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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Microgen | LSE:MCGN | London | Ordinary Share | GB00BVVHWX30 | ORD 6 3/7P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 367.50 | 365.00 | 370.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMCGN
RNS Number : 8169L
Microgen PLC
24 July 2017
24 July 2017
MICROGEN plc ('Microgen' or 'Group')
INTERIM RESULTS
FOR THE SIX MONTHSED 30 JUNE 2017
Microgen plc (LSE: MCGN), a leading provider of business critical software and services, reports its unaudited results for the six months ended 30 June 2017.
Group Highlights:
-- Excellent performance by the Group in the first half of 2017 with strong organic growth reported by Aptitude Software complemented by further progress in the Trust & Fund Administration business of Microgen Financial Systems
-- Overall revenue growth of 45% to GBP28.4 million (H1, 2016: GBP19.5 million), growth of 39% on a constant currency basis*
-- Group adjusted operating profit increased by 42% to GBP6.5 million (H1, 2016: GBP4.6 million), growth of 33% on a constant currency basis**. Group operating profit on a statutory basis of GBP5.6 million (H1, 2016: GBP4.0 million)
-- Adjusted basic earnings per share increased to 8.0 pence (H1, 2016: 5.9 pence). Basic earnings per share increased to 6.9 pence (H1, 2016: 5.1 pence)
-- Interim dividend increased to 2.0 pence per share (2016: 1.5 pence per share), an increase of 33%
-- Strong balance sheet with cash of GBP15.6 million (H1, 2016: GBP12.7 million) and net funds of GBP6.9 million (H1, 2016: GBP1.0 million) in line with expectations following net corporate cash outflows of GBP6.4 million in the past 12 months (principally dividends and net acquisition consideration)
Aptitude Software:
-- A number of new customers contracted across multiple sectors and geographies, including sales of the Aptitude Accounting Hub into the newly opened US healthcare market vertical
-- Partner network continues to develop with sales in new geographical and vertical markets a direct result of partner activity
-- The on-going recurring revenue base at 30 June 2017 has grown to GBP15.0 million (30 June 2016: GBP10.6 million and 31 December 2016: GBP12.6 million), an increase of 42% since 30 June 2016
-- Revenue growth of 70% to GBP19.5 million (H1, 2016: GBP11.4 million), growth of 60% on a constant currency basis
-- Software revenue growth of 41% to GBP7.9 million (H1, 2016: GBP5.6 million)
-- Implementation services revenue doubling to GBP11.6 million (H1, 2016: GBP5.8 million) benefitting from exceptional demand for services in advance of the imminent implementation dates for the Aptitude Revenue Recognition Engine client base. The exceptional growth in demand for services experienced in 2017 is expected to moderate in 2018.
-- Operating profit increase of 108% to GBP3.6 million (H1, 2016: GBP1.7 million), growth of 88% on a constant currency basis
-- Growth in operating margin to 19% (H1, 2016: 15%) achieved whilst investment continues in both the organisation and a series of new growth opportunities
-- Excellent visibility for the remainder of 2017 with a number of well progressed new business opportunities and continued demand for services from the existing client base
Microgen Financial Systems:
-- Further strengthening of position within the Trust & Fund Administration ('T&FA') market following the acquisition of Primacy Corporation in February 2017
-- T&FA revenues increased by 32% to GBP5.4 million (H1, 2016: GBP4.1 million) representing 61% (H1, 2016: 51%) of Microgen Financial Systems' revenue
-- Overall revenue increased by 10% to GBP8.9 million (H1, 2016: GBP8.1 million) of which 77% is recurring in nature (H1, 2016: 81%)
-- Adjusted operating profit of GBP3.8 million (H1, 2016: GBP3.6 million) as the transition to a business focussed on T&FA continues. Operating profit on a statutory basis of GBP3.0 million (H1, 2016: GBP3.2 million)
Commenting on the results, Ivan Martin, Chairman, said:
The Group has made excellent progress in the first half of 2017. Aptitude Software continues to secure growing volumes of new business in both new and existing markets in addition to delivering exceptionally strong levels of services. Microgen Financial Systems continues its successful transition to a business clearly focussed on the Trust & Fund Administration sector having completed the acquisition of Primacy Corporation in February 2017. The Group enters the second half of the year well positioned with good revenue visibility, and an encouraging pipeline of opportunities.
Contacts
Ivan Martin, Chairman 020-7496-8100
Philip Wood, Group Finance Director
James Melville-Ross / Darius Alexander 020-3727-1000
FTI Consulting
* Constant currency growth is calculated by comparing H1 2016 results with H1 2017 results retranslated at the rates of exchange prevailing during H1 2016
** Throughout this statement adjusted operating profit and margin excludes non-underlying operating items, unless stated to the contrary.
Overview:
The Group reports excellent progress in the first half of 2017 resulting in a financial performance ahead of the Board's original expectations for the period. The Group's two businesses are successfully executing their declared strategies with strong organic growth from Aptitude Software whilst Microgen Financial Systems continues its transition to a business focused on the Trust & Fund Administration ('T&FA') market.
