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Computer Software (CSW)

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Wednesday 31 May, 2006

Computer Software

Final Results

Computer Software Group PLC
31 May 2006


31 May 2006

                          Computer Software Group plc

                              Preliminary results

Computer Software Group plc, ("CS Group" or the "Company"), the AIM-listed niche
software consolidator, is pleased to announce its preliminary results for the
year ended 28 February 2006.

Financial Highlights

•         Turnover up 79% to £25.2m (2005: £14.1m)
•         Gross profit margin improved to 85% (2005: 80%)
•         Operating profit before amortisation of intangible fixed assets has
          increased 141% to £5.3m (2005: £2.2m)
•         Profit before tax of £2.35m (2005: £0.93m)
•         Adjusted* earnings per share rose to 7.85p (2005: 6.41p)
•         Net cash inflow from operating activities of £3.2m (2005: £1.2m)

*pre amortisation of intangible assets

Operational Highlights

•         Focus on revenue generation and cost synergies
•         Following the recent acquisition of AIM Group Holdings Limited, the
          Company now comprises three divisions: Business Solutions, Not for 
          Profit and Professional Solutions
•         New customers have been won across all divisions including Corus,
          Boeing, Balfour Beatty, eSpeed (part of Cantor Fitzgerald), St Austell
          Breweries, Paymaster, Inspace and the National Association of Head 
          Teachers.

Michael Jackson, Chairman of CS Group, said,

"These results reflect a combination of both organic and acquisitive growth.
They are also evidence that our corporate strategy of maximising returns from
existing core businesses and identifying value-enhancing acquisition
opportunities in niche markets has been successful."

Vin Murria, Chief Executive, commented:

"We began the year with ambitious growth plans and a determination to deliver
another year of record profits and I am pleased to report that both of these
goals have been achieved. Trading in the current year has, across all divisions,
met expectations and we are confident that we will achieve another year of
strong growth.

"This year has seen a major step forward for the Group.  We have realised good
organic growth and proven our ability to find, acquire and successfully
integrate well-judged acquisitions.  We believe that our investment in new
products and new vertical markets will enable us to continue to achieve
excellent results and provide ample growth opportunity."

Further details:

CS Group                                                        020 8879 3939
Michael Jackson, Chairman
Vin Murria, CEO
Barbara Firth, CFO

Financial Dynamics                                              020 7831 3113
Giles Sanderson / Juliet Clarke / Hannah Sloane



Chairman's Statement

I am pleased to report another very good year for the Group.  Turnover for the
year has grown by 79% to £25.2m (2005: £14.1m), and operating profit before
amortisation of intangible fixed assets has increased 141% to £5.3m (2005:
£2.2m).

These results reflect a combination of both organic and acquisitive growth. They
are also evidence that our corporate strategy of maximising returns from
existing core businesses and identifying value-enhancing acquisition
opportunities in niche markets has been successful.

During the year we strengthened the Not for Profit and Business Solutions
divisions with the acquisitions of Consensus Information Technology Limited and
Transoft Group Limited. Both acquisitions have performed well.

We have also strengthened the Board with the appointment of Chief Commercial
Officer David Woodcock, responsible for Group sales policy and implementation,
and Chief Operating Officer David England, responsible for rolling out the
Group's operational policy.  Rob Downey retired as a non-executive director and
we thank him for his valued support and guidance over the past three years.  We
are pleased to welcome Jeremy Bailey as a non-executive director with effect
from 1 June 2006.  Jeremy is Chairman of Global Banking Europe for Deutsche Bank
and has many years of experience in the software industry.  His appointment will
ensure the Board encompasses a wide range of abilities and skills to effectively
manage the Group's business.

Lastly, we are fortunate to have a dedicated and efficient team of managers and
employees and I would like to thank all my colleagues for their enthusiastic
support over the past year.  I look forward to the next phase in the Company's
dynamic development.

Michael Jackson
Chairman
30 May 2006


Chief Executive's Report

Introduction

Twelve months ago I announced that I looked forward with confidence to another
year of growth and I am delighted to report that we have achieved excellent
growth in the last financial year.  We have increased turnover and profitability
and developed further cross-selling opportunities from the acquisitions made in
the year.

