Interim Results for the six months ended 30 September 2009

Transcription

1 18 November STRATEGIC THOUGHT GROUP PLC ( Strategic Thought Group or the Group ) Interim Results for the six months Strategic Thought Group plc (AIM:STR) the recognised market leader in enterprise risk management (ERM) addresses the varied risk management challenges of its blue chip customers with pioneering software and services that can be implemented across organisations and stand alone projects in a wide range of industry sectors. The Group's principal product, Active Risk Manager (ARM), is the world's most widely deployed and the only truly comprehensive web-based ERM solution available today. Key Points The Group remains confident of meeting market expectations for the full year. Financial Continuing revenue up by 3% to 3.58 million (: 3.46 million) Services revenue up by 69% to 0.61m (: 0.36m) Support revenue up by 28% to 1.33m (: 1.04m) Major Phase 2 contract signed with United States Air Force ( USAF ) for 1.1m on 5 October. This contract fell outside the reporting period which resulted in: Licence sales of ARM down by 27% to 1.47m (: 2.02m) Gross profit down by 11% to 1.90m (: 2.13m) Loss before share based payment charges, interest and tax ( LBIT ) of 0.58m (: LBIT of 0.33m) Loss per share of 2.9p (: loss per share of 1.6p) Cash in the bank of 2.0m at (31 March : 2.1m) Business ARM licences have been secured in the UK, New Zealand, and the USA and include Crossrail, Meridian Energy and Westinghouse Electric Company LLC Growing pipeline of large ERM opportunities in Europe, the Middle East and the USA Major phase two contract signed with the United States Air Force ('USAF') Launched Collaborative Workshop Solution (CWS), the offline workshop-based risk management software solution, unique in the industry today, designed in collaboration with a major customer New release of ARM with major functionality enhancements due in December In its latest research on the Enterprise GRC market, Forrester reported that: Strategic Thought has the best value proposition for enterprise risk management ('ERM') *

2 Lynton Barker, Chairman, commented: I am pleased with the progress that the business continues to make, considering the tough market conditions. But for a delay of three days in signing the 2nd phase of an ongoing large scale deployment of Active Risk Manager ('ARM') at the United States Air Force, this progress would have been reflected in the first half results, which would have delivered total licence sales for the period of 2.31 million. The Board is confident that it has taken the necessary steps to establish and execute its strategy, while aligning its cost base and continuing to invest in product development. As I said in my statement for the year ended 31 March, we are not immune from what is happening in the global economy, but the Board continues to be confident about stronger ARM licence sales in *Strategic Thought was among the select companies that Forrester invited to participate in the July report "The Forrester Wave: Enterprise Governance, Risk and Compliance Platforms, Q3." Enquiries: Strategic Thought Group plc Martin Metcalf, CEO Andrew Darby, CFO T: Hansard Group Justine James T: FinnCap Charles Cunningham T:

3 STRATEGIC THOUGHT GROUP PLC Interim Results for the six months CHAIRMAN S STATEMENT INTRODUCTION This is the first reporting period in which we have reported and operated as a risk-centric software developer in the enterprise risk management ('ERM') marketplace, having disposed of the final element of our technical non-risk services business in April. RESULTS Continuing revenue grew by 3% to 3.58 million (: 3.46 million). Licence sales of ARM were lower by 27% at 1.47 million (: 2.02 million). But for a delay of three days in closing the second phase of an ongoing large scale deployment of Active Risk Manager ('ARM') at the United States Air Force worth 0.84m, licence sales would have been ahead by 14%. Services revenues, driven by customer funded enhancements to ARM, grew by 69% to 0.61m (: 0.36m) and support revenues, driven by new licence sales, grew by 28% to 1.33m (: 1.04m). Cost of sales increased by 26% to 1.67m (: 1.33m). development, consulting and support resources. This includes the costs of our software Gross profit, due to lower ARM licence sales, fell by 11% to 1.90m (: 2.13m). As anticipated, administrative expenses increased by 37% to 1.61 million (: 1.17m), as part of these expenses were absorbed last year by the discontinued businesses. On a like for like basis they fell by 5%. Selling and distribution costs decreased by % to 1.07m (: 1.53m), reflecting the adjustments which we made to the cost base in the second half of last year. The Group s loss before tax was 0.77 million (: loss before tax of 0.46 million) and the loss per share was 2.9p (: loss per share of 1.6p). Cash balances in the bank of 2.0m at remained stable over the period since 31 March when they stood at 2.1m. Continuing focus on working capital management ensured that stability was maintained despite the Group's operating loss. The Group has a loan with the Royal Bank of Scotland to finance office fit-out costs, which it pays off on a monthly basis. This loan stood at 0.21m at (31 March : 0.24m). This loan is separate from the cash balances in the bank. DIVIDEND As in previous years, the Group will not be paying an interim dividend. OPERATING REVIEW Licence sales We have continued to make progress in signing up new ARM customers and in selling additional licences to existing customers. Our new wins for ARM include the following: Crossrail in the UK Los Alamos National Laboratory in the USA Meridian Energy in New Zealand Westinghouse Electric Company LLC in the USA We continue to win additional business from our existing customer base and I am pleased to report further contract wins from: Alstom Amcor Atkins BT

