TIDMSPE
RNS Number : 2578A
Sopheon PLC
23 March 2017
SOPHEON PLC
("Sopheon", the "Group" or the "Company")
AUDITED RESULTS STATEMENT FOR THE YEAR TO 31 DECEMBER 2016
Positive momentum continues
Sopheon plc, the international provider of software and services
that help organizations generate more revenues and profits from new
products, is pleased to announce its results for the year ended 31
December 2016 together with an outlook for the current year.
Highlights:
-- Revenue: $23.2m (2015: $20.9m)
EBITDA: $5.2m (2015: $4.1m)
PBT: $2.7m (2015: $1.2m)
-- Continued growth in revenue and profitability as the business
delivers on its strategy. EBITDA and PBT stated above exclude $0.3m
of foreign exchange gains.
-- Forty-nine license transactions (42 in the prior year) of which 17 are new customers.
-- Full year 2017 revenue visibility of $14.5m, compared to $12m the previous year.
-- Market recognition continues from leading industry voices
such as Gartner and CGT magazine as Sopheon looks to extend
Accolade into new industries and broader enterprise
application.
-- New staff being recruited in early 2017 in key areas as we
continue implementing our strategy.
Barry Mence, Chairman, commented: "I am delighted to report a
truly excellent set of results; the board looks forward to building
on these results to deliver continued positive development in the
strategic and financial performance of our company in 2017 and
beyond... Additional investments in new members of our team are
another key piece of our strategy to move our business forward and
capture the opportunity that we have long believed was coming.
Sopheon has a market-leading solution, global reach, solid
financials, a clear corporate structure, an accelerating market,
and most importantly great people - a real platform for
growth."
For further information contact:
Barry Mence (Chairman) Sopheon + 44 (0) 1276
Arif Karimjee (CFO) plc 919 560
Carl Holmes/Giles Rolls
(Corporate Finance)
Mia Gardener (Corporate finnCap + 44 (0) 20
Broking) Ltd 7220 0500
About Sopheon. Sopheon (LSE: SPE) partners with customers to
provide complete enterprise innovation management solutions
including software, expertise, and best practices, that enable them
to achieve exceptional long-term revenue growth and profitability.
Sopheon's Accolade solution provides unique, fully-integrated
coverage for the entire innovation management and new product
development lifecycle, including strategic innovation planning,
roadmapping, idea and concept development, process and project
management, portfolio management and resource planning. Sopheon's
solutions have been implemented by over 200 customers with over
60,000 users in over 50 countries. Sopheon is listed on AIM,
operated by the London Stock Exchange. For more information, please
visit www.sopheon.com.
Sopheon and Accolade are registered trademarks of Sopheon plc.
Microsoft, Excel, SharePoint and PowerPoint are registered
trademarks of the Microsoft Corporation in the United States and/or
in other countries. Stage-Gate is a registered trademark of the
Product Development Institute, Inc.
Chairman's Statement
It gives me great pleasure to report another year of excellent
financial and operational progress, as we solidify our strategy of
being the world's leading solution provider of enterprise-class
innovation management software solutions. We grew revenues to
$23.2m from $20.9m in 2015 and $18.3m in 2014, and we are reporting
another substantial rise in profitability, with EBITDA(1) rising to
$5.2m before foreign exchange gains ($5.6m inclusive of exchange
gains) from $4.1m the prior year, which was itself more than triple
the 2014 performance. Profit before tax has risen to $3.0m from
$1.2m in 2015. In 2016 we have initiated a degree of recognition of
our substantial deferred tax asset, which has resulted in a profit
after tax of $4.3m. Net assets have nearly doubled to $10.4m from
$5.5m in 2015.
The revenue growth was underpinned by a rise to 49 license
transactions from 42 the year before, of which 17 were new
customers, up from 14 in 2015. We continued to gain traction with
the two elements of our go-to market strategy - both the global
end-to-end enterprise solution, and the "out-of-the-box" Accolade
Express solution for quicker time to value. Our market strength in
the consumer products industry was again recognized with Sopheon
being voted a "top ten software vendor" for the seventh consecutive
year by the CGT magazine readership. In addition to this progress,
we also saw strong traction in the aerospace and defence and
chemicals sectors. The strengthening recurring base, along with a
strong Q4 in sales bookings, has carried work over to 2017.
