RNS Number:0725T
iSoft Group PLC
10 December 2003
Interim results for the six months ended 31 October 2003
iSOFT Group plc, a leading international supplier of healthcare information
systems which support patient, clinical and business management processes in
hospitals and healthcare provider organisations, today announces its interim
results for the six months ended 31 October 2003.
Headlines:
* The results for the period are summarised as follows:
Six months ended Six months ended
31 October 2003 31 October 2002
#m #m
Turnover 40.6 35.3
EBITDA 10.3 9.3
Profit before tax * 9.2 8.2
Earnings per share * 5.89p 5.11p
* stated before amortisation of goodwill
* Turnover up 15.0% to #40.6m (2002: #35.3m)
* Profit before tax * up 12.2% to #9.2m (2002: #8.2m)
* EPS * up 15.3% to 5.89p (2002: 5.11p)
* Interim dividend of 0.7 pence per share (2002: 0.6p)
* Cash inflow of #2.3m against an outflow of #1.0m in 2002
Chief Executive, Patrick Cryne commented:
"I am very pleased with our progress during the half year. We have recorded
continuing growth and profitability, confirming the momentum we are building as
an acknowledged expert in the provision of software applications to the
healthcare industry.
We have devoted considerable time and resources over past the six months in
proving our application solutions against the complex requirements of the NPfIT
and we are very pleased with the results that we have achieved so far. The Board
remains cautiously optimistic about our prospects in this context based on the
strength of our product offering and the substance of our organisation.
Taking into account existing contracted revenue and the opportunities open to
the Group both in the UK and overseas, the Board is confident of a satisfactory
outcome to the financial year."
Enquiries:
iSOFT Group plc +44 (0) 161 935 8800
Patrick Cryne
Tim Whiston
Financial Dynamics +44 (0) 20 7831 3113
Giles Sanderson
James Melville-Ross
Juliet Clarke
Chief Executive's report
Introduction
I am delighted to report the interim financial results for the iSOFT Group for
the six months ended 31 October 2003. The consistent focus of the iSOFT
business has been on achieving acknowledged excellence as a healthcare
application software company. The performance of the Group through this period
confirms our growing stature in this context, with continuing growth and
profitability as evidence of our progress.
Our half year has involved winning and delivering business secured under the
historic model of individual sales to hospital organisations in our target
markets and, simultaneously, preparing proposals in response to the new
procurement approach being adopted in the UK under the auspices of the NHS
National Programme for Information Technology (NPfIT).
We have responded to NHS reform and modernisation initiatives by introducing
innovations in our software applications to ensure improved information flows
both inside healthcare organisations and in support of new national services
being introduced in the areas of electronic booking of appointments and
integrated electronic care records for the citizen.
We believe that our willingness to show leadership in bringing new, relevant and
timely software applications to the healthcare market has consolidated iSOFT's
position as a genuine innovator in the deployment of technology to address the
current and emerging issues of our customers.
Financial performance
In the six months ended 31 October 2003, the Group's turnover grew by 15.0% to
#40.6m (2002: #35.3m), with revenue derived from the sale to healthcare provider
organisations, principally hospitals, of software application product licences
and those attendant services required for the installation and maintenance of
the software products.
Earnings before interest, tax, depreciation of fixed assets and the amortisation
of goodwill (EBITDA) grew to #10.3m (2002: #9.3m) an increase of 10.8%. Whilst
the EBITDA profit margin has reduced slightly to 25.4% of turnover (2002:
26.3%), the profits for the period are stated after expensing #1.8m of
investment in the NHS NPfIT procurement in England.
Profit before tax and goodwill amortisation increased by 12.2% to #9.2m (2002:
#8.2m), representing a profit margin of 22.7% (2002: 23.2%). Earnings per
share before amortisation grew 15.3% to 5.89 pence per share (2002: 5.11 pence).
Given the trading performance for the period and the positioning of the Group
with regards to future market opportunity, the Board has declared an interim
dividend of 0.7 pence per share (2002: 0.6 pence), to be paid on 30 January 2004
to all shareholders on the register on 19 December 2003.
The Group's operating cash flow remains seasonal as the majority of operating
cash inflows are received in the second half of the financial year. I am,
however, pleased to report a notable improvement this year, with the six months
ended 31 October 2003 producing an operating cash inflow of #2.3m (2002: #1.0m
outflow).
