Staffware plc ("Staffware", "Group") Preliminary results (12 months ended 31 December 2002) Staffware returns to profitability in 2002

Financial
! Return to positive EBITDA of 4.0 million (2001: 1.9 million loss)
! Profit before tax of 2.6 million (2001: 3.3 million loss)
! Record profit after tax of 1.6 million (2001: 3.7 million loss)
! Increase in annual revenue to 39.0 million (2001: 38.2 million)
! Cash resources continued to increase to 19.0 million (2001: 17.3 million)
! Significant increase in dividend: final dividend of 4.0p per ordinary share; making a total of 5.0p for the year (2001: 1.0p)
! Continued high investment in new product development: 7.1 million invested in 2002, 18% of sales (2001: 7.5 million). UK and global software industry averages of 5.8% and 10.2% respectively.*
! Earnings per share pre goodwill 18.4p (2001: 18.5p loss)
! Record revenue in Q4 of 12.7 million representing 14% increase on Q4 2001.
Business Development
! Signed 22 250,000 plus contracts in 2002 (2001: 19), including:
- UK: Government contracts DVLA, Environment Agency
- USA: ABN Amro and ABFS (diversified financial services)
- Hong Kong: PCCW has chosen Staffware to implement a workflow solution in respect of the Smart Identity Card System for the Immigration Department of the Government of the Hong Kong Special Administrative Region
! Staffware identified number 1 BPM dedicated specialist by Aberdeen Group (September 2002)
John O'Connell, Chairman and Chief Executive Officer, Staffware plc, said: "We are delighted to report a return to profitability for the full year 2002 and record sales levels. These strong results are due to the strength of the Staffware offering and our focus on tight cost controls. Our blue chip customer base and the solid financial state of the business - profitable, debt free and cash generative - ideally position us to further strengthen our position in the emerging BPM market.
"Going forward the Board will continue to manage the growth of the business both organically and by acquisition to increase shareholder value."
*Source: The 2002 R&D Scoreboard; Department of Trade and Industry
Enquiries:
Staffware plc (www.staffware.com) +44 (0) 20-7638-9571
John O'Connell, Chairman and Chief Executive Officer (for today only)
Tim Perks, Chief Financial Officer
Citigate Dewe Rogerson +44 (0) 20-7638-9571
Peter Pender Cudlip, Sara Batchelor, Fiona Bradshaw
The 2002 preliminary results presentation will be accessible via a live
webcast at 9.00 am on the Staffware website, www.staffware.com
High resolution images are available for the media to view and download
free of charge from www.vismedia.co.uk
Chairman and Chief Executive Officer's Statement
We have delivered record sales and post tax profits for 2002 in continuing tough trading conditions for IT companies. Encouragingly, we have achieved growth for the last three quarters also, at a time when many software companies have reported a major decline in their core software licence revenue. We are also pleased to announce that the Group returned to profitability during 2002. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is 4.0 million for 2002, which compares to an EBITDA loss of 1.9 million for 2001. We have been successful in keeping costs under tight control with the full year benefit of actions taken in 2001 resulting in overall costs being 12% down on 2001 and principally reflecting a lower average headcount of 339 people in the year (13% less than 2001).
Revenue
Overcoming the slow start, total sales increased for the year and finished the year strongly. We achieved record revenue in the fourth quarter of 12.7 million, representing a 14% increase on the fourth quarter 2001 of 1.5 million. The UK/SEEMA division led with a number of noteworthy deals in the period, backed up by solid performances from most other business units, especially in the Netherlands, Spain and the USA. Licence sales surged to 8.3 million, 65% of total sales in the quarter. Overall 65% of sales were overseas (2001: 70%). Staffware licence sales accounted for a healthy 55% of total sales in the year (2001: 56%). The Staffware Process Suite led our thrust into the Business Process Management "BPM" market, and represented 34% of licence revenue in the year.
There was an increase of 27% in the average order value for licences, to 94 thousand, compared to 74 thousand last year, offsetting the lower number of 343 licence deals, compared to the 413 in 2001. Encouragingly, the proportion of sales to existing customers, extending their use of Staffware also increased to 68% (2001:50%). I believe this is a positive reflection of the return our customers are achieving from their investment in Staffware technology, in terms of improved productivity, better customer service and heightened control.
Maintenance support revenue increased to 9.1 million, a 16% increase on 2001. Deferred income increased 47% to 8.1 million (2001: 5.5 million), all of which will be realised as revenue during 2003. Professional services revenue, covering on-site technical consulting and training fees was down by 9% for the year at 8.3 million (2001: 9.1 million) due to a combination of timing of the software revenue, the deliberate shortening of implementation timescales and the successful skills transfer to both partners and customers.
In 2002 we signed 22 (2001: 19) 250,000 plus contracts. These included:
UK - A number of contracts in the government sector including
DVLA, Companies House and the Environment Agency, as
well as the Insurance and Investment Division of HBOS.
Germany - Deutsche BKK, a public health insurance company
seeking to optimise their core business processes for 1,500
employees with Staffware.
India - HDFC Bank using Staffware for account opening in the retail
sector and trade finance in corporate banking.
Holland - Thuiszorg Utrecht, a healthcare company; and ABN Amro.
Australia - AMP Financial Services where Staffware will provide end-toend
visibility of all customer transactions; and Optus who
selected Staffware's iProcess Engine to further enhance its
customer service infrastructure.