Encouragingly, this has resulted in revenue visibility(2) for the
Company of $14.5m as compared to $12m a year ago.
Sopheon's commercial success is being achieved in parallel with
strategic and operational initiatives aimed at underpinning our
continued growth for the next three to five years. We maintained
our rapid pace of product development, with another three Accolade
releases in 2016, strengthening our platform for enterprise
utilization and flexibility. This continued investment supports our
growth strategy in two areas. One is to capitalize on existing
client demand to expand their Accolade investment beyond product
innovation to support Enterprise "Initiative Management" tracking
and decision making. This market opportunity has been validated by
Gartner's 2016 Market Guide for Strategy Execution Software and
their recognition of Sopheon as a representative vendor in this
emerging space. The second growth area we are actively researching
is industry expansion. As an example, we were recently awarded the
business to provide a global insurance company with their
Enterprise Innovation Management platform. We are partnering with
such new customers to understand the value proposition Accolade can
bring to vertical markets that are new to Sopheon, and to determine
if these represent further new growth opportunities.
Following several years of clarifying our debt, equity and
listing structure, 2016 was a relatively quiet year for corporate
activity, other than extension of the maturity of our debt
facilities to January 2019.
I am delighted to report a truly excellent set of results. The
challenge we face, like any growth business, is to introduce new
efficiencies, learnings and capabilities that help us scale on a
sustainable basis while delivering both momentum and profitability.
In 2017, we are investing in both process and product, and we are
also driving recruitment in a number of critical areas for this
purpose. I was very pleased to meet a number of our new employees
at our annual sales kick-off event in Denver this January. These
additional investments in new members of our team are another key
piece of our strategy to move our business forward and capture the
opportunity that we have long believed was coming. Sopheon has a
market-leading solution, global reach, solid financials, a clear
corporate structure, an accelerating market, and most importantly
great people - a real platform for growth.
Barry Mence
22 March 2017
(1) EBITDA is defined and reconciled in Note 5 to this
report.
(2) Revenue visibility comprises revenue expected from (i)
closed license orders, including those which are contracted but
conditional on acceptance decisions scheduled later in the year;
(ii) contracted services business delivered or expected to be
delivered in the year; and (iii) recurring maintenance, hosting,
SaaS and rental streams. The visibility calculation does not
include revenues from new sales opportunities expected to close
during the remainder of the year.
Strategic Review
Sopheon's mission is to help our customers achieve exceptional
long-term growth and profitability through sustainable innovation.
We accomplish this by providing software and services that align
and connect organizations, embed best-practice innovation
processes, and enable corporate speed, agility and adaptability.
Many market-leading corporations are challenged to compete in
today's fast-moving environment due to the complex infrastructure
they have built up over time; a multitude of stand-alone systems
have been put in place to support functional groups, resulting in
isolated pockets of information. These silo-based systems prevent
organizations from quickly and easily responding to external market
changes with sound, fact-based decisions. By delivering an
end-to-end decision-making platform that links the strategic
ambition of the organization to the execution activities required
to realize that strategy, Sopheon's software solutions enable three
transformational corporate capabilities:
-- The ability to shift from a static annual planning schedule
to dynamic and iterative planning.
-- Improving the historically low success rate of strategic realization.
-- Transition from siloed knowledge workers to interconnected,
cross-functional work streams in context of the strategic
objectives, leading to increased employee engagement.
At the same time, the digital movement is fundamentally changing
the face of corporate innovation, forcing a shift away from the
decades-long, narrow focus on research and development management
to a broader, interconnected Enterprise Innovation Management (EIM)
competency. Sopheon clients benefit from any or all of four
distinct and tightly-linked offerings enabled from a single EIM
platform, depending on their level of Innovation maturity.
-- Strategic planning and alignment of long-term Innovation
Plans, engaging teams from marketing, research and development,
supply chain, sales and manufacturing to all work collaboratively
in the common interest of the corporate strategy.
-- Generation and development of higher-value Ideas and Concepts
to fill key gaps relevant to achieving strategic initiatives.