4 EADS Leighton Contractors Linde MOD Nuclear Decommissioning Authority Raytheon A notable additional achievement was the successful completion of software delivery for Phase 1 implementation for Rio Tinto plc. Collaborative Workshop Solution (CWS) Strategic Thought has also launched CWS, its offline workshop-based risk management software solution which enables organisations to capture risks from frontline employees in the field. Designed in collaboration with a major customer, CWS works in conjunction with ARM and is a system that enables the quick and easy capture of risks and opportunities, the scoring of the risks and potential rewards and the logging of the identified causes and impacts together with the establishment of the controls and actions taken to manage the risks. This is done within an interactive workshop setting which helps embed a risk-aware culture throughout the business. CWS adds differentiation from our competition and is unique in the marketplace. It has already been well received by our customers. Pipeline We are continuing to build a growing pipeline of large ERM opportunities in Europe and the Middle East. These engagements are typically driven from the Board which is requesting clear line of sight and competitive advantage. The US market is still seen as the larger growth opportunity but is characterised currently more by project risk management for large-scale capital intensive programmes. We have been encouraged by our recent user conference in the USA and by our user conference in May in London, both of which have confirmed a quality product and a willingness by our customers to transact further business with us. Product Development The next release (4.0) of ARM is currently on test with several of our customers and is due to be generally available from December. The release will include major new functionality such as an offline workshop module, improved financial controls and an enterprise services bus to improve integration to other systems such as enterprise resource planning ('ERP') systems. The current product roadmap is mapped out for the next two years and has been made available to customers with positive feedback. We aim to produce one major product release each year. Independent Analysis ARM was evaluated in Forrester's latest research into the Enterprise GRC market. In 'The Forrester Wave: Enterprise Governance, Risk and Compliance Platforms, Q3 ', ARM was cited as having 'the best value proposition for enterprise risk management ('ERM')'. Additionally Forrester commented that 'Strategic Thought has demonstrated very impressive enterprise risk management implementations with demonstrable return on investment. ARM customers have shown the ability to use risk management as a method for improving business performance.' The Board During the period Simon Ricketts, Senior Independent Non-executive Director, retired from his position at the Annual General Meeting. I would like to record my appreciation and gratitude for the service that Simon has given to the Group since his appointment to the Board shortly before flotation in Outlook Notwithstanding continuing tough market conditions and the difficulties in predicting the timing of the closure of large contract negotiations, the Board remains confident about being on track for the full year. Lynton Barker Chairman

5 STRATEGIC THOUGHT GROUP PLC Consolidated statement of comprehensive income for the six months Continuing operations Six months (Restatedunaudited) Year ended 31 March (Auditedrestated) Notes Revenue 3,575 3,457 6,040 Cost of sales (1,672) (1,328) (2,947) Gross profit 1,903 2,129 3,093 Administrative expenses (1,605) (1,168) (2,219) Selling and distribution costs (1,065) (1,528) (3,083) Group operating loss (767) (567) (2,209) Finance expense (5) - (7) Finance income Loss before income tax (769) (457) (2,088) Income tax (expense)/credit 2 (3) Loss from continuing operations (772) (434) (2,061) Profit from discontinued operations Loss for the period (772) (339) (2,020) Loss per share attributable to the equity holders of the company during the year from continuing operations Basic and diluted 3 (2.9p) (1.6p) (7.8p)

6 STRATEGIC THOUGHT GROUP PLC Consolidated statement of financial position as at ` Non-current assets 31 March (Audited) Property, plant and equipment Trade and other receivables Total non-current assets Current assets Trade and other receivables 2,211 4,460 2,702 Cash and cash equivalents 2,029 2,754 2,090 Total current assets (excluding noncurrent assets classified as held for sale) 4,240 7,214 4,792 Non-current assets classified as held for sale Total current assets 4,240 7,214 4,800 Total assets 4,641 8,143 5,677 Liabilities Current liabilities Trade and other payables (3,143) (3,764) (3,322) Current income tax liabilities (11) (21) (11) Provisions (282) (524) (282) Total current liabilities (3,436) (4,9) (3,615) Non-current liabilities Trade and other payables (162) (619) (4) Total liabilities (3,598) (4,928) (4,045) Net assets 1,043 3,215 1,632 Equity Capital and reserves attributable to equity holders of the company Ordinary shares Share premium 2,551 2,549 2,551 Merger reserve Retained earnings (2,257) (83) (1,668) Total equity 1,043 3,215 1,632