With a number of new contracts in the period Aptitude Software has further strengthened the leading position of its Aptitude Revenue Recognition Engine within the telecoms market whilst opening the US healthcare market for the Aptitude Accounting Hub with two material contracts secured since the start of the year. These successes, building on the record number of clients secured in 2016, have led to revenue growth for Aptitude Software of 70% to GBP19.5 million (H1, 2016: GBP11.4 million), growth of 60% on a constant currency basis.
Microgen Financial Systems has maintained its focus on the T&FA market within the wealth management sector. The acquisition of Primacy Corporation in February 2017, a competitor in the T&FA market, represented the fifth acquisition since December 2014 and further strengthens the Group's leading position within this market. As a result of this focus T&FA revenues now represent 61% of Microgen Financial Systems' H1 2017 revenue (H1, 2016: 51%), compared to 33% at the beginning of this transition in 2014.
The above progress has led to overall revenue for the six months ended 30 June 2017 increasing by 45% to GBP28.4 million (H1, 2016: GBP19.5 million) with adjusted operating profit increasing by 42% to GBP6.5 million (H1, 2016: GBP4.6 million). Growth on a constant currency basis was 39% and 33% respectively.
Pursuant to the Group's continuing progress the interim dividend will be increased by 0.5 pence to 2.0 pence per share (2016: 1.5 pence per share), an increase of 33%, which will be payable on 25 August 2017 to shareholders on the register at the close of business on 4 August 2017.
Once again, this strong set of results would not have been possible without the outstanding contributions from the Group's employees. Further investment continues to be made by the Group in its human capital and Microgen looks forward to inviting its employees to participate in the forthcoming share option scheme grants this summer.
The Group is pleased with the strong results for the first half of 2017 and enters the second half of the year well positioned with good revenue visibility provided by its recent new business successes, and an encouraging pipeline of opportunities.
Aptitude Software Report:
The Aptitude Software business provides a series of specialised financial management software applications with the common capability of very rapid processing of very high volume complex, business event-driven transactions and calculations. Aptitude Software's products continue to be developed at the Aptitude Technology Centre in Wroclaw, Poland. The business generates revenue from this software through a combination of licence fees (primarily annual recurring licences), software maintenance/support and professional services.
During the first half of 2017 the Aptitude Software business has seen continued strong demand for its specialised financial management software applications and associated implementation services. This demand, together with the continuing benefit from contracts won in prior years, has resulted in revenue increasing by 70% to GBP19.5 million (H1, 2016: GBP11.4 million), growth of 60% on a constant currency basis. Margins have increased to 19% (H1, 2016: 15%), with operating profits up by 108% to GBP3.6 million (H1, 2016: GBP1.7 million), growth of 88% on a constant currency basis. The growth in margin is despite continued investment in both the organisation and the new products being developed at the Aptitude Technology Centre in Wroclaw, Poland.
A number of new business contracts have been entered for the Aptitude Revenue Recognition Engine ('ARRE') within the telecoms market in Asia and North America. In addition, new business contracts have been secured for the Aptitude Accounting Hub ('AAH') across both financial services and the US healthcare market, a new market for the Aptitude Software business. The opening of the US healthcare market demonstrates once again Aptitude Software's ability to leverage its technology across new sectors.
Aptitude Software continues to work closely with a number of partners who have contributed to the majority of the new business successes in the first half of 2017. The partners' increasing contributions to Aptitude Software's go-to-market strategy, together with their implementation capability, is enabling the business to reach new geographical and vertical markets.
The new business successes have resulted in the on-going recurring revenue base, the key metric for the Aptitude Software business, increasing to GBP15.0 million (30 June 2016: GBP10.6 million and 31 December 2016: GBP12.6 million), growth of 42% since 30 June 2016 (the on-going recurring revenue base includes recurring revenues contracted but yet to commence and excludes recurring revenues which are currently being received but are known to be terminating in the future). Software revenue recognised in the first half has increased by 41% to GBP7.9 million (H1, 2016: GBP5.6 million).
Implementation revenue has doubled to GBP11.6 million (H1, 2016: GBP5.8 million) benefitting from the new contracts secured in both 2016 and the first half of 2017. There has been particular benefit from the exceptionally strong demand for ARRE implementation services by the regulatory deadline driven IFRS 15 / ASC 606 projects. The exceptional growth in demand for services experienced in 2017 is expected to moderate in 2018 as a number of the larger ARRE projects are completed and the partners, an increasingly important channel for new business, provide a growing proportion of resources for new implementations.
Investment continues in the Aptitude Technology Centre with a number of new products developing in line with expectations. In June 2017 Aptitude Software launched its new Aptitude Lease Accounting Engine, an application which enables organisations to address the requirements of IFRS 16, the new leasing standard effective for accounting periods commencing on or after 1 January 2019. There are a number of opportunities progressing for this latest specialised financial management software application which shares the capabilities of Aptitude Software's other products in being able to very rapidly process very high volume complex, business event-driven transactions and calculations.