-- Improved Process and Project Management that enables and
tracks key decisions, focused on evaluating projects associated
with innovation initiatives, and accelerating productivity and
velocity of development efforts through better execution,
communication and collaboration.
-- Data management, analytics and integrity tools improve
Portfolio Optimization to ensure the best return on innovation
investments
Value
The following value has been derived by Sopheon customers
following implementation of Sopheon's EIM software:
-- Reduced Time to Market: One customer reduced cycle time by
over 30% through process efficiencies and sharing information,
while significantly reducing the average team size.
-- Improved Success Rate: Another customer reduced its new
product failure rate by over 55%, and a continued focus on list of
"top ten" new product projects ensures they continue to meet
success criteria.
-- Increased Portfolio Value: Parker Hannifin reduced the number
of projects in their portfolio by 50% and increased the portfolio
value by 500%.
-- Increased Throughput: One customer increased the revenue from
new products released to the market by 25% without additional
resources.
Sopheon's history is rooted in innovation management; our
mission has never wavered. This conviction and passion has earned
Sopheon a unique position of differentiation in our target markets.
100 percent of our efforts - from product to support to consulting
training - have been directed to advancing our experience and
competency in innovation management. Sopheon clients enjoy, for the
first time, a 'single source of truth', a centralized system of
record that connects strategy with execution. Cross-functional
teams both contribute information to and extract insight out of the
same system, improving the speed and quality of the decision-
making cadence. World leaders like PepsiCo, Parker, P&G, BASF,
Tetra Pak, Honeywell and many others have put their trust in
partnership with Sopheon as they navigate the industry threats of
digitization, consumer power and other external market disrupters.
Sopheon's success in working with world leaders has provided unique
learning and experience to our people, process and technology. In
addition, Sopheon's ecosystem of global innovation leaders has
grown to be a differentiator from which our clients benefit through
collaboration, sharing and learning. Sopheon's unique experience
and success was recognized in 2016 not only by our record financial
performance but also by third-party industry thought leaders such
as Gartner.
We see a continuing convergence of the business, economic and
market trends that play directly into Sopheon's market position,
solutions and investments. There is a market factor at work
representing considerable growth opportunities for Sopheon. We are
seeing some of the most successful companies in the world
recognizing the need for urgent transformation to continue their
relevance in the market. Statistics suggest that 75% of the S&P
500 will no longer be on the list by 2027. We are witnessing
increased behavioural change and urgency at the executive and board
levels of many companies to do everything possible to ensure their
company remains relevant through this time of massive market
disruption and change. The primary challenge for these market
leaders is to transform their operating model from what once served
their success, to a new operating model that leverages the strength
of their assets and capabilities while at the same time allowing
them to operate with the nimbleness and flexibility of small
start-ups.
Growth Strategy
Sopheon's growth strategy is to enable corporations to execute
on their new operational models that will ensure corporate
relevance into the future. Our focus requires Sopheon to:
-- Expand the application of our software and services to a
broader definition of innovation: Sopheon has been a specialist in
new product development for over 15 years. Over the last few years
we have seen the maturity of the innovation space expand beyond
product development to what we have been calling Enterprise
Innovation Management. As the market continues to mature, we see
many new applications that could benefit from our best-practice
decision support and process platform.
-- Increase industry-specific domain knowledge and solutions: We
have always believed that different vertical markets, while sharing
core functionality needs, have differing pain points and best
practice needs. In 2016 we continued our objective to dominate in
our chosen core verticals of chemicals, aerospace, consumer
products, food and beverage, and high technology. Sopheon's long
history and experience in these verticals enables us to operate as
an industry connector for our clients, introducing them to one
another to jointly learn and advance their competency and success.
We will continue to invest in industry- specific expertise and
solutions.
-- Introduce new offerings to leverage growth from our customer
base: Sopheon's roster of customer names is a Who's Who of the
world's leading companies. In 2016 Sopheon continued to expand the
range of our innovation solutions, providing the opportunity for us
to extend our footprint within our customers across their
enterprise, to deliver considerably higher value for their
investment in Accolade. Client expansion in 2016 was markedly
strong, with revenue from expansion at existing clients continuing
to represent the cornerstone of our commercial performance.
