RNS Number:0723T
Northgate Information Solutions PLC
10 December 2003
10 December 2003
NORTHGATE INFORMATION SOLUTIONS plc
Northgate announces strong interim results and the acquisition
of an option to purchase Rebus HR Group
Northgate Information Solutions plc, a supplier of software applications and
outsourcing solutions to the public sector, human resources and corporate
markets, today announces interim results for the six months ended 31 October
2003.
Results highlights
* Turnover up 28% to #50.6 million (2002: #39.6 million), including #7.4
million contribution from acquisitions
* Operating profit from continuing operations, before exceptional items
and amortisation of goodwill, up from #1.2 million to #2.4 million
* Adjusted basic earnings per share up 66% to 0.73p (2002: 0.44p)
* Significant strategic progress achieved, with three acquisitions, Cara
Payroll Group Limited, blue 8 Technologies Limited and Hays Consulting &
Solutions Group, completed and integrations progressing well
Proposed acquisition of Rebus HR Group
Today Northgate is also announcing that the Company has acquired an option to
acquire Rebus HR Group. Details of this transaction are supplied in a separate
release, and the company will be hosting a conference call this morning at 11am
for analysts and investors to discuss these two announcements.
Commenting on the results, Chief Executive Chris Stone said:
"This has been a good first half for Northgate, as we have accelerated our
strategic development, successfully integrating our recent acquisitions into our
business, whilst increasing our operating margins both organically and by
acquisition. Today's additional acquisition will bring further significant
progress with our strategic objectives to deliver substantial value to our
shareholders."
Chairman Nick Irens added:
"These are excellent results, showing progress both organically and from our
recent acquisitions. We are focused on market segments that offer good growth
prospects and continue to pursue the creation of value for our shareholders.
Today's additional acquisition signals a step change for the group, and the
outlook for the Northgate group has never been so exciting."
For further information:
Northgate Information Solutions 020 7404 5959 (On the day)
Sandy Halse 01442 273000 (Thereafter)
Brunswick Group Limited 020 7404 5959
Tom Buchanan / Sarah Tovey
Conference call
An analyst and investor conference call will take place today at 11am. To
listen in please dial +44 (0) 1452 561263, pass code "Northgate".
Cantos
An interview with Chris Stone, Chief Executive in video/audio and text will be
available from this morning on Wednesday 10th December 2003 on
wwww.northgate-is.com and on www.cantos.com.
Chairman's statement
I am pleased to report excellent results for the Group for the first half of
this financial year. During this period we have strengthened further our overall
market position in both the HR and public sectors. Particularly pleasing is the
successful integration of our acquisitions, already contributing to the Group
results.
During the last six months, Northgate has made good progress in all markets with
turnover from continuing operations increasing to #50.6 million (2002: #39.6
million). During the closing weeks of the period, a number of significant
contracts were signed earlier than expected. These included ten new contract
wins for our Front Office solution, which brings the total number of Front
Office customers to seventeen and makes Northgate a leading supplier of citizen
relationship management solutions to Local Government. The increase in revenues,
coupled with the continuing control on costs and the contribution from
acquisitions, leads to operating margins across the Group before exceptional
items and goodwill amortisation improving from 2.9% to 4.7%.
Operating profit from continuing operations before exceptional items and
amortisation of goodwill increased by 104% to #2.4 million (2002: #1.2 million).
#0.7 million of this additional profit came from organic growth.
During the half we made three acquisitions in the HR and public sectors. Since
then, the recent acquisition of the PWA Group complements Northgate's
acquisitions of Prolog Business Solutions in 2002, which brought us a strong
position in the small to medium enterprise (SME) payroll market and which has
already been integrated successfully within Northgate's HR division. It will
also further strengthen the position created by the acquisition of Carapeople.
In our public sector division, the acquisitions of blue 8 and Hays CSG
significantly enhance Northgate's capabilities in the criminal justice arena.
In light of our recent acquisition strategy and our aggressive focus on growing
the business, the Directors have decided that a dividend would not be
appropriate at present.
Northgate finished the period with #6.8 million of cash, and an agreed loan
facility of #12 million following the recently completed purchase of the
freehold of Boundary Way, our headquarters. This acquisition removes the
exposure to the uncertainties of future rent increases and has immediately
reduced the Group's operational cost base.
It has been a period of continued strategic progress for the Group. The
businesses we have acquired are being successfully integrated, significantly
enhancing our positions in our chosen market segments and improving our
opportunities to deliver value to our shareholders.
The Board remains confident in the prospects for the Group. With a continuing
focus on cost control, Northgate is positioned well for the future.