The Group balance sheet has strengthened further during the period, with closing
net assets of #80.2m (2002: #51.6m). The net debt position of #4.0m (2002:
#34.8m) includes cash balances of #41.4m (2002: #17.0m) at the interim balance
sheet date. The net current asset balance of #37.6m (2002: #14.2m) includes
#15.5m of deferred income (2002: #9.8m). Adjusting for this income deferral,
the underlying net current asset position totalled #53.1m (2002: #23.9m).
Market developments
The most significant development in our market during the six months ended 31
October 2003 has been the major IT procurement exercise that has been taking
place, in the first instance in England, under the NPfIT. The scale and
ambition of the project is being referenced by other countries that follow a
similar socialised medicine system and we are confident that some of these
countries will follow a similar process. It has been important therefore to
ensure the compatibility of our products with the programme's requirements.
The NPfIT has been the most comprehensive procurement undertaken in the UK
healthcare sector and will result in the award of the largest ever government
contracts for healthcare IT, with initial funding of #2.3bn available over the
first three years of the programme in addition to the current recurring annual
NHS IT budget. The procurement process will result in contracts being placed
with large scale service providers for the replacement of existing systems
within healthcare provider organisations and their connection to national
systems to support electronic booking of healthcare appointments and the
provision of electronic patient records. All these contracts are expected to be
awarded before the end of the 2003 calendar year.
iSOFT has been selected by a number of major service providers as their
preferred application provider in four of the five regions, namely:
* North East, Yorkshire and Humberside,
* East England and East Midlands,
* North West and West Midlands,
* South East and South West.
At the time of the publication of these half year results, I am pleased to state
that Accenture, being one of the service providers offering iSOFT as their
preferred application provider, has been awarded the contract for the North
East, Yorkshire and Humberside. The remaining contract awards involving iSOFT
are yet to be determined.
Corporate development
In the six months ended 31 October 2003, we have reorganised our systems
development organisation to allow more rapid production and maintenance of
application software to meet the needs of our customer base. We have also been
sensitive to the needs of the major service organisations that will look
increasingly to iSOFT to provide application content that can be offered as an
information service.
As an important contribution to the reorganisation, we have invested further in
our development centre in Chennai, India. We opened new premises in July 2003
to allow the expansion of the local workforce, which now numbers 215
programmers, engineers and software support staff. Our software manufacturing
and the majority of software maintenance are now wholly undertaken in India.
In the UK, we have rationalised our organisation and premises following the
acquisitions of the healthcare business of Northgate Information Systems and the
Revive Group in July 2002 and November 2002 respectively. Both businesses are
now fully integrated with the result that we have a single, strongly managed
organisation structure to meet the demands of the NPfIT procurement exercise. A
number of smaller offices have already been closed, and we will continue to work
towards consolidating our workforce.
Product development
The quality and utility of our software applications are key to our success. In
the six months ended 31 October 2003, we announced and launched our LORENZO
suite of applications as an integrated care records application, which can be
run as a hosted service by third party organisations. This is a successor suite
to the i.Series of market leading applications produced by iSOFT for use within
hospital organisations. We recognise that UK reforms envisage moving
comprehensive care record information across healthcare delivery systems for
shared care purposes. LORENZO offers integrated citizen care records, which can
be maintained and shared on a regional and/or national basis. It also offers
connectivity with the national services being developed in the UK to allow
electronic booking of care by the citizen and access for clinicians to a single
integrated care record for patients, irrespective of where care is delivered.
It is the ingenuity of our analysis and design teams, and the capacity of our
software manufacturing organisation that allows iSOFT to move rapidly in
response to market and technology changes. Our investment and innovation over
the six months ended 31 October 2003 has maintained our leadership at a time of
great opportunity.
Torex merger
In July 2003, we announced our proposed merger with Torex PLC to add their
domain expertise and service capacity to iSOFT's innovative IT solutions. The
proposed consolidation will also create a strong platform for further
international expansion by the merged entity.
Despite initial merger clearance by the Office of Fair Trading (OFT), the
Competition Appeals Tribunal set aside that decision with a ruling that
challenged the OFT's jurisdiction relating to merger investigations. At the
date of this report, it is unclear how the jurisdictional matter will be
resolved, nor are the timescales for that resolution clear. The Boards of both
companies remain convinced of the merits of the merger and, accordingly, the
iSOFT offer to Torex shareholders remains open. On the first closing date, 4
December 2003, iSOFT had received acceptances of the merger offer, which was
approved by our shareholders on 9 December 2003, in respect of 79.25 per cent of
the existing issued share capital of Torex.
