Final Results

RNS Number : 3086T

IDOX PLC

12 December 2012

 



12 December 2012

IDOX plc

Adjusted* pre-tax profits up 36% on acquisitions, organic growth and further international expansion

IDOX plc (AIM: IDOX, 'IDOX' or the 'Group'), a leading supplier of software and services, announces final results for the year ended 31 October 2012.

Highlights

·      Revenues up 50% to £58m (2011: £39m); a combination of strong organic growth and acquisition performance

o  Engineering Information Management Division revenues reached 31% of total (2011: 12%)

o  International revenues increased to 31% (2011:12%)

·      EBITDA** rose 44% to £16.7m (2011: £11.6m)

·      Adjusted profit before tax* up 36% to £14.8m (2011: £10.9m)

·      Profit before tax £6.9m (2011: £5.6m) 

·      Adjusted EPS* increased 55% to 3.83p (2011: 2.47p), Basic EPS 1.94p (2011: 1.31p)

·      Final proposed dividend of 0.40p (2011: 0.36p), total for year 0.675p (2011: 0.60p), 13% increase over last year

·      Completed and integrated £24m of acquisitions funded by cash flow and a new acquisition debt facility resulting in year-end net debt of £21.5m (2011:£2.4m), maintained within a prudent multiple of EBITDA

* Adjusted profit before tax and adjusted EPS excludes amortisation, impairment, restructuring, corporate finance and share option costs

** EBITDA is defined as earnings before goodwill, impairment, amortisation, depreciation, restructuring, corporate finance and share option costs

Martin Brooks, Chairman, said:

"We have enjoyed further transformation in 2012, driven by strong organic growth and our continuing acquisition programme in both our major software divisions. We have implemented a strategy of diversification for the future in order to increase our geographic spread and work towards revenue parity between our operations in the public and private sectors. This strategy is progressing well, as we report 31% of revenue coming from our Engineering Information Management business and 31% of revenue being derived outside the UK; an impressive leap from the 12% achieved in both measures in the previous year.

"We have started the new financial year well, with a business pipeline across all divisions stronger than the previous year, despite continuing wider economic headwinds. As well as international diversification, our growing reputation for domain expertise in both our public and private sector markets brings further new opportunities."

Enquiries:

IDOX plc	[phone]
Martin Brooks, Chairman
Richard Kellett-Clarke, Chief Executive
William Edmondson, Chief Financial Officer
Investec Bank plc (NOMAD & Broker)	[phone]
Andrew Pinder / Patrick Robb
FinnCap (Broker)	[phone]
Stuart Andrews / Stephen Norcross
Leander (Financial PR)	[phone]
Christian Taylor-Wilkinson

About IDOX plc

Idox plc is a supplier of specialist document management collaboration solutions and services to the UK public sector and increasingly to highly regulated asset intensive industries around the world in the wider corporate sector.

Its Public Sector Software Division is the leading applications provider to UK local government for core functions relating to land, people and property, such as its market leading planning systems and election management software. Over 90% of UK local authorities are now customers. The Group provides public sector organisations with tools to manage information and knowledge, documents, content, business processes and workflow as well as connecting directly with the citizen via the web.

Through the Information Solutions Division Idox also supplies, predominantly to the public sector, decision support content such as grants and planning policy information as well as related specialist services.

The Engineering Information Management Division delivers engineering document control, project collaboration and facility management applications to many leading companies in industries such as oil & gas, architecture and construction, mining, utilities, pharmaceuticals and transportation around the world.

In addition the Group provides knowledge and content management skills to customers through its TFPL branded recruitment division.

The Group employs over 500 staff located in the UK, the USA, Europe, India and Australia.

For more information see www.idoxplc.com

Chairman's Statement

Idox has delivered an outstanding performance in this financial year. We have not only consolidated our position as the market leading Land and Property software specialist in the UK Public Sector software local government market, but we have also now established a strong foothold in the global Engineering Information Management market.

We have enjoyed further transformation in 2012 and a greater leap in profitability, driven not only by our continuing acquisition programme, but also by a very encouraging uplift in organic growth in both our major software divisions.  Five acquisitions were made in the financial year; CT Space Group, Interactive Dialogues, Opt2Vote, Currency Connect and FMx.  All are performing well and as a result we have many new Idox employees in the UK and around the world to welcome to our growing organisation. This acquisition programme has been met from the high cash conversion generated from operating activities, together with a flexible debt facility, which is maintained well within a prudent multiple of earnings.

As always, it is our senior management and all our employees who drive this business forward in terms of capability and profitability. We are also privileged to have the support and engagement of many of our key shareholders on our journey as a growing AIM listed company, as well as able professional advisers. All have played a part in helping Idox progress well against the continuing headwinds of great uncertainty in the wider economic world.

Looking to the future, we have sought to diversify our core software businesses, which are largely driven off a common technology base, as well as achieving a greater geographical spread.  We have also sought to achieve a degree of parity in revenues between our Public Sector business and our private sector Engineering Information Management (EIM) business and between the UK and the rest of the world.

Therefore it is pleasing to report that in this financial year we show 31% of Group revenues coming from the EIM division (2011:12%) and 31% coming from outside the UK (2011: 12%) with a particular focus on non European markets such as the USA, our largest market outside the UK, Australia and the BRIC countries which, together, provided 69% of this international total.

As our Company grows, the board has developed its thinking on governance and risk management. We are determined to protect our small company heritage of rigorous attention to detail, cash and cost control, combined with speedy execution, while recognising that new scale and opportunities around the world bring new challenges. Such potential issues include anticipating technology shifts, ensuring revenue recognition policies remain appropriate as business expands, multiple overseas jurisdictions and currencies, different national cultures, as well as more complex product lines and management skills. These all require more planning and oversight by the board acting independently, as well as by senior management. 

In turn this also requires the composition and skill base of the board to be progressively refreshed and as part of this process, we were particularly pleased to welcome Professor Dame Wendy Hall FRS as an additional non-executive director in October.

