TIDMEDP
RNS Number : 9218S
Electronic Data Processing PLC
28 June 2018
28 June 2018
Electronic Data Processing PLC (EDP)
Half-year results - 6 months to 31 March 2018
EDP is an IT solution provider to the UK wholesale distribution
industry and a supplier of Sales Intelligence software solutions
more widely.
Financial Highlights
-- Turnover GBP2.55 million (2017: GBP2.54 million)
-- Adjusted operating profit GBP250,000 (2017: GBP260,000), resulting
in an operating margin of 9.8% (2017: 10.2%)
-- Statutory pre-tax loss of GBP12,000 (2017: profit of GBP180,000)
after providing for GBP269,000 of exceptional legal and professional
costs in relation to the strategic review
-- Hosting revenues represent 63% of total revenues (2017: 61%)
-- Contracted recurring revenues represent 80% of total revenues
(2017: 80%)
-- R&D expenditure amounted to GBP484,000 in first half (2017: GBP461,000)
-- Strong, debt-free balance sheet with total cash balances of GBP6.5
million
-- The strategic review of the business is continuing. Should the
process not result in an acceptable offer being made for the Company,
the Board confirms that it intends to consider returning an amount
of cash to shareholders subject to any constraints on distributable
reserves and the rules of the Takeover Code. As a result, the
Directors are not currently recommending the payment of an interim
dividend pending the outcome of the strategic review
Sir Michael Heller, Chairman of EDP, said:
"Whilst trading conditions remain competitive, we remain
confident about the outlook for the future."
-Ends-
For further information please contact:
Julian Wassell James Storey Toby Mountford
Chief Executive Finance Director Citigate Dewe Rogerson
0114 262 2010 0114 2622010 020 7638 9571
07710 356611
www.edp.co.uk
Chairman's Statement
Turnover for the six months ended 31 March 2018 was GBP2.55
million (2017: GBP2.54 million).
Adjusted operating profit at GBP250,000 was also broadly in line
with the prior period (2017: GBP260,000). This represents an
operating margin of 9.8% compared with 10.2% in the prior
period.
Adjusted operating profit excludes one-off costs and non-cash
IFRS adjustments and is the measure the Directors use to monitor
the performance of the business on a day to day basis.
There was a statutory pre-tax loss for the six months ended 31
March 2018 of GBP12,000 which is stated after providing for
GBP269,000 of exceptional legal and professional costs in relation
to the strategic review. This compares with a profit of GBP180,000
in the prior year. A reconciliation of adjusted operating profit to
statutory pre-tax profit is shown in note 5.
Overall revenues have remained steady as we continue to
transition the business away from our traditional ERP software
products, which we continue to maintain and support, to our newer
products, Quantum VS and Vecta.
R&D expenditure during the period, which was focused mainly
on these new products, was GBP484,000 (2017: GBP461,000).
Revenues delivered through the Group's hosting centre during the
period represented 63% of total sales, up from 61% in the same
period last year. The business model is underpinned by the strong
contracted recurring revenue streams arising from annual software
licences and hosting charges. During the period under review, these
represented 80% of total revenues (2017: 80%) providing the
business with excellent visibility.
The tax charge for the period was GBP50,000. This gives an
effective tax rate of 19.4% on the profits of the business before
deducting the exceptional costs relating to the strategic
review.
Group net assets were GBP6.0 million at 31 March 2018 compared
with GBP6.4 million at the end of the previous financial year, 30
September 2017. The principal factors behind the decrease being
dividends approved of GBP381,000 and the exceptional costs in
relation to the strategic review. At 31 March 2017 net assets were
GBP3.7 million. The main reason for the increase since that time
was, as previously reported, a significant improvement in the
position on the Group's defined benefit pension scheme under IAS
19.
Cash and cash equivalents at 31 March 2018 were GBP6.5 million
compared with GBP6.4 million at 30 September 2017.
We have previously announced that we are carrying out a
strategic review of the business and that process is continuing.
Should the strategic review process not result in an acceptable
offer being made for the Company, the Board confirms that it
intends to consider returning an amount of cash to shareholders
subject to any constraints on distributable reserves and the rules
of the Takeover Code. As a result, the Directors are not currently
recommending the payment of an interim dividend pending the outcome
of the strategic review. The Company will update shareholders
further when it is in a position to do so.
