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Staffware Interim Results

  • 11 September, 2003 11:03

<p>9 September 2003</p>
<p>Staffware plc ("Staffware")
Interim results (six months ended 30 June 2003)</p>
<p>Staffware, a leader in business process management (BPM)/workflow software, today announces interim results for the six months ended 30 June 2003. Highlights include:</p>
· EBITDA of £2.0 million an increase of 76% - H1 2002: £1.1 million
· Profit before tax and pre goodwill amortisation of £1.9 million, up 103% - H1 2002: £0.9 million
· Profit before tax £1.3 million, up 237% - H1 2002: £0.4 million
· Earnings Per Share (pre amortisation) 8.9p, up 123% compared with 4.0p H1 2002
· R &amp; D up 5% to £3.6 million (17% of sales compared with 19% H1 2002)
· Total revenue increased by 15% to £21.0 million - H1 2002: £18.2 million
- Revenue for Q2 2003 increased by 18% to £12.0 million - Q2 2002: £10.1 million
· License revenues increased by 17% to £11.6 million - H1 2002: £9.9 million
· Cash increased to £21.3 million and no material debt - H1 2002: £20.2million
· Cash generated in period was £2.3 million with significant collections since 30 June 2003
· Interim dividend doubles to 2.0p per ordinary share - H1 2002: 1.0p
· Recurring support revenues increased by 40% to £6.0 million - H1 2002: £4.3 million</p>
<p>Business Development
· 13 notable license contracts of over £250,000 signed (H1 2002: 10 contracts);
8 notable contracts in Q2 alone (Q2 2002: 6 contracts)
- Netherlands: ABN Amro, KPN, Nuon and a large government institute*
- UK: DEFRA, Global Home Loans and a major bank*
- USA: ADP Brokerage Services and a leading financial services institution*
- South Africa: Mutual &amp; Federal
- Spain: Winterthur and the Government of the Canary Islands
- India: Employees Provident Fund Organisation</p>
<p>John O'Connell, Chairman and Chief Executive Officer, Staffware plc, said:
"We have achieved these very strong results in a market which continues to be cautious about making significant IT investments. This demonstrates the strength of our BPM and workflow technologies. We are confident that the combination of our proven technologies, our blue chip customer base and our strong balance sheet will enable us to further build on the consistent success of the last two years."</p>
<p>* Contract prohibits publicity</p>
<p>Chairman's Statement</p>
<p>Following our update on 8 July, I am pleased to confirm an excellent set of results for the six months ended 30 June 2003.</p>
<p>Sales Revenue</p>
<p>Total revenue for H1 increased by 15% to £21.0 million, a record for any half year (H1 2002: £18.2 million). Total revenue for Q2 increased by 18% to £12.0 million (Q2 2002: £10.1 million) and increased by 32% over the previous quarter. Staffware has now enjoyed five consecutive corresponding quarters of growth, averaging 12% year on year. Financial services contributed 58% of total revenue reinforcing our strength in this sector (H1 2002: 52%). This was split between banking 40% and insurance 18%. Of the remaining 42% of total revenue, government represented 14% (H1 2002: 12%), telecoms at 11% (H1 2002: 14%) and other sectors approximately 17%.</p>
<p>License revenues for H1 increased by 17% to £11.6 million, representing 55% of total revenue (H1 2002: £9.9 million, representing 54% of total sales revenues). License revenues for Q2 increased by 21% to £7.0 million, representing 59% of total sales revenues (Q2 2002: £5.8 million, representing 57% of total sales revenues).
There were 13 notable license contracts of over £250,000 signed in the first half (H1 2002: 10 contracts), including the largest in the company's history, 8 of which were signed in Q2 (Q2 2002: 6). The notable license contracts were:
· Netherlands: ABN Amro, KPN, Nuon and a large government institute*
· UK: DEFRA, Global Home Loans and a major bank*
· USA: ADP Brokerage Services and a leading financial services institution*
· South Africa: Mutual &amp; Federal
· Spain: Winterthur and the Government of the Canary Islands
· India: Employees Provident Fund Organisation</p>
<p>Staffware maintained its global progress in the period as evidenced by the fact that 10 out of the 13 notable contracts in the period were outside of the UK. Average order values per license customer were approximately £108,000 in the period, an increase of 71% over the average last year as a result of increasing sales of the higher value iProcess engine.</p>
<p>iProcess Engine of the Staffware Process Suite, our Business Process Management offering, went from strength to strength with license revenues increasing by 155% to £9.0 million, compared with H1 2002, £3.5 million. This represents 78% of our total license revenues (36% in H1 2002), accounting for 11 out of the 13 notable contracts in the period.</p>
<p>iProcess Engine license sales increased by 136% to £6.3 million in Q2 2003. This represents 90% of total license revenues (Q2 2002: £2.7 million or 46% of total sales revenues), accounting for 10 contracts. Since its launch in Q4 2001, we have sold £21.6 million of licenses of the iProcess Engine.</p>
<p>Recurring support revenues increased by 40% to £6.0 million and 36% to £3.1 million for the H1 and Q2 respectively, compared with the equivalent periods in 2002. On an annualised basis, recurring support revenues have increased by 40% to £12.1 million since the beginning of the financial year (2002: £8.6 million).</p>
<p>Professional services were engaged in approximately 100 projects during the period, varying in size from a few days to several man years. Due to greater self-sufficiency of some customers and partners, together with some major projects coming to a successful conclusion, revenues were £3.4 million in the period compared with £4.0 million in H1 2002, a reduction of 15%. However Q2 2003 showed a comparative improvement, with revenues of £1.9 million - only 9% down on Q2 2002. One such flagship project, successfully completed with our partner PCCW, was the Smartics project for the Hong Kong Department of Immigration.</p>
<p>Financial Performance</p>