In line with our progressive dividend policy, the Board proposes a final dividend of 0.40p, subject to shareholder approval, making a total for the year of 0.675p, a 13% increase over 2011.

The new financial year has started well, building on our high recurring revenues and strong qualified sales pipeline and we look forward to another year of further development and growth at Idox.

Chief Executive Review

This year we have built on the improvements we have made in previous years and laid the foundations for further growth and prosperity of the business.

To achieve this we continue to evolve our internal processes, develop further our product strategies, invest in new graduates, encourage innovation in all parts of the organisation from product to back office operations and importantly, focus on delivering improved customer care. These continued efforts have delivered this year's growth and we are committed to continuing this growth across the Group.

The Public Sector Software Division has benefited from local government responding to the current difficult economic environment and we have actively engaged with them to look for ways to improve services at a reduced cost through improvements in productivity, vendor consolidation, automation and business change. The division has won seventy-five individual new systems in the past twelve months delivering significant improvements in productivity and thereby cost savings. Although we are not always the cheapest vendor we strive to demonstrate the benefits of our solutions and our commitment to deliver improved services and support over the long term.

Building on our successes in 2011 we have this year implemented more shared, managed and hosted solutions and look forward to growing this part of our business further in 2013.

The Engineering Information Management Division (EIM), which previously just included McLaren Software, was expanded at the start of the year through the acquisition of CTSpace and at the end of the year with the extension of our capabilities into facilities management software with the acquisition of FMx. This, together with another year of double digit organic growth, has helped raise EIM revenue from 12% in 2011 to 31% in 2012.

McLaren Software launched its new hosted "On-Air" offering in Q4.  This resulted in making Idox the only global supplier within the Engineering Information Management market able to provide enterprise-wide document management and collaboration solutions for the construction and operation of large assets, offering a flexible open standards cross platform package whether in the Cloud, off-premise hosted or on-premise solution.

Our Information Solutions Division extended its content and web capabilities through added-value consultancy and training services outside the public sector with the acquisition of Currency Connect and Interactive Dialogues. It is now able to offer a range of content, hosting, e-learning and compliance solutions in the public sector and in the private sector across Europe.  The division has improved its renewal rates, grown its training revenues in double digits and successfully completed its first content and managed services outsourcing contract for the Greater London Authority (GLA), where it not only reduced the costs but also managed to deliver an improved outcome through a combination of content, domain expertise and technical capability.

Recruitment continued to make a contribution to the business and has reorganised its approach to take account of the continued difficult market and the internationalisation of its business.

Outlook

The Group will continue to build upon its previous financial success and has again started this year well with a stronger pipeline than the year before across all of the divisions.

We expect the shift in revenue mix to a higher percentage of private sector revenues to work in our favour with higher top line growth expected, whilst margins are expected to move closer to those of the public sector business.

In 2013 we intend to accelerate the level of innovation in all aspects of the business, not just development, and will continue to look for areas of productivity improvement, improved processes and, above all, improved quality in customer care.

We expect the geographic diversification of the revenue base to help insulate the Group from challenging economic issues closer to home and assist it in the ambition to grow in double digits organically.

Management will continue its strategy of becoming domain experts and partner of choice in the Public Sector and EIM markets through suitable acquisitions which will extend its global and technical reach.

Financial Review

Group revenues grew by 50% to £58m (2011: £39m) reflecting not only the impact of the five acquisitions made in 2012 but also accelerating organic growth across the business.  The Group enjoyed a significant diversification of its revenues geographically with 31% now generated outside of the UK (2011: 12%).  Gross profit earned was 54% higher at £51.4m (2011: £33.4m) and the Group saw an increase in gross margin from 87% to 89% as a result of an increased mix of higher margin software business.  Earnings before interest, taxation, depreciation and amortisation ("EBITDA") increased by 44% to £16.7m (2011: £11.6m) with EBITDA margins of 29% (2011: 30%).

Performance by segment

The Public Sector software business, which accounted for 52% of Group revenues (2011: 68%), delivered revenues of £30.2m (2011: £26.1m), a growth rate of 15%.  Excluding Opt2Vote, the election managed services business acquired in March 2012 which contributed £2.4m, revenues grew by 6% organically on the previous year.

Recurring revenues within the Public Sector software business were 57%, down from 66% in FY11 as a result of the strong growth of new software and services revenue in the year and the classification of Opt2Vote revenue as non-recurring resulting in a change in product mix.   Divisional EBITDA grew by 8% to £10.3m (2011: £9.5m), delivering a 34% margin, a 2% drop on 2011 due to the inclusion of the lower gross margin Opt2Vote business.

The Engineering Information Management ("EIM") business accounted for 31% of Group revenues (2011: 12%) and more than tripled revenues from £4.7m in 2011 to £17.8m in 2012.  This was achieved by organic growth of 46% in the McLaren business in addition to the first year's contribution of CT Space which was acquired in November 2011.   Visibility of revenue in the EIM business has also increased during the year with 48% (2011: 36%) of revenues coming from recurring maintenance and Software-as-a-Service ("SaaS") contracts.  The business is also becoming increasingly international with 60% of divisional revenues coming from the USA, 9% from Australia and 9% from Europe and Asia.

EBITDA for the EIM business increased five-fold to £5.3m (2011: £1.1m), 32% of the Group total.  Margins increased to 30% (2011: 23%) which reflects both the increased scale of the business and progress made during the year in rapidly integrating CTSpace to achieve planned cost synergies.

The Information Solutions business increased revenues by 59% to £7.5m (2011: £4.7m) as a result of the acquisitions of e-learning provider, Interactive Dialogues and grants consultancy business, Currency Connect during the year which contributed £2.1m and £1.2m respectively.   In 2011 the grants subscription business faced headwinds during the first year of the public sector spending cuts which impacted renewal rates and therefore revenue recognition coming into 2012.  However in the second half renewal rates improved providing a solid platform for growth in 2013.  EBITDA for the Information Solutions business increased 70% to £1m (2011: £0.6m).