As ever, I would like to thank our staff for their hard work and
commitment.
Whilst trading conditions remain competitive, we remain
confident about the outlook for the future.
Sir Michael Heller 28 June 2018
Chairman
Principal Risks and Uncertainties
We operate in a changing economic and technological environment
that presents risks, many of which are driven by factors that we
cannot control or predict. The key risks and uncertainties facing
EDP and the measures taken to mitigate these risks are as
follows:
Systems and networks
Risk
EDP's business operations rely significantly on the efficient
and uninterrupted operation of its information technology systems
and networks.
Our computer network may be vulnerable to unauthorised access,
viruses and other disruptive problems.
Potential impact
Any damage or interruption to EDP's networks, however caused,
could have a material adverse effect on the delivery of our
products and services.
A party that is able to override security measures could
misappropriate proprietary information or cause disruption to our
operations.
Mitigation
We continually review and test the security of internal systems
and networks and have developed recovery plans in the event of
systems disruption. We use a third party to internally and
externally scan our network to identify any potential
vulnerability.
Where reliance is placed upon externally provided systems and
networks we undertake regular performance ability reviews and
ensure that contracts provide for an appropriate level of service
maintenance.
Product technology advances
Risk
The markets in which EDP operates are characterised by evolving
technology, market practices and industry standards.
Potential impact
Competitors could develop superior products or more
cost-effective techniques which could render our products
uncompetitive or less acceptable to the market. This could result
in the loss of new revenue opportunities, the non-renewal of
contracts by existing customers or the failure of users of our
legacy applications to migrate to Quantum VS.
Mitigation
We have an ongoing commitment to research and development which
allows us to identify and adapt to any technological and market
changes that do occur thereby ensuring that our products continue
to meet the demands of our customers.
External economic factors
Risk
As with most other businesses in the UK, our operations can be
adversely affected by a significant downturn in the economy. The UK
economy faces considerable uncertainty over the coming years and
most of our customers, the majority of whom import and are
therefore exposed to exchange rate movements, are directly impacted
by Brexit. Furthermore, the uncertainties caused by Brexit could
have a significant impact on discretionary capital expenditure
decisions including IT projects.
Potential impact
Restricted availability of finance for businesses and a stagnant
or recessionary economy could have an adverse effect on the
prospects for EDP, as potential customers, particularly in the
builders and timber merchants sectors may scale back their IT plans
in response to funding difficulties and/or reduced prospects for
their businesses.
Mitigation
We seek to ensure that a significant proportion of our revenues
are derived from long-term contracts with our customers, that our
products appeal to businesses operating in a range of business
sectors and that payments for our recurring fees are received
annually in advance.
Competitor activity
Risk
EDP operates in a competitive environment.
Potential impact
New entrants to our marketplace and actions taken by existing
competitors could have an impact on our levels of business activity
and product pricing in the market generally.
Mitigation
We endeavour to provide excellent customer support together with
high quality products at a competitive price in order to develop
and protect strong customer relationships.
Key employees
Risk
In common with all people-based businesses, our success will, to
a significant extent, be dependent on the experience of the Board
and senior management. The retention of the services of EDP's key
employees cannot be guaranteed.
Potential impact
The loss of key employees could have a material adverse effect
on EDP.
The failure to retain and develop key technical skills and
product knowledge could hinder EDP's future prospects.
Mitigation
We are continually focused on the need to recruit, retain,
reward and motivate staff with the appropriate skills.
Responsibility Statement of the Directors in Respect of the
Half-Yearly Financial Report
We confirm that, to the best of our knowledge:
-- the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union;
-- the half-yearly management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the enterprise
during that period; and any changes in the related party transactions
described in the last annual report that could have a material
effect on the financial position or performance of the enterprise
in the first six months of the current financial year.