During the year we have continued to focus on our strategy of becoming the
leading supplier in each of our chosen niche markets and to seek complementary
and value enhancing acquisitions.  We now offer a broad range of software
applications covering the business solutions, not for profit solutions and, with
the acquisition of AIM Group Holdings Limited ("AIM") in April 2006,
professional solutions sectors.

The acquisition of AIM has provided us with the foundation for a new
Professional Solutions division and we expect to build this structure in the
coming year.  We have consolidated the Field Services business units into the
Business Solutions division and have expanded the Not for Profit division to
include higher education and learning management applications.

Financial Review

Turnover for the year increased by 79% to £25.2m (2005: £14.1m), of which £5.5m
(2005: £6.2m) was derived from acquisitions. Recurring support and similar
revenues for the year just ended were £9.2m (2005: £4.1m) and represent 37%
(2005: 29%) of turnover.  Total revenue from existing customers was
approximately £19.2m (2005: £10.6m) representing 76% (2005: 75%) of total
turnover.

Gross profit margin improved to 85% (2005: 80%) and gross profit increased 89%
to £21.3m (2005: £11.2m).

Operating profit before amortisation increased 141% to £5.3m (2005: £2.2m)
reflecting acquisitions, synergies and continued tight control over overheads.

Profit before tax increased to £2.35m (2005: £0.9m).

Earnings per share was 2.91p (2005: 3.25p).  Adjusted earnings per share,
pre-amortisation of intangible assets, was 7.85p (2005: 6.41p).   Diluted
earnings per share was 2.89p (2005: 3.19p), with adjusted diluted earnings per
share, pre-amortisation of intangible assets, at 7.80p (2005: 6.30p).

The Group was highly cash generative in the year with a cash inflow from
operations of £3.2m compared to £1.2m in the previous year.  Cash balances at 28
February 2006 were £4.7m compared to £0.5m at 28 February 2005. Net debt at 28
February 2006 was £0.2m compared to net debt of £1.2m at 28 February 2005.

Sales and marketing

For a number of years we have achieved a significant part of our growth by
selling into our existing customer base. This year, we have encouraged cross
selling through a range of incentives designed to benefit both customer and
sales teams.  We are focussed on new business generation and have a sales
management structure to ensure that we maximise opportunities. Our sales
pipeline is strong across all divisions and will be further strengthened by the
appointment of David Woodcock as Chief Commercial Officer with specific
responsibility for sales.

We have increased our marketing resource to assist in defining our market
position, promoting our corporate brand and to maintain an effective lead
generation process.

Trading and Acquisitions

In April last year we acquired Consensus Information Technology Limited ("
Consensus") for £1.7m, which expanded our membership customer base and provided
a new product in the learning and compliance management sector.  We then
acquired Transoft Group Limited ("Transoft"), a business which offers valuable
skills and capabilities in the data migration field and utilises legacy systems
in a modern application environment, for £2.7m, in August 2005.  Both
acquisitions have performed well and have made a significant contribution to
group profits in the period since acquisition.

Divisional operations

Our success is not just due to our sales and marketing focus but is also
dependent on our operational management skills and cost containment.  To enable
us to continue with our rapid rate of growth we strengthened the executive team
mid-year by the appointment of David England as Chief Operating Officer.

Business Solutions

Software solutions covering a wide range of business applications - financials,
distribution, CRM on multiple platforms and large scale data migration projects

The acquisition of Transoft in August 2005 has further improved the
profitability of the Business Solutions division by adding a data migration tool
to facilitate the interface of legacy systems to more modern platforms. Data
migration projects tend to occur in larger organisations and already the
strength of the Group's financial covenant has helped to secure several new
contracts in this field such as Paymaster, Boeing, Corus and eSpeed (part of
Cantor Fitzgerald).

Other major new customer wins in the division include St Austell Breweries,
Tradex Insurance and Panathinaikos.

The Business Solutions division provided 51% of the Group's total turnover and
56% of its operating profit.

Not for Profit

Integrated software solutions for the Membership, Charities and Higher Education
sectors

The Not for Profit division was strengthened by the acquisition of Consensus in
April 2005 with a substantial membership customer base including the Caravan
Club of Great Britain, the Audit Commission and the Red Cross, and several new
product lines including learning management and compliance management software
solutions. The customer base for these products is growing steadily and includes
Grant Thornton and numerous Health Care Trusts.  We believe the prospects for
these products are excellent.