The Recruitment business revenues declined by 19% to £2.5m (2011: £3.1m) as a result of a decline in the low margin contract recruitment business.  However, gross margins were relatively stable at £1.3m due to the shift in mix toward the higher margin permanent recruitment business.   EBITDA declined to £0.1m (2011: £0.4m).

Profit before tax

Within the income statement, we present both profit before tax and adjusted profit before tax which is a performance measure that is not defined by GAAP but which the directors believe provides a reliable and consistent measure of the Group's underlying financial performance.  Adjusted profit before tax and adjusted EPS excludes amortisation, impairment, restructuring, corporate finance and share option costs.

Adjusted profit before tax increased 36% to £14.9m (2011: £10.9m).  Financing costs increased from £0.4m to £1.3m as a result of the loan facilities which were taken out to fund the acquisitions made during the year.  Interest payable (including swap costs) was £0.9m (2011:  £0.1m), amortisation of the loan facility fees £0.2m (2011: £0.2m) and foreign exchange translation differences £0.1m (2011: £0.02m). 

Reported profit before tax increased 23% to £6.9m (2011: £5.6m).  Amortisation of intangibles increased from £3.7m to £4.6m as a result of acquisitions made during the year.  An impairment charge of £1m has been made against the carrying value of goodwill in relation to the TFPL recruitment business based on management's review of the future projections for the business.  Restructuring charges of £0.5m (2011: £0.2m) relate to the integration of acquisitions made during the year and corporate finance costs of £1.1m (2011: £0.3m) are all acquisition related and include legal and due diligence fees in respect of the five acquisitions completed during the course of the year and fees incurred in respect of one large acquisition which was aborted.

Taxation

The Group's effective tax rate for the year was 3% compared to 19% in 2011.  The reduction in the effective rate of tax is largely related to both the recognition and utilisation of brought forward tax losses acquired with the McLaren business.  During the year, £2.9m of unrecognised brought forward tax losses were utilised against current year profits within the EIM business.  After utilising these losses, a further £4.1m of tax losses remain available to utilise against future year profits.  Based on EIM trading performance during FY12 the board now consider it highly probable that the Group will benefit from these tax losses in the future and as a result a deferred tax asset of £4.1m has been recognised on the balance sheet which has resulted in a £0.9m reduction in the current year tax charge.  The Group will continue to derive a cash benefit from these tax losses in future years. Excluding the effect of recognising this deferred tax asset the effective tax rate was 17%.

Earnings per share and dividends

Adjusted earnings per share were up 55% to 3.83p (2011: 2.47p).   Diluted adjusted earnings per share increased by 51% to 3.63p (2011: 2.41p). 

Basic earnings per share were up 48% to 1.94p (2011: 1.31p).  Diluted earnings per share increased by 44% to 1.84p (2011: 1.28p). 

The Board proposes a final dividend of 0.40p, to give a full year dividend of 0.675p (2011: 0.60p). This 13% increase in dividend reflects the Group's strong profitability growth whilst also being mindful of maintaining balance sheet capability to capitalise on future acquisition opportunities.  Subject to approval at the Annual General Meeting, the final dividend will be paid on 24 April 2013 to shareholders on the register at 19 April 2013.

Balance sheet and cashflows

Idox's balance sheet continued to strengthen during the year and at 31 October 2012 net assets were £38.9m compared to £34.4m at 31 October 2011.

Cash generated from operating activities before tax as a percentage of EBITDA was 75%, up from 56% in the previous year.  Trade receivables increased to £11.2m (2011: £6.0m) as a result of acquisitions during the year and a strong finish to trading in the year. 

The Group ended the year with net debt of £21.5m (2011: £2.4m) after making acquisition related payments (net of cash acquired) of £23.6m and after total dividends and share buy backs of £2.8m.  The Group's total signed debt facilities at 31 October 2012 stood at £27.7m, a combination of a term loan and flexible working capital and acquisition revolving credit facilities.  The acquisition facility was extended by a further £5m post year-end however remains undrawn.  The Group has enjoyed very significant headroom against its banking covenants during the year.

Deferred income, representing invoiced maintenance and SaaS contracts yet to be recognised in revenue stood at £13.5m at 31 October 2012 (2011: £10.9m), increasing visibility of revenue in the new financial year.

Consolidated Statement of Comprehensive Income for the year ended 31 October 2012
	Note			2012		2011
				£000		£000
Revenue		2		57,903		38,605
Cost of sales				(6,544)		(5,157)
Gross profit				51,359		33,448
Staff costs				(26,940)		(17,400)
Other operating charges				(7,716)		(4,487)
Earnings before goodwill impairment, amortisation, depreciation, restructuring, corporate finance and share option costs				16,703		11,561
Depreciation				(597)		(499)
Amortisation				(4,618)		(3,738)
Impairment of intangible fixed assets				(1,018)		-
Restructuring costs				(464)		(211)
Corporate finance costs				(1,109)		(281)
Share option costs				(731)		(1,064)
Operating profit				8,166		5,768
Finance income				18		247
Finance costs				(1,278)		(401)
Analysed as: Adjusted profit before tax				14,846		10,908
Impairment of intangible fixed assets				(1,018)		-
Amortisation of intangibles				(4,618)		(3,738)
Restructuring costs				(464)		(211)
Corporate finance costs				(1,109)		(281)
Share option costs				(731)		(1,064)
Profit before taxation				6,906		5,614
Income tax expense		3		(201)		(1,089)
Profit for the year				6,705		4,525
Other comprehensive income for the year Available-for-sale financial assets -       transferred to profit for the year				-		(35)
Exchange gains on retranslation of foreign operations				61		41
Other comprehensive income for the year, net of tax				61		6
Total comprehensive income for the year attributable to owners of the parent				6,766		4,531
Earnings per share
Basic		4		1.94p		1.31p
Diluted		4		1.84p		1.28p

