied by the delivery of major Point of Sale solutions and Extranets for Lincoln Financial Group, AEGON Scottish Equitable and others. However, the most significant events from a trading perspective occurred towards the end of the financial year, when we were awarded a contract for the start of Phase Two of HSBC's multi-tie distribution channel for life, pensions and investment products.
Leveraging value from existing customers has played an important role in Focus' strategy and in November, Focus extended its contract with AEGON Scottish Equitable to develop an Extranet service that will support the sale of their suite of Investment Bond products to the UK intermediary market. The Extranet service will enable advisers to quote and transact business electronically whilst tracking the case through to completion with a high degree of data pre-population which can be accessed via multiple distribution channels from the industry portals such as The Exchange to leading Network portals such as Positive Solutions.
Development
It is essential for the future prosperity of the group that we continue to invest in product development. Our technology is one of the clear differentiators between us and our competition. Combining this technology with our business process knowledge and delivery expertise puts us in a strong position to win new business. The development of the focus:360° whole of office solution aimed at bancassurers, lenders, distributors and providers is integral to the success of the group.
Strategy
Our goals are clear:
-
We want to increase new business wins and continue to be recognised as the leading provider of front office solutions to the UK financial services markets
-
We want to strengthen our position in the mid and back office. It is the group’s strong position in the UK financial services sector that underpins its growth and profitability
-
We intend to increase our penetration of both the life and pensions and mortgage market by exploiting our expertise in these sectors to make the most of the continuing structural changes in the market as a result of the regulatory environment and increased competition
-
Over the next two to three years, we intend to increase the proportion of our turnover that is represented by annually recurring revenues. focus:360° is designed to be sold on a per user per month basis, and is central to the achievement of this objective
We recognise that in today's market, Focus must grow faster to build a sustainable business. A central tenet of this strategy is to consider potential acquisitions which will strengthen our product and market coverage in the front office market. Our strategy is based on extending our strong position in the front office space from life and pensions and mortgages into other associated verticals, thereby extending our product portfolio, expanding our client base and bringing added value to our customer base. This will be achieved by a combination of internal development and acquisition. We spent some time and effort on trying to complete a number of transactions in FY2008. Unfortunately, the volatile financial markets in the middle of the year frustrated these efforts. Nevertheless, the strategy remains sound and we will endeavour to execute on it in FY2009.
We aim to deliver much more than just technology. Our objective is to understand fully our customers' business processes and to deliver significant added value to our customers by developing solutions that dramatically reduce their costs and enhance their ability to adapt to changes in their markets.
We have a good story to tell. We provide our staff with a positive working environment, a strong work ethos and competitive salaries and associated benefits. We have a very clear focus on key markets and we have developed a profitable and cash generative business. We have taken a further step forward over the past year. These results are testament to the improvements made by the business and to the efforts of all our employees.
Outlook
The new financial year has started well and in line with management expectations. We look forward to continuing to execute the established strategy and to continue to develop a successful, consistently growing, profitable and cash generative business.
Richard Stevenson
Chief Executive
16 June 2008
Finance Director's Report
Financial review
FY2008 has been a record year for the group in terms of sales revenues and operating profits before exceptional costs. Group revenues increased by 9% to £8.60 million (FY2007: £7.91 million).
The increased sales revenues fed through to growth in operating profit. Operating profit for FY2008 before exceptional items increased to £1.46 million (FY2007: £1.20 million). Operating profit margins before exceptional items rose from 15.2% to 17.0%. The second half performance was particularly strong, with sales of £4.59 million (53% of total sales) and operating profit before exceptional items of £0.94 million.
Exceptional items comprised restructuring costs, principally redundancy costs, costs associated with aborted acquisitions and costs related to share based payments under IFRS 2. After exceptional items, the group made an operating profit of £1.19 million, compared to £0.99 million in FY2007.
Taxation
The group has tax losses of £3.86 million as at 31 March 2008 and there was no material tax charge in the year. A deferred tax asset (£1.03 million) in respect of losses has been recognised. The result of this action is a non-cash credit to the profit and loss account of £0.58 million.
Retained profit
Retained profit for the year of £1.98 million compared to £1.57 million in FY2007.
Earnings per share
As a result of the deferred tax credit this year and the likely reversal of this over future years; the basic and fully diluted EPS calculations will exhibit a high degree of volatility. A more stable measure of EPS, which excludes the impact of the recognition of tax losses which arose in the initial stages of the company's development, is pre-deferred tax adjusted EPS. Using this measure, "adjusted" basic EPS have increased to 4.75 pence from 3.82 pence last year and "adjusted" fully diluted EPS has increased from 3.72 pence to 4.24 pence.