In May 2017 IFRS 17, a new accounting standard focussed on insurance contracts, was released effective for accounting periods commencing on or after 1 January 2021. This standard is anticipated to require unprecedented change by the insurance industry, an industry within which Aptitude Software already has a presence with several clients using Aptitude Software's products. Aptitude Software, working alongside a number of opportunities, is developing its product to address the requirements of this important new standard.
In summary, the business continues to execute successfully its strategy of focussing and leveraging its existing expertise in high volume transaction sectors by providing specialised financial management software applications to meet new accounting standards, regulations or business areas poorly served by ERP systems. With H1 2017 performance above management expectations set at the start of the year, the continuing opportunities for ARRE and AAH combined with the potential of the new products provide the business with confidence for the remainder of 2017 and future years.
Microgen Financial Systems Report:
The Microgen Financial Systems business is continuing to make strong progress in achieving its strategic objective to increase the proportion of its revenues from the Trust & Fund Administration ("T&FA") sector, both through organic growth and add-on acquisitions. Microgen Financial Systems' key product in this sector is Microgen 5Series which addresses the core operational requirements of a number of organisations including Trust Administrators, Fiduciary Companies, Corporate Services Providers and Fund Administrators. In addition to Microgen Financial Systems' T&FA operations, revenue is generated from both a Payments software business and an Application Management business covering a range of Microgen-owned and third party systems principally focussed on the financial services industry. Revenues are generated through a combination of software licence fees (primarily annual recurring licences), software maintenance/support fees and professional services.
The Microgen Financial Systems business reported a 10% increase in total revenues to GBP8.9 million (H1, 2016: GBP8.1 million) with adjusted operating profits of GBP3.8 million (H1, 2016: GBP3.6 million) representing an adjusted operating margin of 43% (H1, 2016: 45%). As highlighted in previous reports, the reduction in the adjusted operating margin is due to the change in mix between the growing T&FA business and the declining Application Management business with its higher margins reflecting the maturity of that business.
The key highlights for the business are the acquisition in February 2017 of Primacy Corporation ('Primacy'), the fifth add-on acquisition within the T&FA sector since December 2014, and the continued sales progress being made by Microgen 5Series.
Primacy was acquired in February 2017 for total cash consideration of GBP3.4 million. Primacy is a Toronto-based provider of software to the Trust & Fund Administration market whose integration into the Microgen Financial Systems business is progressing in line with expectations. Primacy's revenue in the year ended 31 October 2016 was GBP1.2 million with profit before tax of GBP0.6 million. Primacy generated GBP0.3 million revenue in 2017 whilst under Microgen's ownership.
A number of new contracts have also been entered into within T&FA since the start of the year with both new customers and existing clients upgrading to Microgen 5Series from our acquired products. A key highlight for the first half of 2017 is a new multi-office customer headquartered in Singapore building on Microgen Financial Systems' growing presence in this important region.
Primacy and the other recent acquisitions, together with the underlying organic growth due to the successes with Microgen 5Series, has resulted in T&FA revenue growing by 32% to GBP5.4 million (H1, 2016: GBP4.1 million) representing 61% of Microgen Financial Systems' revenue (H1, 2016: 51%). T&FA recurring revenue in H1 2017 has increased by 26% to GBP3.9 million (H1, 2016: GBP3.1 million) with the business benefitting from both a number of new customer contracts and the acquisition of Primacy. The T&FA on-going recurring revenue base at 30 June 2017 has increased to GBP8.0 million, growth of 19% since 30 June 2016 (30 June 2016: GBP6.7 million, 31 December 2016: GBP6.9 million) with GBP0.8 million of the increase attributable to the Primacy acquisition (the on-going recurring revenue base includes recurring revenues contracted but yet to commence and excludes recurring revenues which are currently being received but are known to be terminating in the future).
Included within the T&FA revenue of GBP5.4 million (H1, 2016: GBP4.1 million) is GBP3.8 million (H1, 2016: GBP3.1 million) generated from Microgen 5Series (and 4Series) and GBP1.6 million (H1, 2016: GBP1.0 million) from the T&FA products acquired since December 2014. The software and services fees arising from conversions from the acquired products represents GBP0.7 million (H1, 2016: GBP0.4 million) of the GBP3.8 million revenue from Microgen 5Series (and 4Series).
Further acquisitions and add-on opportunities continue to be actively evaluated within T&FA, however, the number of available acquisition opportunities has been reduced pursuant to the acquisitions performed to date. The business also is appraising opportunities which offer the potential to leverage Microgen Financial Systems' existing technology into adjacent sectors.
After the one-off benefit in 2016 from some exceptional services, revenue from the payment software product line was GBP0.7 million (H1, 2016: GBP0.8 million) while the Application Management business reports revenue in line with Board expectations at GBP2.8 million (H1, 2016: GBP3.2 million). Consistent with the maturity of the solutions provided by the Applications Management business it is the Board's expectations that revenues will continue to reduce in line with recent periods, however, within the business there is a core of supported software solutions which are expected to continue in the medium to long term.