USA - ABN Amro; ABFS, a national, diversified financial services
company using Staffware for its complex loan fulfilment
processes.
Spain - Mapfre Seguros Generales, a major Spanish insurance
company implementing a new generation of claims
processing systems.
Hong Kong - PCCW has chosen Staffware to implement a workflow
solution in respect of the Smart Identity Card System for the
Immigration Department of the Government of the Hong
Kong Special Administrative Region.
The Staffware Enterprise Partner (StEP) Programme continues to deliver
significant revenue and opportunities, and sales through partners, including
Cap Gemini Ernst & Young, EDS and Deloitte and Touche, accounted for
40% of total sales in 2002 (2001: 28%), including noteworthy contracts in
the UK and Hong Kong. In addition another 20% of revenue came in
association with Partners.
Geographically, sales by destination were distributed as follows:
% %
2002 2001
UK 35 30
Rest of Europe 32 30
Americas 13 16
Australia 11 14
Asia Pacific 5 3
Rest of world 4 7
Total 100 100
Our businesses in the UK and the Netherlands had outstandingly profitable
performances in the year. In Spain we achieved excellent sales and profit
growth and our North American business also attained profitability,
notwithstanding an extremely harsh trading environment.
There was again a good distribution of sales across vertical markets; the
main ones of which are detailed below:
% %
2002 2001
Finance 33 28
Insurance 16 8
Government 19 18
(Central and Local)
Telecommunications 11 9
Other 21 37
Total 100 100
Working Capital
The Group has an extremely strong balance sheet and is importantly very
well capitalised. Cash collections continued at a high level and as at 31
December 2002 cash resources were up by 1.7 million to 19.0 million
(2001: 17.3 million). The Group had no indebtedness other than standard
equipment/vehicle leasing arrangements. Trade debtors stood at 12.3
million at 31 December 2002 (2001: 8.6 million) representing
approximately 61 days of sales (2001: 45 days). There were record receipts
in January 2003 of 8.1 million.
Product Development
During the year, we invested 7.1 million in Research and Development
(2001: 7.5 million), representing 18.1% of sales. This compares to the UK
and global software industry averages of 5.8% and 10.2% respectively.
(Source: The 2002 R & D Scoreboard; Department of Trade and Industry).
Following the release in late 2001 of Version 1 of the Staffware Process
Suite, this year we have been developing the new functionality of Version
2, a number of components of which were delivered during the course of
the year to selected customers and partners, once again on time and under
budget. These combined new features further strengthen our appeal to IT
professionals designing, integrating, deploying medium to high volume
mission critical process centric applications in complex environments. The
Staffware Process Suite has proven its capability to enhance customers'
investments in IT, such as Enterprise Software, by streamlining
interconnecting transactions, as the 'Independent Process Layer'.
Dividend
The Board of Directors recommends that a final dividend for 2002 of 4.0p
per ordinary share, be paid on 14 April 2003 to shareholders on the register
at the close of business on 21 March 2003, subject to approval at the AGM
on 11 April 2003. This makes a total of 5.0p for the year and marks a step
change compared with a total of 1.0p for the year 2001, recognising the
improvement in our performance in 2002.
Staff
Our management and staff rose to the challenge magnificently in 2002 by
helping us achieve a great turnaround in profits without sacrificing sales
revenue in the process. A 17% improvement in our productivity, in terms
of revenue per head, reflects the combined results of their skills, experience
and commitment. I am confident they can be relied upon to continue to
perform at world class levels, for which the board is truly appreciative.
Outlook
Notwithstanding the current downbeat tone of most commentators on the IT
industry, we do believe Staffware has carved out a unique position, which
positions it well. Our dedication has been the essence of our success. This
dedication is exemplified by a continued high investment in R&D, in both
good and not so good times, allied to unwavering management focus,
historically on workflow and in the last 18 months on its expansion as
BPM.
During last year our technology has been acclaimed as world leading by
independent analysts such as Doculabs and Yphise. It was gratifying to
note that the Aberdeen Group identified Staffware as the number one BPM
dedicated specialist in the world in its September 2002 survey, despite the
current debate about the definition of BPM and the inclusion of 36 claimed
vendors - both public and private, specialist or otherwise. Such confusion
about BPM, commonplace in emerging technology markets, signals a real
opportunity for Staffware to be a dominant player in one of the few global
IT markets forecast to grow faster than GDP growth.
The planned launch of Version 2 of the Staffware Process Suite in April of
this year should strengthen our market and technology leadership in BPM.
We plan to re-double our efforts in the area of Process Frameworks,
specifically targeted at the financial services and telecoms markets. In
addition we are launching revitalised Customer and Partner programmes,
plus continuing to pay significant management attention to investing in our
staff to build on the improvement in productivity last year.
Our marketing is being targeted at creating a higher profile with both the
business and technology community interested in attaining the benefits
being achieved by our customers and partners around the world - at a time
when there remains deep scepticism about the claims being made by many
other software companies. In other words Staffware is now being seen as a
'must have' rather than just a 'nice to have' technology by more and more
organisations in business and government.
Underlying all of the above will be the continued tight management of costs
and cash, which has especially stood us in good stead in the recent past, and
we look forward to making continued progress during 2003.
John O'Connell Chairman and Chief Executive Officer
24th February 2003