<p>I am very pleased to report that our sales successes in the period have translated into significant improvement at the EBITDA level, which was £2.0 million for H1 (H1 2002: £1.1 million), an increase of 76%. Q2 contributed £1.6 million (Q2 2002: £1.4 million), an increase of 13%. PBTA was £1.9 million compared with £0.9 million in H1 2002.</p>
<p>Operating expenses increased by approximately £1.7 million, up 10% in the period, compared with H1 2002, primarily as a result of increased sales commission and other employment costs (£1.0 million) and increased marketing and travel expenditure (£0.6 million). Average headcount increased by 7 to 341 compared with H1 2002 (334). The actual headcount at 30 June 2003 was 346.</p>
<p>R&amp;D expenditure for H1 2002 increased by 5% to £3.6 million from £3.4 million in H1 2002, but now represents a lower percentage of sales 17%, (H1 2002: 19%) as expected following the release of the Process Suite.</p>
<p>Sales and organisational productivity on a revenue per head basis improved by 35% and 13% respectively in the period compared with H1 2002.</p>
<p>EBITDA converted into an improvement in cash balances of £2.3 million since the end of December 2002 to £21.3 million at the end of June 2003. The group has no material debt. In addition, there have been significant collections since the end of June 2003 of over £8.0 million.</p>
<p>The value of unrecognised revenue in the balance sheet at the end of June 2003 was £6.4 million, an increase of 36% over June 2002, £4.7 million. The amount to be released in H2 2003 is £4.6 million an increase of 31% over H1 2002, £3.5 million.</p>
<p>Product Development</p>
<p>We launched Version 2 of the Staffware Process Suite at the International Staffware Conference in London in April. Since then we have been engaged in making it available on Windows 2000, Linux and key Unix platforms, the benefit of which, in terms of sales revenue, should be seen in the coming months as our customers and partners begin to have access to its many new features and functions. These include a number of unique Business Process Management capabilities including 'Prediction', 'Orchestrator' and unrivalled throughput capability, in a straight through processing environment. We believe these will translate into tangible benefits in terms of productivity for the IT function including:
· reduced development and deployment costs and timescales for BPM projects
· lower on-going updating and support costs; and
· leveraging existing, under-performing, IT investments.</p>
<p>Ensuring business benefits include:
· greater organisational productivity from more streamlined processes
· better customer service by eliminating duplicate or non-added value clerical and computer based tasks
· tighter and more assured governance and controls from automated procedures complying with both internal and external policy and regulations.</p>
<p>The greater scalability and wider platform coverage of Version 2 of the Staffware Process Suite facilitates enterprise wide benefits, helping to achieve our vision of the over-arching 'Independent Process Layer'. The 'Independent Process Layer' encapsulates in one repository all the process rules of all applications helping to achieve an 'Agile Enterprise', which is better able to respond rapidly to the need for changes in its processes.</p>
<p>Good progress has been made with our Process Frameworks, which have materially assisted in sales successes particularly in retail banking and insurance. We are also pleased with initial market reaction to the Process Framework for Complex Order Management for Telecom companies, which we plan to develop further in the coming months.</p>
<p>Board Development</p>
<p>As announced at the AGM in April, effective from 31st May, both Paul Fullagar and Emrys Devonald retired from their positions as Non-Executive Deputy Chairman and Non-Executive Director, respectively. My colleagues and I are extremely appreciative of their many years of service to Staffware.</p>
<p>At the same time, I announced the appointment of Chris Conway and David Thorpe who joined the Board on 1st June as Non-Executive Directors. Chris Batterham is now the Senior Independent Non-Executive Director, chairing the Nomination Committee; Chris Conway is chair of the Remuneration Committee and David Thorpe is chair of the Audit Committee. All three serve on all three committees, I serve on the Nomination Committee only.</p>
<p>Also as announced at the AGM, the board is engaged in the process of appointing a CEO to segregate such duties from those of my role as Chairman and a further announcement will be made at the appropriate time.</p>
<p>We continue to be focused on being the undisputed 'best of breed' BPM player globally in our chosen vertical markets. To this end we were delighted to be identified by Gartner recently as one of the top BPM vendors, in terms of both 'Vision' and 'Capability to Execute'. Part of our plan to achieve our goals is to engage more with Tier 1 Systems Integration and Outsourced Providers globally, but especially in North America, which area we see as being the benchmark for our global success going forward.</p>
<p>In line with our previously stated commitment to a 'progressive dividend policy' and in light of our ability to generate cash, the board is proposing to double the interim dividend to 2 pence per ordinary share, compared with 1 pence this time last year. This will be payable to shareholders on the register at the close of business on 19 September 2003.</p>
<p>In general, the market is still cautious about making any significant commitments to Enterprise Software. However, Staffware is achieving sales growth by consistently proving that its BPM and workflow technologies can achieve real benefits and efficiencies for its customers. At the same time, we have improved our own operational efficiency so that a greater proportion of revenue flows through to profits and cash generation. Consequently we believe that Staffware is well-positioned for further sustainable growth.</p>
<p>John O'Connell, Chairman and CEO
9 September 2003</p>

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