-- Expand the partner ecosystem: Sopheon continues to invest in
and develop additional distribution channels, in particular with
market-leading management consultancies. In 2016 we continued to
deploy Accolade around the world, introducing Accolade to more
partners through our clients. We made progress through corporate
level introductions and have started to nurture relationships with
a handful of partners in the innovation space. These partnership
programs take time to mature but we feel they are critical to our
ability to scale for future growth. We will continue to evolve and
strengthen these relationships as we grow. Our reseller partners in
Asia successfully deployed Accolade at Shanghai Huayi, a large
chemical company in China. This deployment represents another
advancement in our Chinese reseller partnership. We will further
test and develop our reseller partnership network during the course
of this year.
Financial Review
Sopheon's consolidated turnover in 2016 was $23.2m, compared to
$20.9m in 2015. The proportion of revenues from customers in North
America increased slightly at 71 percent (2015: 69 percent) with
the remainder primarily generated from customers in Europe, but
also from a small but important foothold in Asia, Australia and the
Middle East.
Trading
Total license transactions, including extension orders, were up
to 49 in 2016, compared to 42 the previous year. Revenue per
license transaction did fall back somewhat, but overall remains
well above $100,000 in license fees - and overall this combination
led to license revenues around 11 percent higher than the prior
year. Both services and maintenance were higher as well, with
services showing a particularly strong uptick at 16 percent.
Overall, revenues grew by 11 percent. The impact of the strong
dollar on revenue was relatively muted this year as much of its
rise against other global currencies had already happened in 2015;
on a constant currency basis, year on year growth would have been
12 percent.
A key difference to the prior year was the flatter revenue
profile from a calendar perspective; in 2015 we had a quiet first
half offset by a very strong second half. In 2016, the revenue
profile reverted to a more even spread with peaks in the second and
fourth quarters - though as always, the fourth quarter was
particularly strong. Over the years we have frequently referred to
the sensitivity of our license results to individual sales events
and while this effect is reducing as we grow the business, it does
remain a factor to bear in mind. During 2016, we were pleased to
book at least one substantial order in each quarter of the year.
Services work was in fact more concentrated in the first half of
2016, thanks in part to the strong fourth quarter of 2015 leading
to a substantial backlog coming into 2016. This in turn led to busy
times for our services team in the first half of the year, with
more of a lull in the third quarter then picking up again in the
final quarter. Though not quite as marked as last year, when
coupled with initial orders this year, we are starting 2017 with a
similarly strong backlog of service activity.
The Group's base of recurring business rose to approximately
$9.9m compared to $8.2m coming into 2016. This comprises
maintenance, hosting and cloud services, and some initial Software
as a Service (SaaS) contracts. The vast majority of our license
revenue remains perpetual in nature, but we are seeing growing
interest in SaaS options, in particular from prospects in our less
traditional verticals such as high-tech. We are also seeing growing
interest in our hosting service from perpetual customers, and this
has been underpinned during the year by achievement of ISO 27001
security certification, alongside securing the award of the Skyhigh
CloudTrust(TM) Enterprise-Ready rating, based on criteria developed
with the Cloud Security Alliance. Attrition of recurring revenue
remained at excellent levels, at 94 percent retention by value for
the second year in succession. We continue to focus on this metric
as we believe that building recurring revenue is a key goal for
Sopheon, and we have invested in customer satisfaction programs
alongside regular service and account management processes to
maximize value for our customers in this area. Overall, in 2016 our
business delivered a 29:37:34 ratio of licenses, maintenance, and
services respectively compared to 29:38:33 in
the previous year. This marks a further year of solid license
revenue as a cornerstone of our business model, driven by both
volume and size of deals as noted in the previous paragraph.
Gross margin is just over 70 percent, broadly comparable to the
72 percent achieved last year and reflective of the slightly higher
and more front-end loaded services mix. Costs of the professional
services organization are included in costs of sales, alongside the
costs of our hosting activities and some license royalties for OEM
partners. We recruited a number of new consultants coming into the
year, and on average we had 12 percent more staff in the services
team than the year before. However services revenue was 16 percent
higher, and as noted below this led to product development staff
contributing to delivery of certain customer projects.