By order of the Board
J M Storey
Secretary
28 June 2018
The Directors at the date of this half-yearly financial report
are:
Sir Michael Heller Chairman (Non-Executive)
J.H. Wassell Chief Executive
A.R. Heller Non-Executive Director
C.R. Spicer Network Services Director
J.M. Storey Finance Director
Condensed Consolidated Income Statement
For the six months ended 31 March 2018
Unaudited Unaudited
six months six months Audited full year
to to to
31 March 2018 31 March 2017 30 September 2017
GBP'000 GBP'000 GBP'000
Revenue 2,547 2,538 5,108
============== ============== ==================
Gross profit 2,401 2,388 4,787
Administrative expenses (2,423) (2,226) (4,397)
-------------- -------------- ------------------
Operating (loss)/profit (22) 162 390
Finance income 10 18 27
-------------- -------------- ------------------
(Loss)/profit before tax (12) 180 417
Income tax expense (50) (34) (23)
-------------- -------------- ------------------
(Loss)/profit for the period attributable
to equity holders of the parent (62) 146 394
============== ============== ==================
(Loss)/earnings per share
- Basic (0.49)p 1.16p 3.11p
============== ============== ==================
- Diluted (0.48)p 1.14p 3.09p
============== ============== ==================
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2018
Unaudited Unaudited
six
six months months Audited full year
to to to
31 March 2018 31 March 2017 30 September 2017
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (62) 146 394
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement (losses)/gains on defined benefit pension
scheme (49) 809 4,209
Income tax on other comprehensive income 17 (137) (760)
-------------- -------------- ------------------
Other comprehensive income for the period, net of tax (32) 672 3,449
-------------- -------------- ------------------
Total comprehensive income for the period attributable
to equity holders of the parent (94) 818 3,843
============== ============== ==================
Condensed Consolidated Balance Sheet
at 31 March 2018
Unaudited at Unaudited at Audited at
31 March 2018 31 March 2017 30 September 2017
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 1,247 1,277 1,265
Deferred tax asset - 530 -
Employee benefits 194 - 240
Intangible assets 404 428 414
-------------- ---------------- ------------------
1,845 2,235 1,919
-------------- ---------------- ------------------
Current assets
Inventories 77 93 68
Trade and other receivables 1,461 1,444 1,139
Cash and cash equivalents 6,494 6,682 6,360
8,032 8,219 7,567
-------------- ---------------- ------------------
Total assets 9,877 10,454 9,486
Current liabilities
Deferred income (1,939) (1,963) (1,856)
Income tax payable (170) (130) (59)
Trade and other payables (1,606) (1,436) (948)
-------------- ---------------- ------------------
(3,715) (3,529) (2,863)
-------------- ---------------- ------------------
Non-current liabilities
Deferred income (56) (57) (27)
Employee benefits - (3,116) -
Deferred tax liability (141) (86) (160)
-------------- ---------------- ------------------
(197) (3,259) (187)
-------------- ---------------- ------------------
Total liabilities (3,912) (6,788) (3,050)
Net assets 5,965 3,666 6,436
============== ================ ==================
Equity
Share capital 689 689 689
Share premium 119 119 119
Capital redemption reserve 625 625 625
Treasury shares (542) (542) (542)
Retained earnings 5,074 2,775 5,545
-------------- ---------------- ------------------
Total equity attributable to equity holders
of the parent 5,965 3,666 6,436
============== ================ ==================
Condensed Consolidated Cash Flow Statement
for the six months ended 31 March 2018
Unaudited Unaudited
Audited full
six months six months year
to to to
31 March 31 March 30 September
2018 2017 2017
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the period (62) 146 394
Adjustments for:
Depreciation 99 110 214
Amortisation 73 75 149
Net loss/(profit) on disposal of property,
plant and equipment 4 (5) (9)
Defined benefit pension (credit)/charge
net of employer contributions (3) 42 86
Finance income (10) (18) (27)
Income tax expense 50 34 23
Change in inventories net of transfers
to property, plant and equipment (20) (24) (20)
Change in receivables (323) (243) 59
Change in payables 277 46 (61)
Change in deferred income 112 (77) (214)
------------ ----------- -------------
Cash received from operations 197 86 594
Interest received 11 54 63
Income taxes received/(paid) 62 - (77)
------------ ----------- -------------
Net cash received from operating activities 270 140 580
Cash flows from investing activities
Cash transferred from fixed-term deposit
investments - 3,500 3,500
Purchase of property, plant and equipment (73) (39) (118)
Purchase of intangible assets (13) (2) (10)