Cash flow
As expected, operating cash flow was weaker in the year. This reflected the anticipated reversal of a substantial advanced payment from a customer combining with the timing of billings in the latter half of the year. As a result, this generated cash outflows from operating activities of £1.98 million (FY2007: £2.80 million inflow) leading to a net cash balance of £1.03 million at the end of FY2008 (FY2007: £3.01 million).
IFRS
As an AIM listed company, the group is required to adopt International Financial Reporting Standards (IFRS) for accounting periods starting after 1 January 2007. These are the first full year results to be reported under IFRS and the opening balance sheet at 1 April 2006 and the comparative figures for the year ended 31 March 2007 have been restated under IFRS. IFRS differs from UK GAAP in a number of respects and this has resulted in some changes to Focus' previously reported figures.
The change to IFRS in this financial year has impacted on the reported results of the business in that certain Research and Development costs, having met criteria under IAS 38 have been capitalised under IFRS.
Martin Clements
Finance Director
16 June 2008
Consolidated Income
For the year ended 31 March 2008
|
|
|
Year ended 31 March 2008 |
|
Year ended 31 March 2007 |
|
|
Notes |
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Revenue |
2 |
8,600 |
|
7,908 |
|
|
|
|
|
|
|
Cost of sales |
|
(3,851) |
|
(2,441) |
|
|
|
|
|
|
|
Gross profit |
|
4,749 |
|
5,467 |
|
|
|
|
|
|
|
Overheads |
|
|
|
|
|
Distribution costs |
|
(1,170) |
|
(1,407) |
|
Administrative expenses (including exceptional costs of £270,330, FY2007: £209,000) |
|
(2,388) |
|
(3,070) |
|
|
|
(3,558) |
|
(4,477) |
|
|
|
|
|
|
|
Operating profit |
|
1,191 |
|
990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional costs |
|
1,461 |
|
1,199 |
|
|
|
|
|
|
|
Share based payment expense |
|
(87) |
|
(13) |
|
Aborted acquisition costs |
|
(148) |
|
- |
|
Re-organisation costs |
|
(35) |
|
(196) |
|
|
|
|
|
|
|
Operating profit after exceptional costs |
|
1,191 |
|
990 |
|
|
|
|
|
|
|
Finance income |
|
219 |
|
47 |
|
Finance costs |
|
(10) |
|
(2) |
|
Net finance income |
|
209 |
|
45 |
|
|
|
|
|
|
|
Profit before income tax |
|
1,400 |
|
1,035 |
|
|
|
|
|
|
|
Income tax |
|
576 |
|
532 |
|
|
|
|
|
|
|
Profit for the year |
|
1,976 |
|
1,567 |
|
|
|
|
|
|
|
Earnings per ordinary share |
|
|
|
|
|
Basic |
3 |
6.71p |
|
5.46p |
|
Diluted |
3 |
5.99p |
|
5.22p |
The operating profit for both years arises from the company's continuing operations.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2008
|
|
|
Year ended
31 March
2008
|
|
Year ended
31 March
2007
|
|
|
|
£’000
|
|
£’000
|
|
|
|
|
|
|
|
Profit for the financial year
|
|
1,976
|
|
1,567
|
|
New equity issued
|
|
34
|
|
115
|
|
Cost of employee share option schemes
|
|
87
|
|
13
|
|
Opening shareholders’ equity
|
|
4,044
|
|
2,349
|
|
Closing shareholders’ equity
|
|
6,141
|
|
4,044
|
Consolidated Balance Sheet
31 March 2008
|
|
|
2008
|
|
2007
|
|
|
|
£’000
|
|
£’000
|
|
Non-current assets
|
|
|
|
|
|
Intangible assets
|
|
746
|
|
58
|
|
Property, plant and equipment
|
|
198
|
|
160
|
|
Trade and other receivables
|
|
609
|
|
221
|
|
Deferred income tax
|
|
1,026
|
|
450
|
|
|
|
2,579
|
|
889
|
|
Current assets
|
|
|
|
|
|
Trade and other receivables
|
|
4,352
|
|
3,625
|
|
Cash and cash equivalents
|
|
1,027
|
|
3,005
|
|
|
|
5,379
|
|
6,630
|
|
|
|
|
|
|
|
Total assets
|
|
7,958
|
|
7,519
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Trade and other payables
|
|
1,303
|
|
2,615
|
|
Current tax liabilities
|
|
514
|
|
860
|
|
Total liabilities
|
|
1,817
|
|
3,475
|
|
|
|
|
|
|
|
Net assets
|
|
6,141
|
|
4,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to equity shareholders
|
|
|
|
|
|
Called up share capital
|
|
2,946
|
|
2,930
|
|
Share premium
|
|
9,899
|
|
9,881
|
|
Merger reserve
|
|
220
|
|
220
|
|
Share option reserve
|
|
149
|
|
62
|
|
Retained earnings
|
|
(7,073)
|
|
(9,049)
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
6,141
|
|
4,044
|
Approved by the Board on 16 June 2008.