Board changes
At the end of December 2003, Roger Dickens, our Executive Chairman will leave
the Board in line with plans disclosed with the announcement of our proposed
merger with Torex. I am pleased that he will remain with iSOFT on an advisory
basis. Roger has served the company magnificently and played a leading role in
the management buyout from KPMG in 1998 and the subsequent listing of iSOFT on
the London Stock Exchange in July 2000. His continuing involvement in an
advisory capacity will be invaluable as we respond to the changes affecting our
marketplace. Again, consistent with previous statements, I will take on the
role of Executive Chairman with effect from 1 January 2004. Tim Whiston and
John Whelan will take on the roles of Acting Chief Executive and Acting Finance
Director respectively, until the conclusion of the merger process with Torex.
Prospects for the future
I am very pleased with our progress during the half year, but I recognise that
the structural reform taking place in our chosen markets will give rise to
fundamental changes in the way business is conducted. In the UK, we face a time
of great change and through our investment last year and in the first half of
this year, we are well placed to benefit from the increased scale of IT
procurements that will complete shortly. We have devoted considerable time and
resources in the six months ended 31 October 2003 in proving our application
solutions against the complex requirements of the NPfIT and we are very pleased
with the results that we have achieved in terms of conformance and scalability.
It is important that iSOFT wins a significant stake in the scaled-up contracts
being awarded in England, since these contracts will be of significant value and
run for up to ten years. The Board remains cautiously optimistic about iSOFT's
prospects in this context based on the strength of our product offering and the
substance of our organisation.
Taking into account existing contracted revenue and the opportunities open to
the Group both in the UK and overseas, the Board is confident of a satisfactory
outcome to the financial year.
Patrick Cryne
Chief Executive
10 December 2003
Consolidated profit and loss account for the
six months ended 31 October 2003
Six Months Six Months Year
ended ended ended
31 October 31 October 30 April
2003 2002 2003
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Turnover 40,551 35,277 91,495
Operating costs excluding goodwill amortisation (30,601) (26,256) (65,895)
Goodwill amortisation (2,538) (2,104) (4,650)
Operating costs (33,139) (28,360) (70,545)
Operating profit 7,412 6,917 20,950
Net interest payable and similar charges (761) (845) (2,070)
Profit on ordinary activities before taxation 6,651 6,072 18,880
Tax on profits on ordinary activities 2 (1,833) (2,125) (5,484)
Profit on ordinary activities after taxation 4,818 3,947 13,396
Minority interests - equity (40) (146)
(8)
Profit for the period 4,810 3,907 13,250
Dividends 3 (873) (706) (2,192)
Retained profit for the period 3,937 3,201 11,058
Earnings per share:
Basic earnings per share 4 3.86p 3.32p 11.17p
Diluted earnings per share 4 3.81p 3.29p 11.08p
Underlying earnings per share 4 5.89p 5.11p 15.09p
All operations are continuing
Consolidated balance sheet as at 31 October 2003
31 October 31 October 30 April
2003 2002 2003
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Fixed assets
Intangible assets - goodwill 90,427 89,391 91,989
Tangible assets 1,967 1,924 1,776
92,394 91,315 93,765
Current assets
Debtors 35,933 29,446 31,113
Cash at bank and in hand 41,387 17,010 45,451
77,320 46,456 76,564
Creditors: amounts falling due within one year (39,678) (32,256) (44,216)
Net current assets 37,642 14,200 32,348
Total assets less current liabilities 130,036 105,515 126,113
Creditors: amounts falling due after one year (49,660) (53,765) (52,586)
Provision for liabilities and charges - (23) -
Minority interests - equity (202) (163) (257)
Net assets 80,174 51,564 73,270
Capital and reserves
Called up share capital 12,552 11,772 12,382
Share premium account 32,438 18,327 30,119
Merger reserve 7,683 7,204 7,683
Profit and loss account 27,501 14,261 23,086
Equity shareholders' funds 5 80,174 51,564 73,270
Consolidated cash flow statement for the six months ended 31 October 2003
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2003 2002 2003
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Operating profit 7,412 6,917 20,950