The growth in T&FA revenues, which in 2014 only represented 33% of Microgen Financial Systems' business, has created a more focussed and resilient business with an increasing ambition to leverage the capabilities of the Microgen 5Series technology into sectors adjacent to T&FA. To prepare the business for this next step in its evolution Microgen Financial Systems is making a number of investments in its organisation the benefit of which will be received in future years. With recurring revenue accounting for 77% (H1, 2016: 81%) of total revenue the business has excellent future visibility.
Group Financial Performance:
Overall revenue for the six months ended 30 June 2017 has increased by 45% to GBP28.4 million (H1, 2016: GBP19.5 million) producing an adjusted operating profit increasing by 42% to GBP6.5 million (H1, 2016: GBP4.6 million). On a constant currency basis revenue for the period was GBP27.1 million and adjusted operating profit was GBP6.1 million, growth rates of 39% and 33% respectively. Operating profit on a statutory basis was GBP5.6 million (H1, 2016: GBP4.0 million) after non-underlying items of GBP0.9 million (H1, 2016: GBP0.6 million) comprised principally of intangible amortisation. The Group reported a profit for the period attributable to equity shareholders of GBP4.1 million (H1, 2016: GBP3.0 million). The Board has continued to determine that all internal research and development costs are expensed as incurred and therefore the Group has no capitalisation of development expenditure.
The total tax charge of GBP1.3 million (H1, 2016: GBP0.8 million) represents 24.0% of the Group's profit before tax (H1, 2016: 20.0%). The increase in tax rate for 2017 is due to the increasing proportion of profits in overseas territories with higher prevailing tax rates, especially in the US.
The Group continues to have a strong balance sheet with net assets at 30 June 2017 of GBP46.0 million (H1, 2016: GBP40.7 million), including cash at 30 June 2017 of GBP15.6 million (H1, 2016: GBP12.7 million), and net funds at 30 June 2017 of GBP6.9 million (H1, 2016: GBP1.0 million) following net corporate cash outflows of GBP6.4 million in the past 12 months (comprising dividends of GBP3.0 million and GBP3.4 million net acquisition consideration). Consistent with the increase in revenue for the six months ended 30 June 2017, trade and other receivables have increased by 34% to GBP10.3 million (H1, 2016: GBP7.7 million). Deferred income has increased to GBP17.9 million (H1, 2016: GBP13.6 million) due principally to the Group's increased recurring revenue base. Pursuant to the above movements cash generated from operations in the first half of the year was GBP0.4 million (H1, 2016: cash used in operations GBP2.4 million) which is consistent with the seasonal cash flow of the Group in which a significant proportion of its recurring revenue base is invoiced, and cash collected, in the second half of the financial year.
The Group benefits from a geographically diverse customer base with 16% of revenue generated from customers located in the United Kingdom, 17% from other European Union countries and 67% from the rest of the world (H1, 2016: 23%, 13% and 64%). Of the Group's H1 2017 revenue, 37% (H1, 2016: 32%) was invoiced in a currency other than sterling.
Refinancing of Bank Loan
Following negotiations with a number of banks, the Group has agreed replacement credit facilities consisting of a GBP10 million term loan, repayable over five years, in addition to a revolving credit facility of GBP10 million. The loan is secured on the assets of the Group. A very competitive interest margin has been agreed, with the interest rate fixed on the term loan by an appropriate financial instrument at 2.46% over the five year period, a reduction from the interest rate fixed on the previous loan (3.24%). Operating covenants are limited to the Group's net debt leverage and interest cover. The proceeds from the new term loan will be used to refinance the existing term loan (GBP8.8 million outstanding as at 30 June 2017), whilst the revolving credit facility of GBP10 million provides the Group with financing for add-on acquisition opportunities.
Statement on Principal Risks and Uncertainties
Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2016 Annual Report remain applicable for the first six months of the financial year. The Group's 2016 Annual Report is available from the Microgen website: www.microgen.com.