Capitalised development expenditure (50) (37) (89)
Net proceeds from sale of property,
plant and equipment - 1,177 1,189
------------ ----------- -------------
Net cash (used in)/generated by investing
activities (136) 4,599 4,472
Cash flows from financing activities
Issue of shares out of treasury - 41 41
Dividends paid - - (635)
----------- -------------
Net cash generated by/(used in) financing
activities - 41 (594)
Net increase in cash and cash equivalents 134 4,780 4,458
Cash and cash equivalents at beginning
of period 6,360 1,902 1,902
Cash and cash equivalents at end of
period 6,494 6,682 6,360
============ =========== =============
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 March 2018
Capital
Share Share redemption Treasury Retained
capital premium reserve shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2017 (audited) 689 119 625 (542) 5,545 6,436
------- ------- ---------- ---------- -------- -------
Loss for the period - - - - (62) (62)
Other comprehensive income:
- remeasurement loss on defined benefit
pension scheme
net of tax - - - - (32) (32)
Total comprehensive income - - - - (94) (94)
Transactions with owners:
- share-based payment transactions - - - - 4 4
- dividends approved - - - - (381) (381)
------- ------- ---------- ---------- -------- -------
Total transactions with owners - - - - (377) (377)
At 31 March 2018 (unaudited) 689 119 625 (542) 5,074 5,965
======= ======= ========== ========== ======== =======
Capital
Share Share redemption Treasury Retained
capital premium reserve shares earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2016 (audited) 689 119 625 (587) 2,348 3,194
------- ------- ---------- ---------- -------- -------
Profit for the period - - - - 146 146
Other comprehensive income:
- remeasurement gain on defined benefit
pension scheme
net of tax - - - - 672 672
Total comprehensive income - - - - 818 818
Transactions with owners:
- issue of shares out of treasury - - - 45 (4) 41
- share-based payment transactions - - - - (6) (6)
- dividends approved - - - - (381) (381)
------- ------- ---------- ---------- -------- -------
Total transactions with owners - - - 45 (391) (346)
At 31 March 2017 (unaudited) 689 119 625 (542) 2,775 3,666
======= ======= ========== ========== ======== =======
Notes
1 Interim financial information
Electronic Data Processing PLC is a public limited company listed
on the London Stock Exchange and incorporated and domiciled in England.
The condensed consolidated interim financial information was approved
for issue on 28 June 2018.
The condensed financial information is not the Company's statutory
accounts. The interim financial information for the six-month periods
ended 31 March 2017 and 31 March 2018 has not been audited. The comparative
figures for the financial year ended 30 September 2017 are not the
Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditor and delivered to the
registrar of companies. The report of the auditor was (i) unqualified,
(ii) did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying its report, and
(iii) did not contain a statement under Section 498 (2) or (3) of
the Companies Act 2006.
2 Basis of preparation
The unaudited condensed consolidated interim financial information
for the six months ended 31 March 2018 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim Financial Reporting' as adopted
by the EU. The half-yearly condensed consolidated financial report
should be read in conjunction with the annual financial statements
for the year ended 30 September 2017, which have been prepared in
accordance with IFRSs as adopted by the EU.
3 Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2017, as described
in those financial statements.
The following new standards and amendments to existing standards became
effective during the period to 31 March 2018 but had no material impact
on this consolidated financial information:
- IAS 7 (amended) 'Statement of Cash Flows'; and
- IAS 12 (amended) 'Income Taxes'.
The following new standards, amendments to existing standards and
interpretations are not yet effective and have not been early adopted
by the Group:
- IFRS 2 (amended) 'Share-based Payment';
- IFRS 4 (amended) 'Insurance Contracts';
- IFRS 9 'Financial Instruments';
- IFRS 15 'Revenue from Contracts with Customers';
- IFRS 16 'Leases';
- IFRS 17 'Insurance Contracts';
- IAS 19 (amended) 'Employee Benefits';
- IAS 28 (amended) 'Long-term Interests in Associates and Joint Ventures';
- IAS 40 (amended) 'Investment Property';
- IFRIC 22 'Foreign Currency Transactions and Advance Consideration';
- IFRIC 23 'Uncertainty over Income Tax Treatments';
- amendments resulting from Annual Improvements 2014-2016 Cycle; and
- amendments resulting from Annual Improvements 2015-2017 Cycle.