R Stevenson M J Clements
Director Director
Consolidated Cash Flow Statement
31 March 2008
|
|
|
Year ended
31 March
2008
£’000
|
|
Year ended
31 March
2007
£’000
|
|
|
|
|
|
|
|
Cash (absorbed)/ generated from operations
|
|
(1,368)
|
|
2,799
|
|
Net finance (costs)/ income
|
|
209
|
|
45
|
|
Income tax (paid)/ received
|
|
-
|
|
82
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
(1,159)
|
|
2,926
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(119)
|
|
(127)
|
|
Purchases of intangible assets
|
|
(734)
|
|
(32)
|
|
Net cash used in investing activities
|
|
(853)
|
|
(159)
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Issue of ordinary shares
|
|
34
|
|
115
|
|
Net cash from financing activities
|
|
34
|
|
115
|
|
|
|
|
|
|
|
Net (decrease)/ increase in cash and cash equivalents
|
|
(1,978)
|
|
2,882
|
|
Cash and cash equivalents at start of the year
|
|
3,005
|
|
123
|
|
Cash and cash equivalents at end of the year
|
|
1,027
|
|
3,005
|
|
|
|
|
|
|
Notes to the Accounts
1. Focus Solutions Group plc previously prepared its financial statements in accordance with UK Generally Accepted Accounting Principles (GAAP). From 2007, the Group is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
The financial information set out herein (which was approved by the Board on 16 June 2008) does not constitute the Company's statutory accounts for the years ended 31 March 2008 and 31 March 2007 but is derived from those statutory accounts. The statutory accounts for the year ended 31 March 2007, which were prepared under UK GAAP, have been delivered to the Registrar of Companies.
2. Segmental analysis
The group operates in one business and one geographical segment; the development and sale of software based solutions to the UK and Irish financial services market.
3. Earnings/(loss) per share
The basic earnings per share is based on attributable profit for the year of £1,976,000 (FY2007: £1,567,000) and on 29,416,007 ordinary shares (FY2007: 28,717,745) being the weighted average number of ordinary shares in issue during the year. The diluted earnings per share is based on attributable profit for the year of £1,976,000 (FY2007: £1,567,000) and on 32,976,779 shares (FY2007: 30,022,619) calculated as follows:
|
|
Year |
|
Year |
|
|
ended |
|
ended |
|
|
31 March |
|
31 March |
|
|
2008 |
|
2007 |
|
|
000's |
|
000's |
|
|
|
|
|
|
Basic weighted average number of ordinary shares |
29,416 |
|
28,718 |
|
|
|
|
|
|
Dilutive potential ordinary shares: Share options |
3,561 |
|
1,305 |
|
|
|
|
|
|
|
32,977 |
|
30,023 |
Pre-deferred tax adjusted basic earnings per share is based on the pre-deferred tax attributable profit for the year of £1,400,000 (FY2007: £1,117,000) and on 29,416,007 ordinary shares (FY2007: 28,717,745) being the weighted average number of ordinary shares in issue during the year. The pre-deferred tax adjusted fully diluted earnings per share is based on the pre-deferred tax attributable profit for the year of £1,400,000 (FY2007: £1,117,000) and on 32,976,779 shares (FY2007: 30,022,619) calculated as follows:
|
|
Year |
|
Year |
|
|
ended |
|
ended |
|
|
31 March |
|
31 March |
|
|
2008 |
|
2007 |
|
|
000's |
|
000's |
|
|
|
|
|
|
Basic weighted average number of ordinary shares |
29,416 |
|
28,718 |
|
|
|
|
|
|
Dilutive potential ordinary shares: Share options |
3,561 |
|
1,305 |
|
|
|
|
|
|
|
32,977 |
|
30,023 |
4. Cash (absorbed)/ generated from operations
|
|
Year |
|
Year |
|
|
ended |
|
Ended |
|
|
31 March |
|
31 March |
|
|
2008 |
|
2007 |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
Profit before income tax |
1,400 |
|
1,035 |
|
Adjustments for: |
|
|
|
|
Share based payment expense |
87 |
|
13 |
|
Depreciation and amortisation |
126 |
|
76 |
|
Net finance income |
(209) |
|
(45) |
|
Changes in working capital: |
|
|
|
|
Trade and other receivables |
(1,114) |
|
301 |
|
Trade and other payables |
(1,658) |
|
1,419 |
|
|
|
|
|
|
Cash (absorbed)/ generated from operations |
(1,368) |
|
2,799 |
Latest directors dealings
- 1 day ago FBD Holdings (CDI)
- 1 day ago Churchill China
- 1 day ago DCC (CDI)
- 1 day ago BlackRock Smaller Companies Trust
- 1 day ago Whitbread