Related party transactions during the period are disclosed in Note 17.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2017
Hot Features
Premium
Unaudited six months Unaudited six months Audited year ended
ended 30 Jun 2017 ended 30 Jun 2016 31 Dec 2016
Before Before Before
Non-underlying Non-underlying Non-underlying Non-underlying Non-underlying Non-underlying
Note items items Total items items Total items items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 5 28,350 - 28,350 19,493 - 19,493 42,988 - 42,988
Operating
costs (21,891) (877) (22,768) (14,934) (604) (15,538) (33,463) (1,313) (34,776)
--------------- --------------- --------- --------------- --------------- --------- --------------- --------------- ---------
Operating
profit 5/6 6,459 (877) 5,582 4,559 (604) 3,955 9,525 (1,313) 8,212
Finance
income 5 7 - 7 41 - 41 66 - 66
Finance
costs 5 (164) - (164) (208) - (208) (397) - (397)
--------------- --------------- --------- --------------- --------------- --------- --------------- --------------- ---------
Profit
before
income
tax 6,302 (877) 5,425 4,392 (604) 3,788 9,194 (1,313) 7,881
=============== =============== =============== =============== =============== ===============
Income tax
expense 5/7 (1,298) (758) (1,638)
--------- --------- ---------
Profit for
the
period 4,127 3,030 6,243
========= ========= =========
Earnings
per
share
Basic 8 6.9p 5.1p 10.6p
--------- --------- ---------
Diluted 8 6.7p 4.9p 10.0p
--------- --------- ---------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBP000 GBP000 GBP000
Profit for the period 4,127 3,030 6,243
------------ ------------ --------
Other comprehensive income
Items that may subsequently
be reclassified to profit
or loss:
Fair value gain on hedged
financial instruments 150 231 133
Currency translation difference 85 236 95
------------ ------------ --------
Other comprehensive income
for the period, net of tax 235 467 228
------------ ------------ --------
Total comprehensive income
for the period 4,362 3,497 6,471
============ ============ ========
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2017
Unaudited Unaudited Audited
as at as at as at
30 Jun 30 Jun 31 Dec
Note 2017 2016 2016
ASSETS GBP000 GBP000 GBP000
Non-current assets
Property, plant and
equipment 11 1,649 1,272 1,330
Goodwill 41,774 41,774 41,774
Intangible assets 11,151 7,754 7,257
Deferred income tax
assets 741 565 738
55,315 51,365 51,099
---------- ---------- ---------
Current assets
Trade and other receivables 10,288 7,684 8,337
Financial assets
- derivative financial
instruments 184 262 134
Cash and cash equivalents 15,648 12,722 23,849
---------- ---------- ---------
Total current assets 26,120 20,668 32,320
---------- ---------- ---------
Total assets 81,435 72,033 83,419
---------- ---------- ---------
LIABILITIES
Current liabilities
Financial liabilities
- borrowings 13 (3,000) (3,000) (3,000)
- derivative financial
instruments (98) (228) (198)
Trade and other payables 12 (23,497) (17,286) (27,847)
Current income tax liabilities (272) (361) (100)
Provisions 14 (24) (25) (24)
(26,891) (20,900) (31,169)
---------- ---------- ---------
Net current (liabilities)/
assets (771) (232) 1,151
---------- ---------- ---------
Non-current liabilities
Financial liabilities
- borrowings 13 (5,750) (8,750) (7,250)
Provisions 14 (293) (257) (287)
Deferred income tax
liabilities (2,489) (1,446) (1,316)
(8,532) (10,453) (8,853)
---------- ---------- ---------
NET ASSETS 46,012 40,680 43,397
========== ========== =========
SHAREHOLDERS' EQUITY
Share capital 15 3,908 3,797 3,811
Share premium account 15 4,500 4,493 4,498
Capital redemption reserve 12,372 12,372 12,372
Other reserves 34,281 34,229 34,131
Accumulated losses (9,271) (14,489) (11,552)
Foreign currency translation
reserve 222 278 137
---------- ---------- ---------
TOTAL EQUITY 46,012 40,680 43,397
========== ========== =========
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
Foreign
Share currency Capital
Share premium Accumulated translation redemption Other
capital account losses reserve reserve reserves Total
GBP000 GBP000 GBP000 GBP000 GBP'000 GBP000 GBP000
Balance at 1
January 2017 3,811 4,498 (11,552) 137 12,372 34,131 43,397
----------- --------- ------------ ------------- ------------ ---------- --------
Comprehensive
income
Profit for the
period - - 4,127 - - - 4,127
Cash flow hedges
- net fair value
gains - - - - - 150 150
Exchange rate
adjustments - - - 85 - - 85
----------- --------- ------------ ------------- ------------ ---------- --------
Total comprehensive
income for the
period - - 4,127 85 - 150 4,362
----------- --------- ------------ ------------- ------------ ---------- --------
Shares issued
under share option
schemes 97 2 - - - - 99
Share options
- value of employee
service - - 282 - - - 282
Dividends to
equity holders
of the company - - (2,128) - - - (2,128)
Total contributions
by and distributions
to owners of
the company recognised
directly into
equity 97 2 (1,846) - - - (1,747)
----------- --------- ------------ ------------- ------------ ---------- --------
Balance at 30
June 2017 (unaudited) 3,908 4,500 (9,271) 222 12,372 34,281 46,012
=========== ========= ============ ============= ============ ========== ========
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
Foreign
Share currency Capital
Share premium Accumulated translation redemption Other
capital account losses reserve reserve reserves Total
GBP000 GBP000 GBP000 GBP000 GBP'000 GBP000 GBP000