4 Significant judgements, assumptions and risks
In preparing these interim results the main areas of significant judgements
and estimates made by management in applying the Group's accounting
policies are the same as those that applied to the accounts for the
year ended 30 September 2017, namely:
- employee benefits;
- development costs; and
- revenue recognition.
These estimates and associated assumptions are based on historical
experience and other reasonable factors which form the basis of determining
the reported values of assets and liabilities.
In the six months to 31 March 2018 there have been no changes to the
estimates applied to the areas identified above that have materially
affected the half-yearly financial information.
5 Segment information
The Group has identified its reportable segment based on the financial
reports that internally are provided to
the Group's Chief Operating Decision Maker ('CODM'). In line with
its management structure, the Executive Directors collectively make
the key operating decisions and review internal monthly management
accounts and budgets as part of this process. Accordingly, the Executive
Directors collectively are considered to be the CODM. The information
reported regularly to the CODM presents the Group as a single segment
supplying software and related services to customers operating in
similar markets. The Group's software products share a
common sales, development and implementation resource. Consequently
the Group has determined that there is one operating segment and therefore
one reportable segment, Software.
Segment performance is measured based on segment profit before tax
excluding IAS 19 defined benefit pension scheme adjustments and profits
or losses on property disposals or revaluations.
Unaudited six months to Unaudited six months to
31 March 2018 31 March 2017
Software Software
GBP'000 GBP'000
Revenue - external customers 2,547 2,538
======================== ========================
(Loss)/profit
Adjusted operating profit 250 260
Exceptional legal and professional costs (269) (39)
Segment non-cash IFRS (charges)/credits:
- Amortisation of capitalised development expenditure (52) (55)
- Capitalised development expenditure 50 37
- Change in provision for holiday pay (4) 1
Interest revenue 10 18
------------------------ ------------------------
Segment (loss)/profit before tax (15) 222
Defined benefit pension scheme credit/(charge) net of
employer contributions 3 (42)
------------------------ ------------------------
Consolidated (loss)/profit before tax (12) 180
======================== ========================
6 Adjusted operating profit
Unaudited Unaudited
six months six months
to to
31 March 2018 31 March 2017
GBP'000 GBP'000
Operating (loss)/profit (22) 162
Exceptional legal and professional costs 269 39
Adjustments for non-cash items:
- Amortisation of capitalised development expenditure under IFRS 52 55
- Capitalisation of current year development expenditure under IFRS (50) (37)
- Defined benefit pension scheme (credit)/charge under IFRS (3) 42
- Increase/(decrease) in provision for holiday pay under IFRS 4 (1)
Adjusted operating profit 250 260
============== ==============
The exceptional legal and professional costs shown in both 2018 and
2017 relate to expenditure associated with the Group's strategic review.
In the opinion of the Directors, these costs, due to their specific
nature, are added back to statutory operating profit when assessing
the trading performance of the Group.
7 Taxation
The current period taxation charge is derived from the Directors'
best estimate of the annual tax rate applied
to the result for the period.
8 Loss per share
Loss per share is calculated by dividing the loss after tax of GBP62,000
(2017: profit of GBP146,000) by 12,700,976 (2017: 12,621,855) being
the weighted average number of shares in issue during the period.
Basic loss per share is 0.49p (2017: earnings of 1.16p).
For diluted loss per share, the weighted average number of shares
in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. The Company has one class of dilutive potential ordinary
share, share options granted to employees under its Enterprise Management
Incentive Share Option Plan. These shares have been included in the
diluted loss per share calculation.
Diluted loss per share is calculated by dividing the loss after tax
of GBP62,000 (2017: profit of GBP146,000) by 12,819,850 (2017: 12,781,537)
being the weighted average number of shares in issue adjusted for
the effects of all dilutive potential ordinary shares. Diluted loss
per share is 0.48p (2017: earnings of 1.14p).
9 Dividends
The 2017 final dividend of 3.0p per share was approved by shareholders
during the period to 31 March 2018 and a liability of GBP381,000 has
been recognised in this half-yearly report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BVLFLVQFZBBF
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June 28, 2018 06:43 ET (10:43 GMT)
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