Nick Irens
Chairman
10 December 2003
Chief Executive's review
This has been a good first half for the Group. We have accelerated our strategic
development, successfully integrating our recent acquisitions into our business,
whilst increasing our operating margins across all divisions both organically
and by acquisition. The progress we have made in the public sector and HR
markets has been particularly encouraging with double-digit revenue growth,
whilst our corporate sector activities have improved their margins.
Public Sector
Northgate's public sector revenues from continuing operations grew by 26%
against the same period last year. Our public sector offer has seen considerable
growth across the board for the six months and continues to offer substantial
opportunities for the future. Our Front Office solutions performance has been
particularly satisfying, signing ten new contracts earlier than expected in
Northumberland and Somerset, bringing the total number of Front Office customers
to seventeen, making Northgate a leading supplier of citizen relationship
management solutions to Local Government.
We have signed a third contract for our Assert product, a decision support tool
for the administration of means tested benefits, with Cornish Key, a partnership
which comprises Cornwall County Council and six district councils. We continue
to have great hopes for the future success of this innovative, rules-based
product.
The acquisitions of the blue 8 and Hays CSG businesses have significantly
enhanced the Group's capability in the criminal justice arena. The integration
of these products has enabled Northgate to offer an extensive range of
innovative data and performance management solutions and brings further
opportunities for growth.
The successful roll out of the London Congestion Charging Scheme with
Northgate's Penalty Notice enforcement software and administration services
continues to operate well and we are monitoring other potential opportunities
that may arise. Northgate's software for the Home Office's trial of the Penalty
Notice for Disorder scheme has been successful and is currently being rolled out
to a number of police forces in the UK. We believe there are excellent prospects
in this market where we can achieve a leading position.
Overall, Northgate has considerably strengthened its position as a leading
provider of IT solutions to the criminal justice and local government markets.
Human Resources Systems
Prolog Business Solutions and Carapeople have helped to increase HR revenues by
70% compared with the same period last year, and operating profit before
exceptional items and goodwill amortisation by over 90%. The recent acquisition
of the PWA Group, under the brand Empower, has further strengthened Northgate's
overall market position, widening the offer into the SME market. The PWA Group
is a welcome addition to our already comprehensive Human Resource offer and is
an excellent fit within our existing HR business. Together Empower and
ResourceLink complement the earlier acquisitions of Prolog and Carapeople,
enabling Northgate to offer a comprehensive HR software and payroll proposition
to the market.
Overall Northgate now provides HR software and services to more than 1,500 UK
and Irish clients with recent acquisitions adding to our already strong customer
base generating additional growth opportunities for Northgate.
Corporate sector
Northgate's corporate sector division has performed satisfactorily in what
continues to be uncertain market conditions with little sign of improvement in
IT expenditure. We have seen some growth in revenues compared with the same
period last year. This together with the continued success of our established
software products has led to an increase in operating profit before exceptional
items and goodwill amortisation of over 8%.
Outlook
Northgate has seen strong levels of organic and acquisitive growth for the six
months and anticipates this to continue through to the full year. The Group now
has an impressive portfolio of products and services, and is focused on managing
our businesses effectively and leveraging the benefits of the recent deals. We
are pleased with the growth being achieved as a result of the strategic focus of
the Group, and will continue to seek further opportunities to deliver value to
our shareholders going forward. Since the period end we have signed one more new
Front Office contract and are currently preferred supplier with a further eight
local authorities.