Consolidated Balance Sheet

At 31 October 2012

			2012		2011
			£000		£000
ASSETS
Non-current assets
Property, plant and equipment			817		601
Intangible assets			71,371		48,611
Deferred tax assets			1,417		495
Total non-current assets			73,605		49,707
Current assets
Trade and other receivables			16,913		8,843
Cash and cash equivalents			3,640		-
Total current assets			20,553		8,843
Total assets			94,158		58,550
LIABILITIES
Current liabilities
Trade and other payables			5,460		2,304
Other liabilities			17,286		13,315
Provisions			76		117
Current tax			1,020		975
Derivative financial instruments			136		-
Borrowings			2,300		2,408
Total current liabilities			26,278		19,119
Non-current liabilities
Deferred tax liabilities			6,101		5,060
Borrowings			22,879		-
Total non-current liabilities			28,980		5,060
Total liabilities			55,258		24,179
Net assets			38,900		34,371
EQUITY
Called up share capital			3,485		3,463
Capital redemption reserve			1,112		1,112
Share premium account			10,197		10,017
Treasury reserve			(107)		(204)
Share options reserve			1,825		1,366
Merger reserve			1,294		1,294
ESOP trust			(95)		(93)
Foreign currency retranslation reserve			102		41
Retained earnings			21,087		17,375
Total equity			38,900		34,371

Consolidated Cash Flow Statement

For the year ended 31 October 2012

			2012		2011 As restated *
			£000		£000
Cash flows from operating activities
Profit for the period before taxation			6,906		5,614
Adjustments for:
Depreciation			597		499
Amortisation			4,618		3,738
Impairment			1,018		-
Finance income			(18)		(247)
Finance costs			791		146
Interest rate swap liability			136		-
Debt issue costs amortisation			109		134
Share option costs			568		994
Exchange losses			60		(5)
Movement in receivables			(2,571)		(2,050)
Movement in payables			121		(2,288)
Cash generated by operations			12,335		6,535
Tax on profit paid			(2,600)		(2,132)
Net cash from operating activities			9,735		4,403
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired			(23,266)		(1,698)
Deferred consideration paid relating to subsidiaries acquired in prior period			(320)		(648)
Sale of available-for-sale financial assets			-		1,038
Purchase of property, plant and equipment			(523)		(568)
Purchase of intangible assets			(1,240)		(668)
Finance income			18		29
Net cash used in investing activities			(25,331)		(2,515)
Cash flows from financing activities
Interest paid			(620)		(134)
New loans			27,800		-
Loan related costs			(430)		-
Loan repayments			(2,300)		(4,000)
Equity dividends paid			(2,196)		(2,036)
Sale/purchase of shares			(610)		(130)
Net cash flows from financing activities			21,644		(6,300)
Net movement on cash and cash equivalents			6,048		(4,412)
Cash and cash equivalents at the beginning of the period			(2,408)		2,004
Cash and cash equivalents at the end of the period			3,640		(2,408)

*2011 cash flow has been restated to reallocate a cash outflow of £1,000,000 from Investing activities - acquisition of subsidiaries to Financing activities - loan repayments and to reallocate a cash outflow of £917,000 from Investing activities - acquisition of subsidiaries to Operating activities - movement in payables.

Consolidated Statement of Changes in Equity At 31 October 2012
	Called up share capital £000	Capital redemption reserve £000	Share Premium account £000	Treasury reserve £000	Share options reserve £000	Merger reserve £000	ESOP Trust £000	Foreign currency retranslation reserve £000	Retained earnings £000	Total £000
Balance at 1 November 2010	3,442	1,112	9,903	(455)	630	1,294	(93)	-	15,179	31,012
Issue of share capital	21	-	114	-	-	-	-	-	-	135
Transfer on exercise of share options	-	-	-	-	(258)	-	-	-	243	(15)
Sale of treasury shares	-	-	-	972	-	-	-	-	(501)	471
Purchase of treasury shares	-	-	-	(721)	-	-	-	-	-	(721)
Share options granted	-	-	-	-	994	-	-	-	-	994
Equity dividends paid	-	-	-	-	-	-	-	-	(2,036)	(2,036)
Transactions with owners	21	-	114	251	736	-	-	-	(2,294)	(1,172)
Profit for the period	-	-	-	-	-	-	-	-	4,525	4,525
Other comprehensive income
Exchange gains on retranslation of  foreign operations	-	-	-	-	-	-	-	41	-	41
Available-for-sale financial assets - transfer to profit for year	-	-	-	-	-	-	-	-	(35)	(35)
Total comprehensive income for the period	-	-	-	-	-	-	-	41	4,490	4,531
Balance at 31 October 2011	3,463	1,112	10,017	(204)	1,366	1,294	(93)	41	17,375	34,371
Issue of share capital	22	-	180	-	-	-	-	-	-	202
Transfer on exercise of share options	-	-	-	134	(109)	-	-	-	(797)	(772)
Purchase of treasury shares	-	-	-	(37)	-	-	-	-	-	(37)
Share options granted	-	-	-	-	568	-	-	-	-	568
ESOP trust	-	-	-	-	-	-	(2)	-	-	(2)
Equity dividends paid	-	-	-	-	-	-	-	-	(2,196)	(2,196)
Transactions with owners	22	-	180	97	459	-	(2)	-	(2,993)	(2,237)
Profit for the period	-	-	-	-	-	-	-	-	6,705	6,705
Other comprehensive income
Exchange gains on retranslation of  foreign operations	-	-	-	-	-	-	-	61	-	61
Total comprehensive income for the period	-	-	-	-	-	-	-	61	6,705	6,766
At 31 October 2012	3,485	1,112	10,197	(107)	1,825	1,294	(95)	102	21,087	38,900

Notes to the announcement

For the year ended 31 October 2012

1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS. 