Balance at 1
January 2016 3,796 4,484 (16,121) 42 12,372 33,998 38,571
----------- --------- ------------ ------------- ------------ ---------- --------
Comprehensive
income
Profit for the
period - - 3,030 - - - 3,030
Cash flow hedges
- net fair value
gains - - - - - 231 231
Exchange rate
adjustments - - - 236 - - 236
----------- --------- ------------ ------------- ------------ ---------- --------
Total comprehensive
income for the
period - - 3,030 236 - 231 3,497
----------- --------- ------------ ------------- ------------ ---------- --------
Shares issued
under share option
schemes 1 9 - - - - 10
Share options
- value of employee
service - - 256 - - - 256
Dividends to
equity holders
of the company - - (1,654) - - - (1,654)
Total contributions
by and distributions
to owners of
the company recognised
directly in equity 1 9 (1,398) - - - (1,388)
----------- --------- ------------ ------------- ------------ ---------- --------
Balance at 30
June 2016
(unaudited) 3,797 4,493 (14,489) 278 12,372 34,229 40,680
=========== ========= ============ ============= ============ ========== ========
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW
For the six months ended 30 June 2017
Unaudited Unaudited Audited
year
six months ended six months ended ended
Note 30 Jun 2017 30 Jun 2016 31 Dec 2016
GBP000 GBP000 GBP000
Cash flows from operating activities
Cash generated from / (used in) operations 9 419 (2,403) 13,032
Interest paid (164) (208) (397)
Income tax paid (1,035) (928) (2,060)
Net cash flows (used in) / generated from operating
activities (780) (3,539) 10,575
----------------- ----------------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment 11 (610) (556) (894)
Sale of property, plant and equipment - 2,350 2,352
Acquisition of subsidiaries, net of cash acquired (3,342) (1,396) (1,430)
Interest received 7 41 66
Net cash (used in) / generated from investing
activities (3,945) 439 94
----------------- ----------------- ------------
Cash flows from financing activities
Net proceeds from issuance of ordinary shares 15 99 10 29
Dividends paid to company's shareholders 10 (2,128) (1,654) (2,540)
Repayments of loan (1,500) (1,500) (3,000)
Net cash used in financing activities (3,529) (3,144) (5,511)
----------------- ----------------- ------------
Net (decrease) / increase in cash and cash
equivalents (8,254) (6,244) 5,158
Cash and cash equivalents at beginning of period 23,849 18,600 18,600
53 366 91
Exchange rate gains on cash and cash equivalents
Cash and cash equivalents at end of period 15,648 12,722 23,849
================= ================= ============
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
Microgen plc (the 'Company') and its subsidiaries (together, the 'Group') is a provider of business critical software and services.
The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.
These condensed consolidated interim financial statements were approved for issue on 21 July 2017.
These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the Board of directors on 8 March 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have been reviewed, not audited.
2. Basis of preparation
These condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated interim financial statements.
3. Accounting policies
The accounting policies adopted are consistent with those of the previous financial statements, except as described below.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profits.
New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date. There are no new IFRSs or IFRS ICs that are effective for the first time for this interim period that would be expected
4. Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016, with the exception of changes in estimates that are required in determining the provision for income taxes.
Fair value estimation
Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings, however, due to their short term nature and ability to be liquidated at short notice their carrying value approximates their fair value.
Financial instruments measured at fair value
The fair value hierarchy of the financial instruments measured at fair value is provided below.
Level 2 inputs
Unaudited Unaudited
six months six months
ended ended
30 Jun 2017 30 Jun 2016
GBP'000 GBP'000
Financial assets
Derivative financial assets (designated hedge instruments) 184 262
184 262
============= =============
Financial liabilities
Derivative financial liabilities (designated hedge instruments) (98) (228)
(98) (228)
===== ======
The derivative financial assets and liabilities have been valued using the market approach and are considered to be Level 2 inputs. There were no changes to the valuation techniques used in the year. There were no transfers between levels during the year.
5. Segmental information
The Board of Microgen plc (the "Board") has determined the operating segments based on the reports it receives from management to make strategic decisions.
The segmental analysis is split into the Aptitude Software and Microgen Financial Systems operating businesses, the chief operational decision makers for the two businesses are Tom Crawford (Aptitude Software) and Simon Baines (Microgen Financial Systems).
The operating businesses are allocated central function costs in arriving at operating profit/(loss). Group overhead costs are not allocated into the operating businesses as the Board believes that these relate to Group activities as opposed to the operating businesses.
