Interim Results

Focus Solutions Group PLC 05 December 2006 FOCUS SOLUTIONS GROUP PLC Interim results for the six months ended 30 September 2006 (unaudited) Focus Solutions Group Plc ("Focus" or "the Group"), a leading provider of adaptive software solutions, today announces its interim results for the six months ended 30 September 2006. Highlights • Trading for first half in line with expectations • £0.4 million improvement in Operating Profit before Reorganisation Costs compared to last year • Total revenues up 3% to £2.8 million (2005: £2.7 million) • Operating Loss before reorganisation costs £0.1 million (2005: £0.5 million) • Operating loss before tax and interest £0.3 million (2005: £0.6 million) • Cash balances £0.4 million (2005: £0.3 million) and debt free • Cash generated from operating activities in period £0.3 million (2005: £0.7 million) outflow • New contract wins in the period included: - Consultancy and development services for HSBC Bank Plc - Initial £60k software licence agreement with the UK subsidiary of a major US provider of life, pensions and investment products • Further new contract wins since the period end: - Our largest ever contract win with HSBC worth £6.0 million over the next 18 months - First contract with BT worth £120k for the development of an online registration solution in Central Government • Loss per share 0.71 pence (2005: loss 2.0 pence) Commenting on the results, Focus Chief Executive, Richard Stevenson said: "The results for the first half of FY2007 show that the Company is continuing to move forward. Revenues were up 3%, however with careful management of the cost base we delivered a significantly improved performance. Over the past few months we have announced a series of major contract wins. The latest HSBC contract win is the most significant, awarded following eight months of consultancy work. Further contract wins for the UK subsidiary of a major US Insurance Company and from the established customer base have consolidated our position as the leading Point of Sale solution provider to the UK Financial Services market. Furthermore, the award of a contract from BT has provided further proof of the applicability of our technology in other markets, particularly Government. I am extremely pleased with the recent progress of the Company since becoming CEO in March which gives me confidence that we will continue to build strength in the business and enjoy further success in the short to medium term." For further information Focus Solutions Group plc 01926 468300 Richard Stevenson - Chief Executive Martin Clements - Finance Director Chairman's Statement Business Review It is with some pleasure that I report that the Group's results for the first half of FY2007 continue to demonstrate strong progress in our business. Sales revenues are up 3% on the same period last year. Our order backlog, as we enter the second half of the year, stands at a record level and we remain confident we will meet market expectations. Richard Stevenson joined the Group as Chief Executive as at the start of March 2006. His impact has been immediate, with the reorganisation of the management team in line with our strategic objectives, refocusing of effort on the business's key strengths, improved efficiencies within the organisation, and developing the team and company ethos which he believes will ensure the future success of the business. The Board is exceptionally pleased with the impact Richard has made since joining us and is confidently expecting further positive developments in the Group's future. Focus has continued to win business against major competition in the Point of Sale market, with a strong record in the Life and Pensions, Bancassurance and Mortgage sectors. With highly successful solutions delivered to the likes of Norwich Union, Openwork and Barclays Bank in recent years, leading UK financial services business will naturally call on the expertise of Focus when new front end systems are required. Our ability to rapidly generate and deploy software, delivering return on investment in exceptionally short timescales, remains the major differentiator. Since the start of FY2007, we have seen further progress with the award of a series of consultancy services contracts from HSBC Bank plc worth £1.28 million in aggregate. Our ability to deliver consultancy services to HSBC's timetable led to the award of a contract in November worth approximately £6.0 million over the next two years. This is the Company's largest ever contract win. The Group has also won business from two new customers in its core UK life and pensions market. In October, we won a one year licence, worth £60,000 for the supply of our Focus technology software to the UK subsidiary of a major US provider of life, pensions and investment products. This followed the award of an initial consultancy contract in the first half and has been followed by further orders for consultancy services. It is expected that this will lead to a further significant contract for the delivery of an extranet solution providing support for financial advisers selling and servicing retirement products. During the period we have continued to win further business from established customers including Openwork, Barclays, Home of Choice, Prudential, Scottish