Our membership and charity products have had a tremendous year overall with many
new customers added in both the private and public sectors - The National
Association of Headteachers, the British Sub Aqua Club, the National Domestic
Violence Helpline and the Scottish Society for the Prevention of Cruelty to
Animals to name just a few.

The Not for Profit division provided 30% of the Group's total turnover and 41%
of its operating profit.

Field Services

Cross industry mobile data and scheduling software solutions

This has been the first full year for the field services division and some
significant restructuring and evaluation of products and markets has taken
place. We now offer a comprehensive portfolio of proprietary products addressing
the requirements of all tiers of the market and this is reflected in the healthy
pipeline for the division.

Recent major wins include Inspace, Hobart and Checkpoint.

The Field Services division provided 19% of the Group's total turnover and 3% of
its operating profit.

Post Period End Activity

Since the year-end we have acquired Care Business Solutions Limited for £2.85m,
a business which provides a modern, functionally rich solution for the not for
profit sector. Earlier this month we also announced the acquisition of AIM Group
Holdings Limited, which provides software solutions to the legal profession, for
£5.3m. This acquisition has taken us into a new market which promises
significant opportunity for both consolidation and growth. Both acquisitions fit
our selection criteria; they hold niche market positions with proprietary
software products offering development potential, both will benefit from our
commercial and marketing expertise and are expected to be earnings enhancing
immediately.

Current Trading and Outlook

Trading in the current year has, across all divisions met expectations and we
are confident that we will achieve another year of record growth.

This year has seen a major step forward for the Group.  We have achieved good
growth and proven our ability to find, acquire and successfully integrate
well-judged acquisitions.

Vin Murria
Chief Executive
30 May 2006



Consolidated Profit and Loss Account
For the year ended 28 February 2006




                                                                                        2006                   2005
                                                             Notes         £'000       £'000      £'000       £'000
Turnover
Continuing operations                                                                 19,625                  7,917
Acquisitions                                                                           5,531                  6,155
                                                               2                      25,156                 14,072
Cost of sales                                                  2                     (3,888)                (2,844)
Gross profit                                                                          21,268                 11,228
Sales and marketing costs                                      2                     (3,719)                (2,505)
Administrative expenses                                        2        (15,175)                (7,974)
Less amortisation of intangible fixed assets                   2           2,727                  1,233
Administrative expenses before amortisation
of intangible fixed assets                                                          (12,448)                (6,741)
Other operating income                                         2                         199                    226
Operating profit before amortisation of
intangible fixed assets                                                                5,300                  2,208
Amortisation of intangible fixed assets                                              (2,727)                (1,233)

Operating profit before interest
Continuing operations                                          2             742                      4
Acquisitions                                                   2           1,831                    971
                                                               2                       2,573                    975
Interest receivable                                                                       38                      9
Interest payable and similar charges                                                   (264)                   (56)
Profit on ordinary activities before taxation                                          2,347                    928
Tax on profit on ordinary activities                                                   (743)                    339
Profit on ordinary activities after
taxation transferred to reserves                               4                       1,604                  1,267

Earnings per Ordinary Share (pence)                            3                        2.91                   3.25

Diluted earnings per Ordinary Share (pence)                    3                        2.89                   3.19


All amounts relate to continuing operations.



Consolidated Balance Sheet
As at 28 February 2006


                                                                                        2006                  2005
                                                              Notes        £'000       £'000     £'000       £'000

Fixed Assets
Intangible                                                                            25,140                20,622
Tangible                                                                                 909                   921
                                                                                      26,049                21,543
Current Assets
Debtors                                                                    8,196                 6,245
Cash at bank and in hand                                                   4,685                   455
                                                                          12,881                 6,700
Creditors
Amounts falling due within one year                                      (6,155)               (4,777)
Net Current Assets                                                                     6,726                 1,923
Total Assets Less Current Liabilities                                                 32,775                23,466

Creditors
Amounts falling due after more than one year                                         (3,144)               (1,263)
Provisions for liabilities and charges                                                 (325)                     -
Deferred income                                                                      (6,807)               (4,626)
Net Assets                                                                            22,499                17,577