Goodwill amortisation 2,538 2,104 4,650
Depreciation of tangible fixed assets 322 284 592
Increase in debtors (4,821) (4,970) (7,483)
(Decrease)/increase in creditors (3,052) (5,304) 4,908
Profit on sale of fixed assets - (6) (3)
Foreign exchange (116) (17) (76)
Net cash inflow/(outflow) from operating activities 2,283 (992) 23,538
Returns on investment and servicing of finance (654) (968) (2,663)
Taxation (2,716) (1,150) (4,295)
Capital expenditure (507) (233) (331)
Acquisitions and disposals - (33,925) (34,430)
Equity dividends paid (1,486) (942) (1,648)
Net cash outflow before financing (3,080) (38,210) (19,829)
Net cash flow from loans and finance leases (3,045) 31,737 28,686
Share capital issued net of costs 1,597 - 12,381
Financing (1,448) 31,737 41,067
(Decrease)/increase in cash 6 (4,528) (6,473) 21,238
Note to the financial statements
1 Basis of preparation
The interim financial information has been prepared in accordance with the
accounting policies set out in the annual report and financial statements for
the year ended 30 April 2003, except that the taxation charge for the six months
was based upon the forecast effective rate for the year ended 30 April 2004.
The interim financial information was approved by the board of directors on 10
December 2003 and is unaudited. The financial information set out does not
constitute statutory accounts for the purposes of Section 240 of the Companies
Act 1985. The abridged information for the year ended 30 April 2003 has been
extracted from the Group's statutory accounts for that period which have been
filed with the Registrar of Companies. The auditors' report on the statutory
accounts of the Group for that period was unqualified and did not contain a
statement under either Section 237(2) or Section 237(3) of the Companies Act
1985.
2 Taxation
The charge for the period was based upon the estimated effective tax rate on FRS
3 reported profits for the year ending 30 April 2004 of 27.6% (2002: 35.0%).
The charge for the period includes #nil in respect of overseas taxation (2002:
#730,000).
3 Dividends
The directors are recommending the payment of an interim dividend for the period
of 0.70 pence per share (2002: 0.60p). This interim dividend will be paid on 30
January 2004 to shareholders on the register on 19 December 2003.
4 Earnings per share
Basic and diluted earnings per share were based on earnings of #4,810,000 (six
months ended 31 October 2002: #3,907,000; year ended 30 April 2003:
#13,250,000).
Earnings per share were based on the weighted average number of shares in issue
of 124.7 million (six months ended 31 October 2002: 117.7 million; year ended 30
April 2003: 118.6 million). The diluted earnings per share were based on a
weighted average number of shares of 126.1 million (six months ended 31 October
2002: 118.8 million; year ended 30 April 2003: 119.6 million).
Underlying earnings per share represents basic earnings per share (3.86p; six
months ended 31 October 2002: 3.32p; year ended 30 April 2003: 11.17p) before
goodwill amortisation (2.03p; six months ended 31 October 2002: 1.79p; year
ended 30 April 2002: 3.92p).
5 Analysis of movement in shareholders' funds
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2003 2002 2003
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Profit for the period 4,810 3,907 13,250
Dividends (873) (706) (2,192)
Retained profit for the period 3,937 3,201 11,058
Issue of share capital (net of issue costs) 2,489 - 12,881
Exchange differences 478 (298) 670
Net addition to shareholders' funds 6,904 2,903 24,609
Opening shareholders' funds 73,270 48,661 48,661
Closing shareholders' funds 80,174 51,564 73,270
6 Reconciliation of net cash flow to movement in net debt
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2003 2002 2003
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
(Decrease)/Increase in cash (4,528) (6,473) 21,238
Cash (inflow)/outflow from (increase)/ decrease in debt 3,045 (31,737) (28,205)
Increase in net debt resulting from cash flows (1,483) (38,210) (6,967)
New finance leases incepting in the period - (42) (42)
Amortisation of loan arrangement fees (108) (47) (51)
Exchange 464 (178) 500
Increase in net debt (1,127) (38,477) (6,560)
Opening net (debt)/funds (2,875) 3,685 3,685
Closing net debt (4,002) (34,792) (2,875)
This information is provided by RNS
The company news service from the London Stock Exchange
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