Equitable and the Co-Operative Bank. A prudent approach to revenue recognition will also lead to a significant increase in software licence revenues in the second half of FY2007. For some time, we have recognised the value of our software and the value of its potential application outside of the UK financial services market, and to this end there has been significant new progress in terms of identifying opportunities, securing long term contracts with partners and developing a sales pipeline. For example, last month, we announced the award of a potentially significant order from BT, worth £120,000 initially, for the delivery of an online registration solution to enable businesses to electronically register company incorporations. The Focus software will form part of a framework available for other business to Government transactions. This agreement gives the Group a real platform for growth outside of UK financial services. Financial Review Turnover in the first half of the year was up 3% at £2.8 million (2005:£2.7 million). An Operating Loss before Reorganisation Costs of £0.1 million compared to a loss of £0.5 million in the same period last year. As in previous years, we expect revenues to be substantially greater in the second half than in the first half. Total costs in the first half were £3.1 million, £0.2 million down on the same period last year, a decrease of 7%. This reflected the continued tight control over expenditure, despite the increasing activity levels. We expect some additional costs in the second half as the business gears up to deliver the order book. However, we would also expect to see the benefits of increased economies of scale to be felt in the second half. There were a number of one-off or exceptional costs relating to the reorganisation of the Group which were incurred in the first half and which totalled £181k. Operating Loss after reorganisation costs and before tax was £0.3 million compared to £0.6 million last year. This was in line with expectations. We are now generating cash on an improved basis and remain debt free. Cash balances at the end of September were £0.4 million (2005: £0.3 million; 31 March 2006: £0.1 million). Overdraft facilities totalling £500k are available to us from our bankers, HSBC plc. Cash inflow from operating activities in the first half was £261k (2005: £724k outflow). With the expected improvement in trading in the second half, we anticipate that the business will be cash generative in the second half. The Directors continually review the funding requirements for the Group and will ensure that the continued development of the business is properly funded. The loss per share of 0.71 pence per share compares to 2.0 pence loss per share in the same period last year. As in previous periods, the Directors are not recommending the payment of an interim dividend. Operational Review Focus has built on the progress made last year. We have won important new customers as well as winning additional business from our established customer base. The changes in regulations in the life and pensions market have certainly led to some major financial institutions changing their sales processes, and their supporting technology, to sell products from a wide range of providers. Focus' e-trading solutions and extensive footprint in the life assurance market has put the Company in a strong position to support the organisations who have chosen to become distributors, or multi-tied, and this has resulted in major strategic projects. Changes in regulations affecting the sales of mortgages have also been driving demand from organisations across the mortgage sector and the customer base now increasingly reflects mortgage providers, distributors and portals. The development of the business outside UK financial services has been a central plank of our strategy for some time. The highlight in this regard has undoubtedly been the contract win with BT. Government targets for e-Government are driving the public sector to look at how, and where, it captures the data for any services it makes available electronically. The characteristics and capabilities of our XML toolkit, goal:technology, provides highly effective solutions to these problems. We have therefore focused attention on building relationships with established suppliers to the public sector and the initial results have been encouraging. Investment in development continues, extending the breadth of the product range offered to our customers and in new technologies. Outlook It remains our strategy to create a sustainable and scalable business. The fundamental drivers for the business remain unchanged. Our customers operate in extremely competitive and heavily regulated markets and we believe that to maintain competitive advantage, they must continue to invest in electronic trading. With the strengthening of the Group's balance sheet, the management team have a clear strategy for both organic and non-organic growth and is looking to broaden the Company's portfolio where and when appropriate. Our sales pipeline is at its highest level to date and we expect this to contribute to a further improvement in financial performance in the second half. Alastair M. Taylor Chairman Focus Solutions Group plc Summarised Consolidated Profit and