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities, being derivatives at fair value through profit or loss.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 31 October 2012 within the meaning of section 434 of the Companies Act 2006.  The financial information for the year ended 31 October 2011 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for the year ended 31 October 2012 are expected to be finalised on the basis of the financial information presented by the directors in this preliminary announcement.

2 Segmental Analysis

In previous periods, the Group was organised into three main operating segments. Following the acquisition and integration of McLaren Software Group and CT Space Group, the Group now includes an Engineering Information Management (EIM) segment.  As at 31 October 2012, the Group is primarily organised into four main operating segments, which are detailed below.  Segmental analysis for the comparative period to 31 October 2011 has been restated to show results for all four business segments.

Financial information is reported to the chief operating decision maker, which comprises the Chief Executive Officer and the Chief Financial Officer, monthly on a business unit basis with revenue and operating profits split by business unit.  Each business unit is deemed an operating segment as each offers different products and services.

·      Public Sector Software - delivering software service solutions to mainly local government customers across a broad range of departments

·      Engineering Information Management - delivering engineering document management and control solutions to asset intensive industry sectors

·      Information Solutions - delivering both an information service and consultancy services to a diverse range of customers across both private and public sectors

·      Recruitment - providing personnel with information, knowledge, records and content management expertise to a diverse range of customers

Segment revenue comprises of sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the chief operating decision maker represents the profit earned by each segment before the allocation of taxation and Group related interest payments and Group corporate finance costs.  The assets and liabilities of the Group are not reviewed by the chief operating decision maker on a segment basis.

The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.

The segment revenues by geographic location for the year ended 31 October 2012 are as follows:

				2012		2011
				£000		£000
Revenues from external customers
United Kingdom				39,688		33,786
USA				10,635		1,884
Europe				5,732		1,551
Australia				1,603		1,255
Rest of World				245		129
				57,903		38,605

Revenues are attributed to individual countries on the basis of the location of the customer. 

The segment results by business unit for the year ended 31 October 2012 are as follows:	Public Sector Software			EIM		Information Solutions		Recruitment		Total
	£000			£000		£000		£000		£000
Revenues from external customers	30,172			17,740		7,470		2,521		57,903
Cost of sales	(3,493)			(1,347)		(495)		(1,209)		(6,544)
Gross profit	26,679			16,393		6,975		1,312		51,359
Operating costs	(16,409)			(11,070)		(5,952)		(1,225)		(34,656)
Profit  before interest, tax, depreciation, amortisation, impairment, share option costs, corporate finance costs and restructuring costs	10,270			5,323		1,023		87		16,703
Depreciation	(345)			(126)		(119)		(7)		(597)
Amortisation	(2,776)			(964)		(869)		(9)		(4,618)
Impairment of goodwill	-			-		-		(1,018)		(1,018)
Share option costs	(570)			(102)		(35)		(24)		(731)
Restructuring	(188)			(41)		(176)		(59)		(464)
Corporate finance costs	(59)			(815)		(195)		-		(1,069)
Profit before interest and taxation	6,332			3,275		(371)		(1,030)		8,206
Interest receivable	-			1		3		-		4
Finance costs	9			(129)		(21)		(4)		(145)
Segment profit (see reconciliation below)	6,341			3,147		(389)		(1,034)		8,065

The segment results by business unit for the year ended 31 October 2011 (restated) are as follows:	Public Sector Software			EIM		Information Solutions		Recruitment		Total
	£000			£000		£000		£000		£000
Revenues from external customers	26,132			4,655		4,707		3,111		38,605
Cost of sales	(2,809)			(296)		(310)		(1,742)		(5,157)
Gross profit	23,323			4,359		4,397		1,369		33,448
Operating costs	(13,806)			(3,287)		(3,794)		(1,000)		(21,887)
Profit  before interest, tax, depreciation, amortisation, impairment, share option costs, corporate finance costs and restructuring costs	9,517			1,072		603		369		11,561
Depreciation	(387)			(15)		(90)		(7)		(499)
Amortisation	(2,984)			(23)		(722)		(9)		(3,738)
Share option costs	(857)			(105)		(102)		-		(1,064)
Restructuring	(21)			(173)		(17)		-		(211)
Corporate finance costs	(121)			(160)		-		-		(281)
Profit before interest and taxation	5,147			596		(328)		353		5,768
Interest receivable	1			2		-		-		3
Segment profit (see reconciliation below)	5,148			598		(328)		353		5,771

Reconciliations of reportable profit

			2012		2011
			£000		£000
Profit
Total profit for reportable segments			8,065		5,771
Corporate finance costs			(40)		-
Net financial costs			(1,119)		(157)
Profit before taxation			6,906		5,614

Corporate finance costs comprise legal fees in relation to arrangement of Group working capital facilities.  Net financial costs relate to Group bank loan interest, bank facility fee amortisation and fair value loss on financial derivatives which have not been included in reportable segments.

3 Taxation

The tax charge is made up as follows:

		2012	2011
		£000	£000
Current tax
UK corporation tax on profits for the period		1,455	2,046
Foreign tax on overseas companies		1,108	8
Under/(over) provision in respect of prior periods		(70)	3
Total current tax		2,493	2,057
Deferred tax
Origination and reversal of temporary differences		(1,712)	(715)
Amortisation of intangibles difference in tax rate		(580)	(120)
Adjustments in respect of prior periods		-	(133)
Total deferred tax		(2,292)	(968)
Total tax charge		201	1,089

Factors affecting the tax charge in the period:

		2012	2011
		£000	£000
Profit before taxation		6,906	5,614
Profit on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 24% (2011: 27%)		1,657	1,516
Effects of:
Tax losses utilised		(689)	(491)
Non taxable income		(3)	-
Expenses not deductible for tax purposes		718	205
Capital allowances in excess of depreciation		17	50
Other timing differences		864	104
R&D enhanced relief		(10)	(60)
Deferred tax - trading losses		(941)	-
Deferred tax - intangible assets		(1,373)	(991)
Deferred tax - other movements		23	753
Foreign tax withheld		13	-
Adjustments to tax charge in respect of prior year		(75)	3
		201	1,089

