Tikit publish their 2007 results
The Tikit Group plc published its preliminary results for its trading year to 31st December 2007 earlier today (Wednesday 12th March). Here are the summary results…
• Group Revenues up 12.4% to £26.43 million (2006: £23.52 million)
– Total services, including consultancy and support, up 16% to £17.56 million (2006: £15.18 million)
– Consultancy up 8% to £7.9 million (2006: £7.3 million)
– Recurring managed services and support revenues up 23%
to £9.63 million (2006: £7.84 million)
– Software sales up 8% to £8.12 million (2006: £7.53 million)
• Profits before taxation and share option charges up 24% to £3.62 million
(2006: £2.92 million)
• Proposed final dividend of 3.25 pence per share resulting in a full year dividend up 25% to 5.0 pence per share (2006: 4.0 pence).
• Cash generated from operations was £2.09 million (2006: £3.61 million). In the year, £1.58 million of Tikit’s cash resources was used to satisfy earn-out payments and £0.39 million was used to purchase shares into treasury, resulting in net cash of £2.55 million at 31 December 2007 (2006: £4.15 million)
And here is chairman Mike McGoun's statement…
I am pleased to report that solid organic growth in revenues combined with our continued focus on improving margins has resulted in the Group achieving its planned profit growth over 2006.
This is the first set of full year results announced under IFRS with comparisons against re-stated 2006 results. Total Group revenues of £26.43 million in 2007 represent organic growth of 12.4% compared with £23.52 million reported in 2006. The Group has again increased its operating margins, achieving 13.8% for the full year (2006 12.4%). Profit before taxation increased by 22% to £3.39 million (2006: £2.79 million) and after adjustment for share option charges increased by 24% to £3.62 million (2006: £2.92 million).
Good progress has been made in many areas of the business, with continued solid growth in our contracted support revenues, major project wins with our existing large legal clients and significant success from our recent move into the accountancy sector. In addition, customer response to the release of new Tikit-developed software, particularly the enhanced version of Tikit e-marketing suite and the Tikit Template Manager System for Microsoft Word (TMS) resulted in sales in the second half and also indicate potentially higher sales of these products during 2008 and beyond.
Our European subsidiaries based in France and Spain continue to make good progress with new customer wins and increased market share. Both France and Spain are experiencing a good start to 2008..
Revenues for the period increased by 12.4% to £26.4 million. (2006: £23.5 million). Reported revenues were slightly below expectations as a result of the earlier implementation of subscription-based pricing on some of our products than was originally planned. In conjunction with one of our key software partners, we offered subscription-based pricing to new clients in the final quarter of 2007. This is an exciting development for the Group, which will secure more predictable long-term revenues. There will be a short term impact on both revenues and profits as we move from initial licence fee recognition of software sales to revenue recognition over typically 5 year contracts.
Total services revenue from our consultancy and managed services businesses increased by 16% to £17.6 million (2006: £15.2 million) of which £9.6 million (2006: £7.8 million) related to managed services and support revenue. These contracted recurring revenues accounted for 37% of total group revenues in 2007.
The improvement of operating margins from 12.4% to 13.8% reflects higher utilisation rates of our chargeable staff and efficiencies gained through the integration of managed services operations and reducing some lower margin business in non-strategic areas such as hardware sales.
Profits before taxation increased to £3.4 million (2006: £2.8 million). After adjusting for share options, profits for the Group increased by 24%, achieving an audited profit before taxation and share option charges for the period of £3.6 million (2006: £2.9 million).
Share option charges during the period, as required by IFRS, were £231,000 (2006: £127,000). This is a non-cash charge to profits based upon the best estimate of the market value of shares at the time in the future that share options become exercisable. In order to eliminate the potential dilution effect of share options and to meet the anticipated future liabilities associated with share options, the Group has purchased 250,000 Tikit Group shares and hold them in treasury. The average price paid for these shares was 251 pence per share.
Earnings per share, before share option charges, increased by 10% to 20.1 pence (2006: 18.3 pence). However, the effective tax rate on profits increased from 22.4% in 2006 to 30.0% in 2007. On a normalised tax basis, earnings per share increased by 21%. Normalising tax means restating the prior year earnings as if the effective rate of tax was 30%. Basic earnings per share were 18.6 pence (2006: 17.3 pence).
Our balance sheet remains strong, with net assets at 31 December 2007 of £8.2 million (2006: £6.9 million), including cash balances of £2.5 million (2006: £4.1 million). Cash generated from operations was £2.09 million (2006: £3.61 million). The reduction in cash generated is primarily as a result of an increase of £2.45 million in trade receivables at 31 December 2007 over the prior year.
In summary, 2007 was a good year for the Group. We enter 2008 with a strong order book of projects to be implemented, reflecting the blend of consultancy, support and software business sold in the last quarter.
Tikit is in an excellent position to continue to support its clients in the legal and accountancy sectors. Both of these sectors have shown good resilience in previous economic downturns and it is our belief that the excellent range of services and products available from Tikit will enable our clients to manage their businesses more effectively during such a period and beyond.
During the last twelve months, we have seen a strengthening in the partnership with LexisNexis to expand their business in the legal and accountancy sectors. LexisNexis, part of the Reed Elsevier group of companies is an established global provider of information-based subscription services to the legal sector. In recent years they have expanded, through acquisition, into the provision of software, such as Interaction and more recently Redwood Business Analytics. Tikit are their partner in the UK for these products.
We have recently been appointed as a partner for the implementation of Thomson Elite products into the legal market place. We expect to capitalise on this arrangement in 2008 and beyond, not only in the UK, but also in mainland Europe, utilising our own operations and clients in that territory.