Chris Stone
Chief Executive
10 December 2003
Consolidated Profit & Loss Account (unaudited)
6 months ended
----------------
31 October
------------
2003 2002
------ ------
#'000 #'000
---------------------------------- ------- ------
TURNOVER
Continuing operations 43,138 39,616
Acquisitions 7,426 -
Discontinued operations - 1,918
---------------------------------- ------- --------
Group turnover 50,564 41,534
Operating costs (including exceptional items) (50,094) (40,161)
---------------------------------- ------- --------
Group operating profit 470 1,373
---------------------------------- ------- --------
Continuing operations:
Operating profit before exceptional items and
amortisation of goodwill 2,357 1,158
Exceptional items ( Note 4 ) (523) (281)
Amortisation of goodwill (1,364) (46)
---------------------------------- ------- --------
Operating profit from continuing operations 470 831
Discontinued operations:
Operating profit - 542
---------------------------------- ------- --------
Group Operating Profit 470 1,373
---------------------------------- ------- --------
Profit on sale of operations ( Note 5 ) - 28,114
Interest receivable 301 546
Interest payable and similar charges (369) (226)
------- --------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 402 29,807
Taxation on profit on ordinary activities (Note 5 ) (96) (3,460)
------- --------
RETAINED PROFIT FOR THE FINANCIAL PERIOD 306 26,347
======= ========
EARNINGS PER ORDINARY SHARE ( Note 6 )
- basic 0.11p 9.27p
- diluted 0.10p 8.99p
- adjusted basic 0.73p 0.44p *
- adjusted diluted 0.71p 0.43p *
* The comparative figures for adjusted basic and adjusted diluted earnings per
share have been restated to reflect discontinued activities and amortisation of
goodwill
Consolidated Balance Sheet (unaudited)
31 October 30 April 31 October
------------ ---------- ------------
2003 2003 * 2002
------ ------ ------
#'000 #'000 #'000
------- ------- -------
Fixed assets
Intangible assets 34,921 6,788 1,959
Tangible assets 22,679 5,032 4,264
Investments 1,059 1,098 1,137
--------- ------- --------
58,659 12,918 7,360
Current assets
Stocks 516 424 386
Debtors - due within one year 34,426 22,212 19,657
- due after one year 12,990 11,880 6,036
Investments ( Note 7 ) - - 20,085
Cash at bank and in hand 6,802 39,377 25,051
--------- ------- --------
54,734 73,893 71,215
Creditors: amounts falling due within
one year (47,724) (33,699) (32,420)
--------- ------- --------
Net current assets 7,010 40,194 38,795
--------- ------- --------
Total assets less current liabilities 65,669 53,112 46,155
Creditors: amounts falling due after
more than one year (12,855) (244) (292)
Provisions for liabilities and charges (5,006) (6,792) (2,981)
--------- ------- --------
Net assets 47,808 46,076 42,882
========= ======= ========
Capital and reserves
Called up share capital 28,727 28,713 28,708
Share premium account 38,156 38,123 38,114
Merger reserve 162 162 162
Profit and loss account (19,237) (20,922) (24,102)
--------- ------- --------
Shareholders' funds - equity 47,808 46,076 42,882
========= ======= ========
*audited
Cash Flow Statement (unaudited)
6 months ended
----------------
31 October
------------
2003 2002
------ ------
#'000 #'000
------- -------
Operating Profit 470 1,373
Depreciation and Amortisation 2,906 1,371
Loss on disposal of tangible fixed assets 3 -
Decrease in provisions (2,121) (854)
Exceptional Operating Items 1,605 81
(Increase) / Decrease in debtors (1,667) 3,164
(Increase) / Decrease in stocks (69) 367
Increase / (Decrease) in creditors 3,118 (2,139)
-------- -------
Net cash inflow from Operating Activities 4,245 3,363
Returns on investments and servicing of finance 198 432
Taxation (299) -
Capital expenditure (18,079) (1,619)
Acquisitions and disposals (30,433) 31,451
-------- -------
(44,368) 33,627
Financing 11,859 (381)
-------- -------
(Decrease) / Increase in cash and cash (32,509) 33,246
equivalents
======== =======
Statement of Total Recognised Gains and Losses and Movements in Shareholders'
Funds (unaudited )
6 months ended
----------------
31 October
------------
2003 2002
------ ------
#'000 #'000
------- -------
Profit for the financial period 306 26,347
Currency translation differences 156 183
-------- --------
Total recognised gains and losses for the 462 26,530
period
Credit in respect of share related award 1,223 44
charges
New share capital subscribed (net of expenses) 47 156
Reduction in shares to be issued - (200)
-------- --------
Increase in Shareholders' funds 1,732 26,530
Opening Shareholders' funds 46,076 16,352
-------- --------
Closing Shareholders' funds 47,808 42,882
-------- --------
Notes to the Report
1. Interim Report
The information given here does not constitute statutory accounts within the
meaning of section 235 of the Companies Act 1985. Statutory accounts in respect
of the year ended 30 April 2003 have been reported on by the Company's auditors
and delivered to the Registrar of Companies. The audit report thereon did not
contain a qualified audit opinion under section 237 (2) or (3) of the Companies
Act 1985.
The results for the six months to 31 October 2003 have been prepared using the
same accounting policies as were used in the preparation of the Annual Report
for the year ended 30 April 2003.
The interim report will be sent to shareholders and copies will be available to
the public at the registered office of the Company at Boundary Way, Hemel
Hempstead, Hertfordshire HP2 7HU.
This interim financial information was approved by the Board of Directors on 10
December 2003.
2. Acquisitions
During the period, the Group acquired the entire issued share capital of Cara
Payroll Group Limited and blue 8 Technologies Limited. In addition, the Group
acquired the entire issued share capital of Hays Redfern Limited, together with
the IT enablement Business of the Hays Group.