Encouragingly, coming into 2017 and following some early sales
bookings at the start of the year, revenue visibility for the year
already stands at $14.5m compared to just over $12m a year ago.
Operations
As a knowledge intensive business, almost 80 percent of
Sopheon's costs are related to its people. Sopheon has a relatively
mature and highly qualified blend of staff, reflecting the
professional and intellectual demands of our chosen market. Over
the last five years, Sopheon has held staffing between 100-115
depending on requirements and natural movement of people in and out
of the business. Our focus is on securing the right mix of people
rather than targeting a headcount number, however as revenue growth
has progressed over recent years we have sought to match this with
a growing level of resources. Consequently, we ended the year with
115 staff compared to 100 a year ago; however, the majority of the
staff increase was later in the year and we had in fact targeted a
greater number of hires in our plan - a factor which contributed to
the outperformance in profitability in 2016. We have continued to
add staff in early 2017, and still have a number of incremental
staff to add in our forward planning as we seek to support the
growth positive trajectory of the business.
The average headcount during 2016 was 110, compared to 105 the
year before, leading to higher overall wage costs as reported in
the financial statements. Payroll costs in both 2015 and 2016 were
also elevated due to achievement of our ambitious EBITDA goals,
leading to full award of the corporate bonus scheme for which all
non-sales staff in the company are eligible. This has contributed
to a higher payables balance at each year end, since the bonuses
are not paid until the following year. Bonus costs in a given year
are allocated to the relevant categories of the income statement
based on employee department.
Results
The combined effect of the revenue and cost performance
discussed above has resulted in Sopheon's EBITDA performance for
2016 rising very strongly to $5.6m, from $4.1m in 2015 and $1.2m in
2014. The 2016 performance does include approximately $0.3m of
exceptional foreign exchange gains as described above; stripping
these out still gives an EBITDA result of $5.2m, a significant
increase on the prior year.
The Group reported a profit before tax for the year of $3.0m
(2015: $1.2m) or $2.7m if the exchange gains are deducted. Although
Sopheon benefits from accumulated tax losses in a number of
jurisdictions this is not universal and accordingly a small current
tax charge of approximately $0.1m was incurred in each of 2016 and
2015. However, due to the rising profit trend of the Group, in
consultation with our advisers we have started recognition of the
substantial deferred tax asset owned by the business. This has led
to initial recognition of $1.3m (2015: $Nil) in the current year,
of a total potential asset of approximately $16m (2015: $19m).
Altogether this leads to a profit after tax of $4.3m (2015: $1.1m).
In line with this substantial increase, profit per ordinary share
has also risen sharply to 59 cents (2015: 15.5 cents).
Financing
In early 2014 the group established new bank facilities with the
London branch of Silicon Valley Bank, comprising a term loan of
$0.5m, and a $3.0m revolving line of credit. Last year these
facilities were renewed and refinanced for a further three year
period through January 2019, reflecting the growing maturity of the
Sopheon business. Both facilities bear interest at rates of 2.75
percent over Wall Street Prime, resulting in a current effective
rate of 6.5 percent. The facilities are subject to covenants based
on working capital ratios. The drawdown mechanics and interest
rates are also subject to working capital ratios.
In 2009 and 2011, the Company issued a total of GBP2.0m of
convertible unsecured loan stock (the "Loan Stock") to a group of
investors including key members of the board and senior management
team. The maturity of the Loan Stock has been extended on several
occasions, most recently in April 2016, and now extends to January
2019. The conversion price is 76.5 pence per share. During the
year, one of the investors exercised GBP0.01m of loan stock,
leading to a net remaining amount due of GBP1.99m.
Consolidated net assets at the end of the year stood at $10.4m
(2015: $5.5m), an increase of $4.9m. Over $3.1m of this increase is
attributable to an improvement in the net current asset position
excluding taxes, itself arising from the strong operational
performance in 2016. A further $1.3m relates to the recognition of
the deferred tax asset, leaving $0.4m due to other factors. Within
the net current asset position, gross cash resources at 31 December
2016 amounted to $10.0m (2015: $7.0m). Approximately $7.3m was held
in US Dollars, $2.4m in Euros and $0.3m in Sterling.