Movement on trading losses during 2012 are as follows:

				UK unrelieved trading losses	Foreign unrelieved trading losses	Total unrelieved trading losses	Tax effect
	Recognised trading losses			£000	£000	£000	£000
	As at 1 November 2011			-	-	-	-
	Recognised during the year			6,960		6,960	1,879
	Utilised during the year			(2,871)	-	(2,871)	(689)
	Adjustment for reduction in standard rate of corporation tax from 27% to 24%			-	-	-	(209)
Adjustment for difference between standard rate of tax at 24% and deferred tax rate at 23%				-	-	-	(40)
				4,089	-	4,089	941
	Unrecognised trading losses
	As at 1 November 2011			6,960	50	7,010	1,886
	Recognised during year			(6,960)	-	(6,960)	(1,879)
	Utilised during the year			-	(29)	(29)	(4)
				-	21	21	3
	The foreign losses arise in the US and are subject to IRC s382 limitation.

The effective tax rate was 3% (2011: 19%). The decrease is due to the recognition of a deferred tax asset in relation to brought forward losses of £6,960,000 and the utilisation of £2,871,000 of those losses in the current year. The tax effect of the utilisation of losses was a credit of £689,000 in the tax charge.

The unrelieved trading losses of £4,089,000 arising in the UK remain available to offset against future taxable trading profits.  A deferred tax asset of £941,000 was recognised during the year in relation to these losses.  The losses were acquired during the prior year and were not previously recognised as a deferred tax asset.  Given the high probability that the Group will benefit from these tax losses in the future, the deferred tax asset was recognised during the year.

4 Earnings per Share

The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:

			2012	2011
			£000	£000
Profit for the year			6,705	4,525
Basic earnings per share
Weighted average number of shares in issue			346,231,724	344,267,741
Basic earnings per share			1.94p	1.31p
Weighted average number of shares in issue			346,231,724	344,267,741
Add back:
Treasury shares			432,000	230,000
ESOP shares			128,618	178,494
Weighted average allotted, called up and fully paid share capital			346,792,342	344,676,235
Diluted earnings per share
Weighted average number of shares in issue used in basic earnings per share calculation			346,231,724	344,267,741
Dilutive share options			18,852,529	9,096,287
Weighted average number of shares in issue used in dilutive earnings per share calculation			365,084,253	353,364,028
Diluted earnings per share			1.84p	1.28p
Adjusted earnings per share
Profit for the year			6,705	4,525
Add back:
Amortisation			4,618	3,738
Impairment			1,018	-
Share option costs			731	1,064
Corporate finance costs			1,109	281
Restructuring costs			464	211
Tax effect			(1,395)	(1,303)
Adjusted profit for year			13,250	8,516
Weighted average number of shares in issue			346,231,724	344,267,741
Adjusted earnings per share			3.83p	2.47p
Adjusted diluted earnings per share			3.63p	2.41p

5 Acquisitions

Interactive Dialogues Limited

On 7 November 2011, the Group acquired the entire share capital of Interactive Dialogues Limited and Interactive Dialogues NV ("ID") for a total considerationof €2.2m (£1.9m) in cash. Control passed on the date of acquisition.  ID is a leading supplier of e-learning and information solutions in Europe enabling organisations to conduct 'dialogues' with employees, customers and suppliers to achieve legislative compliance in areas such as Competition Law and the UK Bribery Act. The acquisition of ID extends the range of solutions available within the Idox Information Solutions business and provides Idox with an e-learning platform that will be used to support customers across the Group.

An initial payment of €2m has been made on completion and a further €0.2m is payable one year after completion subject to the fulfilment of certain conditions.  ID had revenues of €2.4m for the year ended 31 May 2011.

Goodwill arising on the acquisition of ID has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of ID with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of ID has been accounted for using the acquisition method of accounting.

		Book value £000	Fair value adjustments £000		Fair value £000
Intangible assets	8		962		970
Property, plant and equipment	17		-		17
Trade receivables	349		-		349
Other receivables	283		-		283
Cash at bank	199		-		199
TOTAL ASSETS	856		962		1,818
Trade payables	(59)		-		(59)
Other creditors	(263)		-		(263)
Accruals	(179)		-		(179)
Deferred tax liability	-		(233)		(233)
TOTAL LIABILITIES	(501)		(233)		(734)
NET ASSETS					1,084
Purchased goodwill capitalised					832
Total consideration					1,916

Satisfied by:

Cash to vendor			1,742
Contingent consideration			174
Total consideration			1,916

The fair value adjustment for the intangible assets relates to customer relationships, trade names and software.  A related deferred tax liability has also been recorded as a fair value adjustment.

The fair value of trade receivables is equal to the gross contractual amounts receivable.  All debts have been reviewed and are considered recoverable.

The revenue included in the consolidated statement of comprehensive income since 7 November 2011, contributed by ID was £2,083k .  ID also contributed a profit after tax of £281k for the same period.   If ID had been included from 1 November, it would have contributed revenue of £2,083k and a profit after tax of £256k.

The earn out period is 1 November 2011 to 31 October 2012.  The earn out arrangements require the Group to pay the former owners of ID €1 for every €1 the revenue in the earn out period exceeds €2,200,000 up to a maximum consideration of €200,000.  The maximum consideration has been recognised at the date of acquisition, which represents the fair value of the contingent consideration. 

Acquisition costs of £82k have been charged to profit or loss within corporate finance costs in the consolidated statement of comprehensive income.