Capital and Reserves
Called up share capital                                         4                      5,679                 4,985
Share premium account                                           4                      5,397                 3,035
Share reserve account                                           4                          -                   520
Merger reserve                                                  4                      6,889                 6,052
Special reserve                                                 4                        394                 3,158
Profit and loss account                                         4                      4,140                 (173)

Shareholders' Funds                                             4                     22,499                17,577




Consolidated Cash Flow Statement
For the year ended 28 February 2006

Reconciliation of operating profit to net cash inflow from operating activities

                                                                                           2006         2005
                                                                                          £'000        £'000

Operating profit                                                                          2,573          975
Depreciation charge                                                                         284          111
Profit on sale of fixed assets                                                                -          (4)
Amortisation of intangible fixed assets                                                   2,727        1,233
Increase in debtors                                                                       (756)      (1,209)
(Decrease)/increase in creditors and provisions                                         (1,621)          107
Net cash inflow from operating activities                                                 3,207        1,213

Cash Flow Statement
Net cash inflow from operating activities                                                 3,207        1,213
Returns on investments and servicing of finance                                           (161)         (47)
Taxation                                                                                  (253)           50
Capital expenditure and financial investment                                              (148)        (108)
Acquisitions                                                                            (3,753)      (5,473)
Net cash outflow before financing                                                       (1,108)      (4,365)
Financing                                                                                 5,338        3,228
Increase/(decrease) in cash                                                               4,230      (1,137)

Reconciliation of net cashflow to movement in net debt
Increase/(decrease) in cash                                                               4,230      (1,137)
Cash (inflow)/outflow from (increase)/ decrease in net debt                             (2,775)          233
Loan converted into shares                                                                  245            -
Loan note issued on acquisition of Transoft                                               (250)            -
Loans and finance leases acquired with subsidiaries                                       (382)      (1,477)
Movement in net debt                                                                      1,068      (2,381)
Net (debt)/funds at 1 March 2005                                                        (1,222)        1,159
Net debt at 28 February 2006                                                              (154)      (1,222)



Statement of Group Total Recognised Gains and Losses

                                                                                            2006         2005
                                                                                           £'000        £'000

Profit attributable to shareholders                                                        1,604        1,267
Translation adjustments in respect of overseas subsidiary                                   (55)            -

Total recognised gains and losses for the year                                             1,549        1,267



Notes to the Financial Statements
For the year ended 28 February 2006

1.  Status of Information

The financial information presented in this preliminary announcement does not
constitute statutory accounts within the meaning of the Companies Act 1985.  The
information has  however  been  extracted  from  the Company's statutory
accounts for the year ended 28 February 2006 which were approved by the Board on
30 May 2006 and on which the Company's auditors have given an unqualified
opinion.

The comparative figures for 2005 have been abridged from the statutory accounts
for the year ended 28 February 2005. The auditors' opinion on these accounts was
unqualified and did not contain any statements under section 237(2) or (3) of
the Companies Act 1985. The statutory accounts for the year ended 28 February
2005 have been filed with the Registrar of Companies.

2.  Analysis of Continuing Operations

                                                                                                   2006        2005
                                                                   Continuing  Acquisitions       Total       Total
                                                                        £'000         £'000       £'000       £'000
Turnover                                                               19,625         5,531      25,156      14,072
Cost of sales                                                         (2,802)       (1,086)     (3,888)     (2,844)
Gross profit                                                           16,823         4,445      21,268      11,228
Sales and marketing costs                                             (2,965)         (754)     (3,719)     (2,505)
Administrative expenses                                              (13,315)       (1,860)    (15,175)     (7,974)
Other operating income                                                    199             -         199         226
Less amortisation of intangible fixed assets                            2,306           421       2,727       1,233
Operating profit before amortisation of intangible fixed assets         3,048         2,252       5,300       2,208
Amortisation of intangible fixed assets                               (2,306)         (421)     (2,727)     (1,233)
Operating profit                                                          742         1,831       2,573         975


3.  Earnings per Ordinary Share

Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year. Diluted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted average number of
shares that would be in issue after conversion of all the dilutive potential
ordinary shares into ordinary shares.