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER
2016
2016 2015
$'000 $'000
Revenue 23,203 20,886
Cost of sales (6,872) (5,748)
-------- --------
Gross profit 16,331 15,138
Sales and marketing expense (6,565) (6,481)
Research and development expense (3,881) (4,261)
Administrative expense (2,562) (2,850)
Operating profit 3,323 1,546
Finance income 1 4
Finance expense (290) (354)
-------- --------
Profit before tax 3,034 1,196
Income tax credit/(expense) 1,275 (65)
Profit for the year 4,309 1,131
======== ========
Earnings per share - basic 59.05c 15.54c
Earnings per share - diluted 44.35c 13.90c
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
$'000 $'000
Profit for the year 4,309 1,131
Other comprehensive expense
Exchange differences on translation
of foreign operations 336 43
------ ------
Total comprehensive income for
the year 4,645 1,174
====== ======
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2016
2016 2015
$'000 $'000
Assets
Non-current assets
Property, plant and equipment 241 181
Intangible assets 5,469 5,579
Deferred tax asset 1,338 -
Non-current receivables 19 19
------- --------
7,067 5,779
------- --------
Current assets
Trade and other receivables 9,696 7,609
Cash and cash equivalents 10,061 7,046
------- --------
19,757 14,655
------- --------
Total assets 26,824 20,434
Liabilities
Current liabilities
Trade and other payables 4,428 4,142
Borrowings 3,167 3,147
Deferred revenue 6,224 4,628
13,819 11,917
------- --------
Non-current liabilities
Borrowings 2,648 2,986
Total liabilities 16,467 14,903
------- --------
Net assets 10,357 5,531
======= ========
Equity
Share capital 2,375 2,354
Capital reserves 5,843 5,751
Profit and loss account and
translation reserve 2,139 (2,574)
------- --------
Total equity 10,357 5,531
======= ========
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR
ED 31 DECEMBER 2016
2016 2015
$'000 $'000
Operating activities
Profit for the year 4,309 1,131
Adjustments for non-cash and financing
items 1,245 3,032
Movements in working capital (138) 37
Net cash generated from operating
activities 5,416 4,200
Investing activities
Finance income 1 4
Purchases of property, plant and
equipment (250) (124)
Development costs capitalized (1,933) (2,058)
Net cash used in investing activities (2,182) (2,178)
Financing activities
Issue of shares 107 -
Drawdown/(repayment) of borrowings 177 (167)
Movement in lines of credit - 1,021
Finance expense (290) (354)
-------- --------
Net cash (used in)/generated from
financing activities (6) 500
Effect of foreign exchange rate
changes (213) (211)
Net increase in cash and cash equivalents 3,015 2,311
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED
31 DECEMBER 2016
Share Capital Translation Retained
Capital Reserves Reserve Profits Total
$'000 $'000 $'000 $'000 $'000
At 1 January
2015 2,354 5,654 (46) (3,719) 4,243
Total comprehensive
income - - 43 1,131 1,174
income for
the year
Share based
payments - 97 - 17 114
At 1 January
2016 2,354 5,751 (3) (2,571) 5,531
Total comprehensive
income - - 336 4,309 4,645
income for
the year
Issue of shares 21 98 - - 119
Share based
payments - (6) - 68 62
At 31 December
2016 2,375 5,843 333 1,806 10,357
======== ========= ============ ========= =======
The translation reserve represents accumulated differences on
the translation of assets and liabilities of foreign operations.
Retained losses represent accumulated trading losses, including
amortisation and impairment charges in respect of goodwill and
intangible assets arising from past acquisitions. Capital reserves
represent share premium, merger reserve, capital redemption reserve
and share options reserve.
NOTES
1. Basis of Preparation
The financial information set out in this document does not
constitute the Company's statutory accounts for 2015 or 2016.
Statutory accounts for the years ended 31 December 2015 and 31
December 2016 have been reported on by the Independent Auditors.