CTSpace

On 15 November 2011, the Group acquired CTSpace, an engineering and construction sector document management and control business, for £11.6m in cash from Sword Group.   The Group acquired the entire share capital of CT Space Limited, Buildonline Global Limited, Buildonline Ireland Limited, CT Space SARL, CT Space Gmbh, CT Space Technologies Pty, CT Space Inc and Citadon Inc.  Control passed on the date of acquisition.

CTSpace provides document management and collaboration workflow applications for the global construction and engineering industry and will complement the McLaren Software business that IDOX acquired in December 2010.  CTSpace provides both Software as a Service ('SaaS') and on-premise enterprise solutions, the latter of which leverage an organisation's existing investment in leading enterprise content management ('ECM') platforms such as IBM FileNet®, EMC Documentum® or Microsoft SharePoint®. When deployed with leading enterprise content management platforms, CTSpace's products provide an integrated, best practice environment that supports a project's entire lifecycle.

Goodwill arising on the acquisition of CTSpace has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of CTSpace with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of CTSpace has been accounted for using the acquisition method of accounting.

	Book value £000		Fair value adjustments £000		Fair value £000
Intangible assets	6,065		(2,555)		3,510
Property, plant and equipment	360		(243)		117
Trade receivables	2,390		(78)		2,312
Other receivables	758		(71)		687
Corporation tax	590		-		590
Cash at bank	239		-		239
TOTAL ASSETS	10,402		(2,947)		7,455
Trade payables	(350)		3		(347)
Deferred revenue	(2,768)		50		(2,718)
Other creditors	(587)		(18)		(605)
Corporation tax	(502)		(215)		(717)
Deferred tax liability	-		(804)		(804)
TOTAL LIABILITIES	(4,207)		(984)		(5,191)
NET ASSETS					2,264
Purchased goodwill capitalised					9,323
Total consideration satisfied by cash to vendor					11,587

The fair value adjustment for the intangible assets relates to customer relationships, trade names and software.  A related deferred tax liability has also been recorded as a fair value adjustment.  Other adjustments relate to depreciation, bad debt provision and accrued income to bring these in line with Idox Group policies.

The fair value of assets acquired includes trade receivables of £2,312k.  The gross amount due under contracts is £2,726k of which £414k is expected to be uncollectible.  Other receivables are considered to be fully recoverable.

The revenue included in the consolidated statement of comprehensive income since 15 November 2011, contributed by CTSpace was £8,996k.  CTSpace also contributed a profit after tax of £1,098k for the same period.   If CTSpace had been included from 1 November, it would have contributed revenue of £9,398k and a profit after tax of £965k.

Acquisition costs of £488k have been charged to profit or loss within corporate finance costs in the consolidated statement of comprehensive income.

Opt2Vote

On 27 March 2012, the Group acquired the entire share capital of Opt2Vote Ltd, one of the UK's leading providers of electoral managed services and innovative democracy solutions, for a maximum cash consideration of £3.5m.  Control passed on the date of acquisition.

Opt2Vote provides expertise and knowledge across all areas of election management and specialises in the provision of managed services solutions and innovation in areas such as e-Counting and Early Voting. Opt2Vote supplies electronic vote counting solutions to the 32 Scottish local authorities as well as managed print services to UK councils. It is based in Londonderry, Northern Ireland.  Opt2Vote products and services will complement solutions provided by Strand Electoral Software, acquired by IDOX in 2010 and will enable the Group to deliver a comprehensive range of democratic solutions and managed services.

Goodwill arising on the acquisition of Opt2Vote has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of Opt2Vote with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Opt2Vote has been accounted for using the acquisition method of accounting.

	Book value £000	Provisional fair value adjustments £000	Fair value £000
Intangible assets	-	1,996	1,996
Property, plant and equipment	44	(24)	20
Trade receivables	181	-	181
Corporation tax	103	-	103
Other receivables	51	5	56
Cash at bank	633	-	633
TOTAL ASSETS	1,012	1,977	2,989
Trade payables	(81)	-	(81)
Other creditors	(73)	-	(73)
Accruals	(307)	3	(304)
Deferred tax liability	-	(478)	(478)
TOTAL LIABILITIES	(461)	(475)	(936)
NET ASSETS			2,053
Purchased goodwill capitalised			1,447
Total consideration			3,500

Satisfied by:

Cash to vendor			2,700
Contingent consideration			800
Total consideration			3,500

The fair values stated above for trade receivables, other receivables, trade payables, other creditors and accruals remain provisional.  The fair value adjustment for the intangible assets relates to customer relationships, trade names and software.  A related deferred tax liability has also been recorded as a fair value adjustment.  The fair value of trade receivables is equal to gross contractual amounts receivable.

The revenue included in the consolidated statement of comprehensive income since 27 March 2012, contributed by Opt2Vote was £2,484k .  Opt2Vote also contributed a profit after tax of £665k for the same period.   If Opt2Vote had been included from 1 November, it would have contributed revenue of £2,993k and a profit after tax of £320k.

The earn out period is 1 July 2012 to 30 June 2013.  The earn out arrangements require the Group to pay the former owners of Opt2Vote an amount to be determined by Revenue less associated direct costs in the earn out period, up to a maximum consideration of £800k less direct costs.  The potential undiscounted amount of all future payments that the Group could be required to make is between £nil and £800k.  £800k has been recognised at the date of acquisition, which represents the fair value of the contingent consideration.

Acquisition costs of £58k have been charged to profit or loss within corporate finance costs in the consolidated statement of comprehensive income.

Currency Connect

On 3 May 2012 the Group acquired the entire share capital Currency Connect Holdings BV ('Currency Connect'), a significant Dutch based grants advisory business, for a maximum cash consideration of €4.7m (£3.8m).  Control passed on the date of acquisition.

Currency Connect provides expertise and knowledge that helps clients obtain funding for innovation projects through grant-based subsidies and research & development tax credits. It monitors and informs customers of innovation subsidies, prepares grant applications and administers the end-to-end process. In addition, Currency Connect provides grants management software and advises clients on process change to enable them to accelerate their innovation and consequent eligibility for related grants. The Currency Connect acquisition extends the current Idox Solutions grants offering, particularly in the growing innovation funding space.