An adjusted earnings per share figure is provided to exclude the impact of
amortisation.

Reconciliations of the earnings and weighted average number of shares used in
the calculations are as follows:

                                                                2006                                2005
                                                            Weighted                            Weighted
                                                             Average                             Average
                                                           number of   Per share               number of   Per share
                                                Earnings      shares      amount    Earnings      shares      amount
                                                   £'000        '000       pence       £'000        '000       pence
Basic earnings per share                           1,604      55,152        2.91       1,267      38,997        3.25
Dilution for employee share options                              420                                 635
Dilution for contingent shares                                     -                                  31
Diluted earnings per share                         1,604      55,572        2.89       1,267      39,663        3.19

Basic earnings per share                           1,604      55,152        2.91       1,267      38,997        3.25
Amortisation of intangible fixed assets            2,727                    4.94       1,233                    3.16
Adjusted earnings                                  4,331      55,152        7.85       2,500      38,997        6.41

Diluted earnings per share                         1,604      55,572        2.89       1,267      39,663        3.19
Amortisation of intangible fixed assets            2,727                    4.91       1,233                    3.11
Adjusted diluted earnings per share                4,331      55,572        7.80       2,500      39,663        6.30


4.  Reconciliation of Movement in Shareholders' Funds and Reserves

                                                                                                       2006      2005
                                                                                                      Total     Total
                                                   Share     Share                         Profit    Share-    Share-
                                          Share  Premium   Reserve     Merger   Special  and Loss  holders'  holders'
                                        Capital  Account   Account    Reserve   Reserve   Account     funds     funds
                                          £'000    £'000     £'000      £'000     £'000     £'000     £'000     £'000
Group
Balance at 1 March 2005                   4,985    3,035       520      6,052     3,158     (173)    17,577     6,285
Profit for the year                           -        -         -          -         -     1,604     1,604     1,267
Translation adjustments                       -        -         -          -         -      (55)      (55)         -
Shares to be issued                           -        -         -          -         -         -         -       520
Shares issued                               694    2,362     (520)        837         -         -     3,373     9,505
Transfer from Special Reserve                 -        -         -          -   (2,764)     2,764         -         -
Balance at 28 February 2006               5,679    5,397         -      6,889       394     4,140    22,499    17,577


All shareholders' funds are equity shareholders' funds


5.  Acquisitions

The Company acquired 100% of the issued ordinary share capital of two companies
during the year. The book and fair values of the net assets acquired were as
follows:


                                                                           Total    Consensus     Transoft
                                                                           £'000        £'000        £'000
Intangible fixed assets                                                      257            -          257
Tangible fixed assets                                                        122           57           65
Debtors                                                                    1,420          474          946
Cash/(debt)                                                                (496)          167        (663)
Creditors and provisions                                                 (3,664)        (552)      (3,112)
Net assets/(liabilities) acquired                                        (2,361)          146      (2,507)
Goodwill                                                                   6,768        1,549        5,219
Consideration                                                              4,407        1,695        2,712

Consideration satisfied by
Shares                                                                       517          400          117
Cash (including expenses)                                                  3,640        1,295        2,345
Loan note                                                                    250            -          250
                                                                           4,407        1,695        2,712


Number of Shares Issued                                                                640,000      225,978
Date of Acquisition                                                                    6 April    31 August
                                                                                          2005         2005


6.  Post Balance Sheet Events

On 10 March 2006 the Group acquired Care Business Solutions Limited for a total
initial consideration of £2,850,000 to be satisfied in cash. Additional deferred
consideration, estimated at a maximum of £800,000 will be settled from the net
proceeds of a sale of a commercial property acquired with the business.

On 28 April 2006 the Group acquired AIM Group Holdings Limited for a total
consideration of £5,300,000 to be satisfied in cash partly settled from the
proceeds of a treasury loan from Barclays Bank plc amounting to £5,000,000 taken
out for that purpose and the remainder from its own resources.

7.  Annual Report and Financial Statements

Copies of the Annual Report and Financial Statements will be circulated to
shareholders shortly and may be obtained after the posting date from Barbara
Firth, the Company Secretary, Computer Software Group plc, Integra House,
138-140 Alexandra Road, London SW19 7JY.




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