The Independent Auditors' Reports on the Annual Report and
Financial Statements for each of 2015 and 2016 were unmodified and
did not contain a statement under 498(2) or 498(3) of the Companies
Act 2006.
Statutory accounts for the year ended 31 December 2015 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2016 will be delivered to the Registrar
in due course, and are available from the Company's registered
office at Dorna House One, Guildford Road, West End, Surrey GU24
9PW and are available today from the Company's website
www.sopheon.com.
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs). The accounting
policies adopted in these results have been consistently applied to
all the years presented and are consistent with the policies used
in the preparation of the statutory accounts for the period ended
31 December 2015. The principal accounting policies adopted are
unchanged from those used in the preparation of the statutory
accounts for the period ended 31 December 2015. New standards,
amendments and interpretations to existing standards, which have
been adopted by the Group have not been listed, since they have no
material impact on the financial statements.
Approximately three-quarters of the Group's revenue and
two-thirds of its operating costs are denominated in US Dollars and
accordingly the Group's financial statements have been presented in
US Dollars.
2. Going Concern
The financial statements have been prepared on a going concern
basis. In reaching their assessment, the directors have considered
a period extending at least 12 months from the date of approval of
these financial statements. This assessment has included
consideration of the forecast performance of the business for the
foreseeable future, the cash and financing facilities available to
the Group, and the repayment terms in respect of the Group's
borrowings, including the potential of having to repay convertible
loan stock in January 2019.
During 2016, the Group achieved revenues of $23.2m and a profit
before tax of $3.0m. This follows a strong performance in 2015,
itself a dramatically improved performance compared to the previous
year. The directors believed the 2014 performance was a temporary
pause in the development of the business and this view continues to
be supported by ongoing performance. Coming into 2017, the Group's
sales pipeline remains active, and accordingly, the directors
remain positive about the prospects for the business.
In addition to growing cash resources, the Group has bank
facilities with the London branch of Silicon Valley Bank comprising
a term loan of $0.5m repayable in 36 equal monthly instalments, and
a $3m revolving line of credit, currently for a three year period
through January 2019. The facilities are subject to covenants based
on working capital ratios. The drawdown mechanics and interest
rates are also subject to working capital ratios. In addition, the
Group has GBP1,990,000 convertible loan outstanding to key
investors including members of the board and management. The
current terms of the loan call for repayment or conversion by 31
January 2019.
NOTES
Notwithstanding the Group's strong funding position, the
time-to-close and the order value of individual sales continues to
be subject to variation. When combined with the relatively
low-volume and high-value nature of the Group's business, these are
factors which constrain the ability to accurately predict revenue
performance. However the directors believe that taken as a whole,
the factors described above enable the Group to continue as a going
concern for the foreseeable future. The financial statements do not
include the adjustments that would be required if the Company or
Group were unable to continue as a going concern.
3. Segmental Analysis
All of the Group's revenue in respect of the years ended 31
December 2016 and 2015 derived from the design, development and
marketing of software products with associated implementation and
consultancy services, as more particularly described in the
Directors' Report. For management purposes, the Group is organized
geographically across two principal operating segments. The first
segment is North America, and the second Europe. Information
relating to these two segments is given below.
The information in the following table relating to external
revenues includes analysis both by location of customer and by
location of operations. The information relating to other items
provides analysis by location of operations only. Inter-segment
revenues are priced on an arm's length basis.