The total cash paid for these acquisitions amounted to #32.3m, which includes a
total of #20.2m paid in settlement of loans, overdrafts and other liabilities of
the acquired businesses.
The fair value of the net assets acquired, after settlement of the above
liabilities, amounts to #2.9m. The resultant goodwill arising on these
acquisitions of #29.4m has been capitalised and will be written off over a
period of 10 years in line with the Directors' estimate of its useful economic
life.
Notes to the Report (Continued)
3. Segmental Analysis
------------------ ----------------- ----------------
Turnover Operating Profit /
(Loss)
6 months ended 6 months ended 6 months ended 6 months ended
31 October 2003 31 October 2002 31 October 2003 31 October 2002
----------------- ---------------- ----------------- ---------------
#'000 #'000 #'000 #'000
------- ------- ------- --------
Public Sector 20,477 19,526 1,358 1,157
Human
Resources
Systems 10,626 8,169 1,213 773
Corporate
Sector 12,035 11,921 699 643
Administration
costs - - (1,411) (1,415)
------------------ ---------- --------- ---------- ---------
Continuing
Operations 43,138 39,616 1,859 1,158
------------------ ---------- --------- ---------- ---------
Public Sector 4,167 - 239 -
Human
Resources
Systems 3,259 - 259 -
------------------ ---------- --------- ---------- ---------
Acquisitions 7,426 - 498 -
------------------ ---------- --------- ---------- ---------
Total from
continuing
operations 50,564 39,616 2,357 1,158
Discontinued
operations - 1,918 - 542
------------------ ---------- --------- ---------- ---------
Total 50,564 41,534 2,357 1,700
------------------ ---------- --------- ---------- ---------
Operating
profit before
exceptional
items and
goodwill
amortisation
2,357 1,700
Exceptional
items (523) (281)
Amortisation
of goodwill (1,364) (46)
---------- ---------
Group
Operating
Profit 470 1,373
========== =========
In the above analysis, all overhead costs have been allocated to continuing
operations. This resulted in overhead costs being reallocated from discontinued
operations in the prior period comparatives. In addition, certain administration
costs relating to the Group's central activities have been separated, and the
basis of allocating other overhead costs has been revised, so as to better
reflect the business' operations. The prior period comparatives have been
revised accordingly.
4. Operating Exceptional Items
6 months ended
----------------
31 October
------------
2003 2002
------ ------
#'000 #'000
------- -------
Exceptional operating items during the period
represent :
Re-organisation costs (893) (200)
Property Provisions 1,975 -
Employee share option scheme (1,605) (81)
------- --------
(523) (281)
======= ========
Notes to the Report (Continued)
5. Disposal of Health Business
On 31 July 2002 the Group completed the disposal of its Health business. The
disposal is analysed as follows:
#'000
-------
Proceeds 33,000
Less: Costs of disposal (1,549)
--------
Net proceeds 31,451
Assets sold (3,337)
--------
Profit on sale 28,114
========
The charge for taxation in the prior period includes #3,230,000 in respect of
the profit on sale of operations of #28,114,000.
6. Earnings Per Share
Basic earnings per share has been calculated based on the profit for the period
of #306,000 (2002: #26,347,000) and by reference to 284,801,956 (2002:
284,316,830) ordinary shares being the weighted average number of shares in
issue and ranking for dividend during the period, after excluding shares owned
by the Northgate Employee Share Ownership Plan.
Diluted earnings per share has been calculated on the profit of #306,000 (2002:
#26,347,000) and after including the effect of all dilutive potential ordinary
shares, which increases the average number of shares to 292,783,373 (2002:
292,972,221).
The adjusted earnings per share figure has been calculated using the following
adjusted earnings figures:
6 months ended
----------------
31 October
------------
2003 2002
------ ------
#'000 #'000
------- -------
Profit for the financial period 306 26,347
Amortisation of goodwill 1,364 46
Discontinued operations - (542)
Profit on sale of operations, net of attributable
taxation - (24,884)
Exceptional Items, net of attributable taxation 421 281
------- --------
Adjusted profit for the financial period 2,091 1,248
======= ========
7. Current Asset Investments
Current asset investments comprise short-term liquid investments.
Independent review report to Northgate Information Solutions plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 5 to 10 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with Listing
Rules of the Financial Services Authority that require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where they
are to be changed in the next annual accounts, in which case any changes, and
the reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2003.
KPMG Audit Plc
Chartered Accountants
London
10 December 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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