Loss Account For the six months ended 30 September 2006 (Unaudited) (Unaudited) (Audited) 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Total Total Total £000 £000 £000 Turnover 2,806 2,731 6,585 Cost of sales (1,129) (1,040) (2,055) Gross profit 1,677 1,691 4,530 Overheads Distribution costs (582) (678) (1,424) Administrative expenses (including re-organisation costs of £181k, 2005:£120k, FY2006 £257k) (1,391) (1,615) (2,996) (1,973) (2,293) (4,420) Operating (Loss)/ Profit (296) (602) 110 ----------- ------------ ------------ Operating (Loss)/ Profit before reorganisation Costs (115) (482) 367 reorganisation costs (181) (120) (257) Operating (Loss)/ Profit after reorganisation costs (296) (602) 110 ----------- ------------ ------------ Net Interest receivable 11 17 18 (Loss)/ Profit on ordinary activities before taxation (285) (585) 128 Taxation 83 - - (Loss)/ Profit on ordinary activities after taxation and retained loss for the period (202) (585) 26 ========== ============== ========== Basic and diluted (Loss)/ Earnings per ordinary share (note 2) (0.71p) (2.0p) 0.1p ========== ============== ========== No separate statement of total recognised gains and losses has been presented as all such gains and losses have been dealt with in the profit and loss account. Focus Solutions Group plc Summarised Consolidated Balance Sheet For the six months ended 30 September 2006 Restated (Unaudited) (Unaudited) (Audited) 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Fixed Assets 157 144 135 Tangible Assets 157 144 135 Current Assets 2,642 2,378 4,147 Debtors 418 262 123 Cash at bank and in hand 3,060 2,640 4,270 Creditors: amounts falling due within one year (1,070) (1,149) (2,056) ------- ------- -------- Net Current Assets 1,990 1,491 2,214 Total Assets less current liabilities 2,147 1,635 2,349 Creditors: amounts falling due in - - - more than one year -------- ------- ------- Net Assets 2,147 1,635 2,349 ======== ======= ======= Capital and Reserves Called up share capital 2,864 2,864 2,864 Shares to be issued - - - Share premium 9,832 9,833 9,832 Merger reserve 220 220 220 Share option reserve 55 - 55 Profit and Loss Account (10, 824) (11,282) (10,622) ------- ------ ------ Shareholders' funds 2,147 1,635 2,349 Equity interest ======= ====== ====== Focus Solutions Group plc Summarised Consolidated Cash Flow Statement For the six months ended 30 September 2006 (Unaudited) (Unaudited) (Audited) 6 months 6 months Year ended ended ended 30 Sept 30 Sept 31 March 2006 2005 2006 £000 £000 £000 Net cash inflow/ (outflow) from 261 (724) (833) operating activities Returns on investments and 11 17 18 servicing of finance Taxation 83 - - Capital expenditure and (60) (48) (79) financial investment Cash inflow/ (outflow) before management of 295 (755) (894) liquid resources and financing Financing Increase / (Decrease) in cash - 10 10 Change in net debt resulting from cash flows 295 (745) (884) Increase/ (Decrease) in cash in the period 295 (745) (884) Cash outflow from increase in liquid - - - resources Movement in net funds in the period 295 (745) (884) Net funds at start of year 123 1,007 1,007 Net funds at end of period 418 262 123 Focus Solutions Group plc Notes to the interim financial statements 1. Basis of preparation The summarised half year financial information is unaudited and does not constitute statutory accounts for the purposes of section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 March 2006, which received an unqualified audit report, have been delivered to the Registrar of Companies. The unaudited financial information has been prepared on a consistent basis with the accounting policies set out in the Group's 31 March 2006 audited statutory accounts with the exception of FRS 20 (see below) and are consistent with those which will be adopted in the accounts for the year ending 31st March 2007. 2. Loss per ordinary share 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Earnings attributable to ordinary shareholders (Loss)/ Profit for the financial period (202) (585) 128 Weighted average number of ordinary shares issued during the year (000's) 28,642 28,615 28,629 Dilutive effect of share options - - 223 Basic and Diluted earnings per share (0.71p) (2.0p) 0.45p 3. Reorganisation costs Reorganisation costs related to the restructuring of the business into two separate business streams and to management reorganisation. 4. Reconciliation to shareholders' funds organisation costs Share Share Merger Share Profit and Total Capital Premium Reserve Option Loss Reserve account £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 2006 as previously 2,864 9,832 220 - (10,567) 2,349 reported Transferred to Share Option - - - 55 (55) - Reserve Loss for the period - - - - (202) (202) _______ _______ _______ _______ _______ _______ At 30 September 2,864 9,832 220 55 (10,824) 2,147 2006 _______ _______ _______ _______ _______ _______ Opening reserves have been restated as a result of the adoption of FRS20 - share based payments. This has created a share option reserve at 31 March 2006 of £55k and increased the retained loss brought forward to £10.622 million. This information is provided by RNS The company news service from the London Stock Exchange

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