Year ended 31 December 2016 North
America Europe Total
$'000 $'000 $'000
Income Statement
External revenues - by location
of operations 17,172 6,031 23,203
Operating profit/(loss) before
interest and tax 4,136 (813) 3,323
Profit/(loss) before tax 4,072 (1,188) 3,034
Finance income - 1 1
Finance expense (64) (226) (290)
Depreciation and amortization (2,191) (41) (2,232)
EBITDA 6,327 (772) 5,555
------- ------- -------
Balance Sheet
Fixed asset additions 214 36 250
Capitalization of internally
generated development costs 1,933 - 1,933
Total assets 22,211 4,613 26,824
Total liabilities (11,046) (5,421) (16,467)
------- ------- -------
NOTES
3. Segmental Analysis (continued)
Year ended 31 December 2015 North
America Europe Total
$'000 $'000 $'000
Income Statement
External revenues - by location
of operations 15,676 5,210 20,886
Operating profit/(loss) before
interest and tax 2,804 (1,258) 1,546
Profit/(loss) before tax 2,703 (1,507) 1,196
Finance income - 4 4
Finance expense (101) (253) (354)
Depreciation and amortization (2,524) (44) (2,568)
EBITDA 5,328 (1,214) 4,114
------- ------- -------
Balance Sheet
Fixed asset additions 114 10 124
Capitalization of internally
generated development costs 2,058 - 2,058
Total assets 16,540 3,894 20,434
Total liabilities (9,198) (5,705) (14,903)
------- ------- -------
External revenues in 2016 exclude inter-segmental revenues which
amounted to $1,715,000
(2015: $1,633,000) for North America and $378,000 (2015:
$627,000) for Europe.
Revenues attributable to customers in North America in 2016
amounted to $16,458,000 (2015: $14,407,000). Revenue attributable
to customers in the rest of the world amounted to $6,745,000
(2015: $6,478,000) of which $6,109,000 (2015: $5,219,000) was
attributable to customers in Europe.
4. Revenue
All of the Group's revenue in respect of the years ended 31
December 2016 and 2015 derived from continuing operations and from
the design, development and marketing of software products with
associated implementation and consultancy services.
5. EBITDA
The directors consider that EBITDA, which is defined as
earnings/(loss) before interest, tax, depreciation and
amortization, is an important measure, since it is widely used by
the investment community. It is calculated by adding back
depreciation and amortization charges amounting to $2,232,000
(2015: $2,568,000) to the operating profit of $3,323,000 (2015:
$1,546,000).
NOTES
6. Share-Based Payments
In accordance with IFRS2 Share based Payments, an option pricing
model has been used to work out the fair value of share options
granted since November 2002, with this being charged to the income
statement over the expected vesting period and leading to a charge
of $62,000 (2015: $114,000).
7. Income Tax
At 31 December 2016, tax losses estimated at $64m (2015: $70m)
were available to carry forward by the Sopheon Group, arising from
historic losses incurred. These losses have given rise to a
deferred tax asset of $1.3m (2015: Nil) and a further potential
deferred tax asset of $17.4m (2015: $20.7m), based on the tax rates
currently applicable in the relevant tax jurisdictions. An
aggregate $9.4m (2015: $11.7m) of these losses are subject to
restriction under section 392 of the US Internal Revenue Code due
to historical changes of ownership.
8. Earnings per Share
The calculation of basic earnings per ordinary share is based on
a profit of $4,309,000 (2015: $1,131,000), and on 7,297,000 (2015:
7,279,000) ordinary shares, being the weighted average number of
ordinary shares in issue during the year. For the purpose of
calculating diluted earnings per ordinary share, adjustments are
made to both the profit and the number of ordinary shares to
reflect the impact of options, warrants and convertible loan stock
to the extent conversion or exercise prices are below the average
market price for Sopheon shares during the year. The effect of
these adjustments is to increase profit for the purposes of
calculating diluted earnings per ordinary share to $4,526,000
(2015: $1,376,000), and to increase the number of ordinary shares
to 10,205,000 (2015: 9,897,000).
9. Intangible Assets
In accordance with IAS 38 Intangible Assets, certain development
expenditure must be capitalised and amortised based on detailed
technical criteria, rather than automatically charging such costs
in the income statement as they arise. This has led to the
capitalisation of $1,933,000 (2015: $2,058,000), and amortisation
of $2,043,000 (2015: $2,368,000) during the year.
10. Cautionary Statement
Sopheon has made forward-looking statements in this press
release, including statements about the market for and benefits of
its products and services; financial results; product development
plans; the potential benefits of business relationships with third
parties and business strategies. These statements about future
events are subject to risks and uncertainties that could cause
Sopheon's actual results to differ materially from those that might
be inferred from the forward-looking statements. Sopheon can make
no assurance that any forward-looking statements will prove
correct.
11. Annual Report
The annual report and financial statements are available on the
Company's website www.sopheon.com.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFETVLIFFID
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