Goodwill arising on the acquisition of Currency Connect has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of Currency Connect with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of Currency Connect has been accounted for using the acquisition method of accounting.

	Book value £000	Provisional fair value adjustments £000	Fair value £000
Intangible assets	-	2,513	2,513
Property, plant and equipment	80	-	80
Trade receivables	513	(18)	495
Other receivables	259	-	259
Cash at bank	118	-	118
TOTAL ASSETS	970	2,495	3,465
Trade payables	(36)	-	(36)
Corporation tax	(82)	-	(82)
Other creditors	(131)	-	(131)
Accruals	(65)	-	(65)
Deferred tax liability	-	(603)	(603)
TOTAL LIABILITIES	(314)	(603)	(917)
NET ASSETS			2,548
Purchased goodwill capitalised			1,304
Total consideration			3,852

Satisfied by:

Cash to vendor			3,524
Contingent consideration			328
Total consideration			3,852

Due to the timing of the acquisition, all fair values stated above are provisional.  The fair value adjustment for the intangible assets relates to customer relationships, trade names and software.  A related deferred tax liability has also been recorded as a fair value adjustment. 

The fair value of assets acquired includes trade receivables of £514k.  The gross amount due under contracts is £624k of which £110k is expected to be uncollectible.  Other receivables are considered to be fully recoverable.

The revenue included in the consolidated statement of comprehensive income since 3 May 2012, contributed by Currency Connect was £1,185k .  Currency Connect also contributed a profit after tax of £148k for the same period.   If Currency Connect had been included from 1 November, it would have contributed revenue of £2,603k and a profit after tax of £657k.

The earn out period is 1 January 2012 to 31 December 2012.  The earn out arrangement requires the Group to pay the former owners of Currency Connect an amount to be determined by gross revenue in the earn out period, up to a maximum of €400k. The potential undiscounted amount of all future payments that the Group could be required to make is estimated at €400k.  €400k has been recognised at the date of acquisition, which represents the fair value of contingent consideration.

Acquisition costs of £109k have been charged to profit or loss within corporate finance costs in the consolidated statement of comprehensive income.

FMx

On 18 October 2012 the Group acquired the entire share capital of FMx Limited ('FMx'), a leading supplier of computer-aided facilities management ('CAFM') software, for a cash consideration of £5.6m.  Control passed on the date of acquisition.

FMx, through its CAFM Explorer product, provides facilities management software solutions to corporate, public and commercial real estate customers in over 30 countries.  CAFM Explorer is a comprehensive solution to manage all aspects of an operational facility including building management, maintenance, asset tracking and cost control.  The addition of CAFM Explorer to the Idox EIM product range extends the division's existing project collaboration solution, now enabling it to encompass the lifecycle of a building, campus or facility.  CAFM Explorer also provides the EIM division with a comprehensive solution for the estates departments of its existing asset intensive customers in Oil & Gas, Energy & Utilities and Process Manufacturing sectors.   In addition, CAFM Explorer adds to the Group's offering of information and estate solutions to its local government customer base.

Goodwill arising on the acquisition of FMx has been capitalised and consists largely of the workforce value, synergies and economies of scale expected from combining the operations of FMx with Idox.  None of the goodwill recognised is expected to be deductible for income tax purposes.  The purchase of FMx has been accounted for using the acquisition method of accounting.

	Book value £000	Provisional fair value adjustments £000	Fair value £000
Intangible assets	-	1,231	1,231
Property, plant and equipment	56	-	56
Trade receivables	150	-	150
Other receivables	709	-	709
Cash at bank	666	-	666
TOTAL ASSETS	1,581	1,231	2,812
Trade payables	(33)	-	(33)
Corporation tax	(45)	-	(45)
Other creditors	(728)	(15)	(743)
Accruals	(158)	-	(158)
Deferred tax liability	-	(295)	(295)
TOTAL LIABILITIES	(964)	(310)	(1,274)
NET ASSETS			1,538
Purchased goodwill capitalised			4,030
Total consideration satisfied by cash to vendor			5,568

Due to the timing of the acquisition, all fair values stated above are provisional.  The fair value adjustment for the intangible assets relates to customer relationships, trade names and software.  A related deferred tax liability has also been recorded as a fair value adjustment. 

The fair value of trade receivables is equal to the gross contractual amounts receivable.  All other receivables are considered to be fully recoverable.

The revenue included in the consolidated statement of comprehensive income since 18 October 2012, contributed by FMx was £86k .  FMx also contributed a profit after tax of £25k for the same period.   If FMx had been included from 1 November, it would have contributed revenue of £2,918k and a loss after tax of £41k.

Acquisition costs of £28k have been charged to profit or loss within corporate finance costs in the consolidated interim statement of comprehensive income.

Acquisition cash flows

Acquisition cash flows in the year are as follows:

Subsidiaries acquired during the year:					Net cash outflow £000
Interactive Dialogues					1,543
CT Space					11,348
Opt2Vote					2,067
Currency Connect					3,406
FMx					4,902
					23,266
Deferred consideration paid relating to previous year acquisitions					£000
Grantfinder Limited					68
Lalpac Limited					252
					320

No fair value adjustments have been made in the year in respect of prior year acquisitions.

6 Post Balance Sheet Events

On 1 November 2012 the Group increased the acquisition Revolving Credit Facility from £10m to £15m.  

7 Further Copies

Copies of this announcement and, on finalisation, the full annual report and accounts will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker Investec Bank plc, 2 Gresham Street, London EC2V 7QP, Tel: [phone] or from IDOX plc, 2nd floor, Chancery Exchange, London, EC4A 1AB, Tel: [phone].  Copies of the full financial statements will be made available to shareholders in due course.

 

END

 

 

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