7 STRATEGIC THOUGHT GROUP PLC Consolidated statement of cash flows for the six months Note 31 March (Audited) Cash flows from operating activities Cash used in operations 4 - (1,857) (2,408) Income tax (paid)/received (3) Net cash used in operating activities (3) (1,754) (2,363) Cash flows from investing activities Purchases of property, plant and equipment (29) (402) (444) Interest received Interest paid (5) - (7) Net cash used in investing activities (31) (292) (323) Cash flows from financing activities Proceeds from bank loan Repayments on bank loan (27) (11) (37) Proceeds from issuance of ordinary shares Net cash (used in)/generated from financing activities (27) Net decrease in cash, cash equivalents and bank overdrafts (61) (1,782) (2,446) Cash, cash equivalents and bank overdrafts at beginning of period/year 2,090 4,536 4,536 Cash, cash equivalents and bank overdrafts at end of period/year 2,029 2,754 2,090

8 STRATEGIC THOUGHT GROUP PLC Consolidated Statement of Changes in Equity for the six months Ordinary Share Merger Retained Total shares premium reserve earnings equity 000s 000s At 31 March 263 2, ,317 Total comprehensive income for the period (339) (339) Share based payments costs At 263 2, (83) 3,215 Ordinary Share Merger Retained Total shares premium reserve earnings equity 000s 000s At 31 March 263 2, ,317 Total comprehensive income for the year (2,020) (2,020) Share based payments Issue of share capital At 31 March 263 2, (1,668) 1,632 Total comprehensive income for the period (772) (772) Share based payments At 263 2, (2,257) 1,043

9 Notes to the Accounts 1. Basis of preparation The unaudited interim accounts were approved by the Board of Directors on 17 November and have been prepared under the accounting policies set out in the annual report. The financial information contained in this interim report does not constitute statutory accounts, as defined by S434 of the Companies Act Statutory accounts for Strategic Thought Group plc for the year ended 31 March, on which the auditors gave an unqualified opinion, have been delivered to the Registrar of Companies. The restatement of prior year results was due to compliance with IAS 34 Interim Financial Reporting. Cost of sales, administrative expenses and selling and distribution costs have been restated to achieve a fairer presentation of these costs. Non-core services activities, from which the Group completed its withdrawal in April, have been classified as discontinued operations and the prior year results have been restated to reflect this. The Directors confirm that the Group has adequate resources to continue its operational existence for the foreseeable future and therefore continue to adopt the going concern basis for the preparation of the Interim Results. The Directors believe that there is only one reportable segment and, therefore, no segmental disclosures required under IFRS 8 Operating Segments have been presented. 2. Taxation (Unauditedrestated) Year ended 31 March (Auditedrestated) Income tax (expense)/credit (3) 23 27

10 3. Loss per share (Unauditedrestated) Year ended 31 March (Auditedrestated) Loss from continuing operations attributable to equity holders of the Company (772) (434) (2,061) (Loss)/profit from discontinued operations attributable to equity holders of the Company Total (772) (339) (2,020) Number Number Number Weighted average number of shares in issue 26,326,699 26,315,000 26,316,923 Dilution effect of share options Diluted weighted average number of shares in issue 26,326,699 26,315,000 26,316,923 Basic (loss)/earnings per share From continuing operations attributable to the ordinary equity holders of the Company (2.9p) (1.6p) (7.8p) From discontinued operations - 0.3p 0.1p Attributable to the ordinary equity holders of the Company (2.9p) (1.3p) (7.7p) Diluted (loss)/earnings per share From continuing operations attributable to the ordinary equity holders of the Company (2.9p) (1.6p) (7.8p) From discontinued operations - 0.3p 0.1p Attributable to the ordinary equity holders of the company (2.9p) (1.3p) (7.7p)

11 4. Cash used in operations (Unauditedrestated) 31 March (Auditedrestated) Operating loss (767) (567) (2,209) Profit from discontinued operations before tax Depreciation of property, plant and equipment Share based payments Changes in working capital: Trade and other receivables 900 (251) 1,513 Trade and other payables (420) (1,461) (1,852) Movement in provisions - - (450) Cash used in operations - (1,857) (2,408) 5. Loss before share based payments, interest and taxation ('LBIT') (Unauditedrestated) Year ended 31 March (Auditedrestated) Group operating loss (767) (567) (2,209) Share based payments LBIT (584) (3) (1,876) 6. Post balance sheet event On 5 October, a contract was signed for 1.1million with the United States Air Force for software licences, services and support. 7. Interim statement A copy of this interim statement will be sent to shareholders. Additional copies are available on request from the Group's registered office: 20 Grenfell Road Maidenhead Berkshire SL6 1EH