Unaudited six months ended
30 Jun 2017
Aptitude Software Microgen Financial Systems Group Total
GBP000 GBP000 GBP000 GBP000
Revenue 19,485 8,865 - 28,350
Operating costs (15,856) (5,089) - (20,945)
------------------- ---------------------------- -------- ---------
Operating profit before Group
overheads 3,629 3,776 - 7,405
Unallocated Group overheads (946) (946)
Operating profit before
non-underlying items 6,459
Non-underlying items - (811) (66) (877)
Operating profit / (loss) 3,629 2,965 (1,012) 5,582
------------------- ---------------------------- --------
Finance income 7
Finance costs (164)
Profit before tax 5,425
Income tax expense (1,298)
Profit for the period 4,127
=========
5. Segmental information (continued)
Unaudited six months ended
30 Jun 2016
Aptitude Software Microgen Financial Systems Group Total
GBP000 GBP000 GBP000 GBP000
Revenue 11,435 8,058 - 19,493
Operating costs (9,689) (4,458) - (14,147)
------------------ --------------------------- -------- ---------
Operating profit before Group
overheads 1,746 3,600 - 5,346
Unallocated Group overheads (787) (787)
Operating profit before
non-underlying items 4,559
Non-underlying items - (383) (221) (604)
Operating profit / (loss) 1,746 3,217 (1,008) 3,955
------------------ --------------------------- --------
Finance income 41
Finance costs (208)
Profit before tax 3,788
Income tax expense (758)
Profit for the period 3,030
=========
Audited year ended
31 Dec 2016
Aptitude
Software Microgen Financial Systems Group Total
GBP000 GBP000 GBP000 GBP000
Revenue 26,364 16,624 - 42,988
Operating costs (22,522) (9,405) - (31,927)
---------- --------------------------- -------- ---------
Operating profit before Group
overheads 3,842 7,219 - 11,061
Unallocated Group overheads (1,536) (1,536)
Operating profit before non-underlying
items 9,525
Non-underlying items - (914) (399) (1,313)
---------- --------------------------- -------- ---------
Operating profit / (loss) 3,842 6,305 (1,935) 8,212
---------- --------------------------- --------
Finance Income 66
Finance Cost (397)
Profit before tax 7,881
Income tax expense (1,638)
Profit for the period 6,243
=========
6. Non-underlying items
Unaudited Unaudited Audited
six months six months year
ended 30 Jun 2017 ended 30 Jun 2016 ended 31 Dec 2016
GBP000 GBP000 GBP000
Amortisation of intangibles 616 347 812
Share based payments on share options
issued in 2013 only 66 221 399
Acquisition and associated restructuring costs 195 36 102
877 604 1,313
=================== =================== ===================
7. Income tax expense
Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year of 24% (the estimated tax rate for the six months ended 30 June 2016 was 20%).
8. Earnings per Unaudited Unaudited
share six months six months Audited
ended ended 30 year ended
30 Jun 2017 Jun 2016 31 Dec 2016
pence pence pence
Earnings per share
Basic 6.9 5.1 10.6
------------- ------------ -------------
Diluted 6.7 4.9 10.0
------------- ------------ -------------
Adjusted earnings
per share
Basic 8.0 5.9 12.3
------------- ------------ -------------
Diluted 7.7 5.6 11.6
------------- ------------ -------------
8. Earnings per share (continued)
To provide an indication of the underlying operating performance the adjusted earnings per share calculation above excludes intangible amortisation and other non-underlying items and has a tax charge based on the effective rate.
Unaudited Unaudited
six months six months Audited
ended ended 30 year ended
30 Jun 2017 Jun 2016 31 Dec 2016
pence pence pence
Basic earnings per share 6.9 5.1 10.6
Non-underlying items 1.1 0.8 1.9
Tax losses recognised - - (0.2)
Adjusted earnings per share 8.0 5.9 12.3
------------- ------------ -------------
9. Cash generated from operations
Unaudited six months ended Unaudited six months ended Audited
30 Jun 2017 30 Jun 2016 year ended 31 Dec 2016
GBP000 GBP000 GBP000
Profit before tax for the
period 5,425 3,788 7,881
Adjusted for:
Depreciation 324 283 601
Amortisation 616 347 812
Share-based payment
expense 282 256 610
Finance income (7) (41) (66)
Finance costs 164 208 397
Changes in working
capital:
Increase in receivables (1,726) (2,994) (3,412)
(Decrease) / increase in
payables (4,666) (4,257) 6,173
Increase / (decrease) in
provisions 7 7 (36)
Cash generated from / (used
in) operations 419 (2,403) 13,032
=========================== =========================== ========================
10. Dividends
The interim dividend of 2.0 pence per share (2016: 1.5 pence per share) was approved by the Board on 21 July 2017. It is payable on 25 August 2017 to shareholders on the register at 4 August 2017. This interim dividend, amounting to GBP1,216,000 (2016: GBP886,000), has not been included as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 31 December 2017.
The dividend that relates to the period to 31 December 2016 and that amounted to GBP2,128,000 (2015: final dividend GBP1,654,000) was paid in May 2017.
11. Property, plant and equipment
Unaudited Unaudited
six months six months
ended ended
30 Jun 30 Jun
2017 2016
GBP000 GBP000
Opening net book amount
1 January 1,330 928
Additions 610 556
Acquired through acquisitions 25 46
Disposals (8) -
Exchange movements 16 27
Depreciation (324) (285)
Closing net book amount 30 June
(unaudited) 1,649 1,272
===================== =====================
The group has not placed any contracts for future capital expenditure which have not been provided for in the financial statements.
12. Trade and other payables
Unaudited Unaudited
six months six months
ended ended
30 Jun 30 Jun
2017 2016
GBP000 GBP000
Trade payables 741 506
Other tax and social
security payable 839 662
Other payables 137 48
Accruals 3,902 2,503
Deferred income 17,878 13,567
Closing net book amount 30 June
(unaudited) 23,497 17,286
================== ==============
13. Financial liabilities
Unaudited Unaudited
six months six months
ended ended
30 Jun 30 Jun
2017 2016
GBP000 GBP000
At 1 January 10,250 13,250
Loan repayment (1,500) (1,500)
At 30 June 8,750 11,750
================= ================
The borrowings are repayable
as follows:
Within one year 3,000 3,000
In the second year 5,750 3,000
In the third to fifth
years inclusive - 5,750
8,750 11,750
(3,000) (3,000)
Less: Amount due for settlement
within 12 months (shown under
current liabilities)
Amount due for settlement
after 12 months 5,750 8,750
================= ================
14. Provisions for other liabilities and charges
Unaudited Unaudited
six months ended six months ended
30 Jun 2017 30 Jun 2016
GBP000 GBP000
At 1 January 310 275
Exchange movements 7 7
At 30 June 317 282
===================== ===================
Provisions have been analysed between current and non-current as follows:
Unaudited Unaudited
six months six months
ended ended
30 Jun 30 Jun
2017 2016
GBP000 GBP000
Current 24 25
Non-current 293 257
At 30 June 317 282
============ ============
15. Share capital
Unaudited Unaudited
six months six months
ended ended
30 Jun 2017 30 Jun 2016
Ordinary share capital Number Ordinary Number Ordinary
at 6 3/7 pence each of shares Shares of shares Shares
000 GBP000 000 GBP000
Opening balance as at
1 January 59,297 3,811 59,060 3,796
Shares issued to satisfy
option awards 1,529 97 20 1
Closing balance as at
30 June (unaudited) 60,826 3,908 59,080 3,797
=========== ========= =========== =========
Employee share option scheme: options exercised during the period to 30 June 2017 resulted in 1,529,339 shares being issued (30 June 2016: 19,667), with exercise proceeds of GBP99,000 (30 June 2016: GBP28,000). The related weighted average share price at the time of exercise was GBP2.34 per share (30 June 2016: GBP1.40).
Unaudited Unaudited
six months six months
ended ended
30 Jun 30 Jun
2017 2016
GBP000 GBP000
Opening balance as at 1 January 4,498 4,484
Movement in relation to share options
exercised 2 9
Closing balance as at 30 June (unaudited) 4,500 4,493
============ ============
16. Acquisitions
On 27 February 2017 the Group acquired the entire share capital and voting rights of Primacy Corporation (Primacy) for consideration in cash of GBP3.4 million. Primacy is a wealth management software provider for the trust and corporate services industry, which will strengthen our market position.
Provisional values of the net assets acquired in the transactions and the intangibles arising, are as follows:
Carrying
values
pre Fair value Provisional
acquisition adjustments fair value
GBP000 GBP000 GBP000
Net assets acquired
Intangible fixed assets - 4,515 4,515
Deferred tax liability - (1,174) (1,174)
Property, plant and
equipment 25 - 25
Trade and other receivables 223 - 223
Cash and cash equivalents 122 - 122
Trade and other payables (68) - (68)
Deferred income (194) - (194)
108 3,341 3,449
------------- -------------
Goodwill -
Total consideration 3,449
============
17. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. During 2017, the Group entered into transactions with a subsidiary of FDM Group (Holdings) plc, a company for which Ivan Martin (Chairman) and Peter Whiting (non-executive director) are current non-executive directors. FDM Group provided consultancy services to Microgen Financial Systems during the six month period ended 30 June 2017 at a cost of GBP21,730. No equivalent transaction occurred during 2016. There were no other related party transactions during the six month period ended 30 June 2017 (30 June 2016: GBPnil), as defined by International Accounting Standard No 24 'Related Party Disclosures', except for key management compensation.
The related party transactions for the year ended 31 December 2016 as defined by International Accounting Standard No 24 'Related Party Disclosures' are disclosed in note 29 of the Microgen plc Annual Report for the year ended 31 December 2016.
18. Statement of directors' responsibilities
The directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Microgen plc are listed in the Microgen plc Annual Report for 31 December 2016. A list of current directors is maintained on the Microgen plc website: www.microgen.com
Copies of this statement are being posted to shareholders and will also be available on the investor relations page of our website (www.microgen.com). Further copies are available from the Company Secretary at Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.
By order of the Board
P Wood
21 July 2017
Group Finance Director
Independent review report to Microgen plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Microgen PLC's condensed consolidated interim financial statements (the "interim financial statements") in the Interim Results of Microgen PLC for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated interim balance sheet as at 30 June 2017;
-- the condensed consolidated interim income statement and condensed consolidated interim statement of comprehensive income for the period then ended;
-- the condensed consolidated interim statement of cash flow for the period then ended;
-- the condensed consolidated interim statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Interim Results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Reading
21 July 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GMGZNRMGGNZM
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