Tikit, a leading independent provider of IT software, solutions, consultancy and services to legal and accounting firms in the UK, North America and mainland Europe, today reports interim results for the six months to 30 June 2012.

Key Financial Results (presented under IFRS)

 

 

2012

2011

Change %

Revenue

£13.4m

£13.3m

Profit before tax1

£2.4m

£2.3m

5.5

Statutory profit before tax

£1.7m

£1.6m

8.5

Earnings per share1

12.8p

11.8p

8.5

Basic earnings per share

9.5p

8.2p

15.9

Interim dividend per share

3.0p

2.5p

20.0

Cash generation from operations

£2.7m

£2.4m

13.8

Net cash at period end

£6.6m

£4.1m

62.2

 

Highlights

 

  • Profit before tax1 increased 5.5% to £2.4 million (H1 2011: £2.3 million)
  • Improvement in operating margin1 to 17.9% (H1 2011: 17.1%)
  • Revenue generated from sales and support of Tikit-owned software increased 7.5% to £4.3 million (H1 2011: £4.0 million)
  • Earnings per share1 up 8.5 % to 12.8p (H1 2011: 11.8p)
  • Interim dividend up 20.0% to 3.0p per share (H1 2011: 2.5p)
  • Encouraging demand for eMarketing and Carpe Diem suites
  • 500 user multi-year outsourcing contract win in first half

 

Commenting on the results, Mike McGoun, Chairman, said;

“The Board is pleased with the progress that the Group is making to increase revenues from higher margin Tikit-owned software and the investments made in the first half of the year in sales and marketing are expected to result in even higher sales in the second half. In addition, Tikit is well-positioned to capitalise on the increased enthusiasm of law firms to outsource their IT requirements, where larger, multi-year contracts would add significantly to our future recurring revenues. Since the end of the half year, trading has continued to be in-line with the Board’s expectations. ”

1 Before amortisation of acquired intangibles and share-based charges

 

CHAIRMAN’S STATEMENT

Introduction

I am pleased to report that the Group has increased profits during the six months to 30 June 2012 over the same period last year and has remained strongly cash generative during the period. There has been some improvement in market conditions during the first half and the level of interest in Tikit-owned software continues to increase. This software generates higher margins and as previously indicated we have continued to invest in its development and have increased expenditure in sales and marketing activities, particularly in North America.

Results

Total revenues of £13.4 million were slightly ahead of the previous year and reflected an improved mix, with total revenues from Tikit-owned software increasing 7.5% to £4.3 million (H1 2011: £4.0 million). Tikit-owned software now represents 32.2% of total revenue (H1 2011: 30.0%)

Profit before tax1 increased 5.5% year-on-year to £2.4 million (H1 2011: £2.3 million) and our operating margin improved to 17.9% (H1 2011: 17.1%).  Earnings per share1 increased 8.5% year-on-year to 12.8p (H1 2011: 11.8p), reflecting the increase in pre-tax profit and reduction in the effective tax rate to 24.1% from 26.6%, arising from a decrease in UK corporation tax rates. Statutory profit before tax increased by 8.5% to £1.7 million (H1 2011: £1.6 million), with basic earnings per share up 15.9% to 9.5 pence (H1 2011: 8.2 pence).

Our balance sheet remains strong.  Net assets at 30 June 2012 were £18.7 million (H1 2011: £16.9 million), with net cash balances up £2.5 million to £6.6 million (H1 2011: £4.1 million).  The business continues to be cash generative with a net cash inflow from operating activities in the period of £2.7 million (H1 2011: £2.4 million), representing a conversion into cash of 108% (H1 2011: 98%) of operating profit before depreciation, amortisation and share-based charges.  Cash outflow for dividends was £0.77 million in the period (H1 2011: £0.60 million).

1 Before amortisation of acquired intangibles and share-based charges

Interim Dividend

The interim dividend has been increased by 20.0% to 3.0p (H1 2011: 2.5p) and will be paid on 12 October 2012 to shareholders on the register at 14 September 2012.  This underlines the Board’s continued confidence in the cash generating qualities of the Group.

Operating Review

Recurring revenues

Total revenues from support and outsourcing are similar year-on-year at £7.6 million (H1 2011: £7.7 million), with support of Tikit-owned software generating £3.3 million (H1 2011: £3.2 million).  Recurring revenues accounted for 57.1% of total revenues. Our reseller agreement with LexisNexis ceased in May 2011 and it is pleasing to note that we have replaced revenues derived from that agreement with higher margin revenues from support of our own software.

Despite improving conditions in the sector, law firms continue to review their cost bases.  This presents an obvious opportunity for Tikit and we are engaging with clients to advise how they could deliver their IT more efficiently by utilising Tikit’s managed services teams.  We signed a multi-year contract with Clarke Willmott in the first half which consists of a blended on-site technical resource and off-site help desk approach to delivering efficient IT management and support services to the firm.  This outsourced contract began in June and will run for a minimum of three years.

Software sales

Total software sales increased in the first half by 15.5% to £3.1 million (H1 2011: £2.7 million) and accounted for 23.2% of our total revenues. Sales of Tikit-owned software increased by 19.0% to just over £1.00 million (H1 2011: £0.84 million).

Of particular note is the success of our Template Management System (TMS) which was implemented most recently at Linklaters and is now being installed by a number of other major law firms such as Simmons & Simmons, Olswang, Irwin Mitchell and Nauta Dutilh.

We have also increased our presence in the accountancy market with HP iManage DMS sales to both Price Bailey and Kingston Smith, in addition to completing further sales to both UK and mainland Europe law firms.

The Tikit Carpe Diem suite of time recording products are well established in large law firms worldwide and we continue to win large orders from law firms looking to improve and standardise their time recording capabilities, with Kammeradvokaten and Blank Rome recently committing to the new Enterprise version of the product.

Sales of TikitConnect CRM solutions have been encouraging in the first half, with clients implementing this new software in the UK, France, Spain and North America.  Adoption of our cloud-based subscription software, Tikit Legal Office (TLO), in the first half has been slower than we had hoped for, however interest levels are good as prospective and existing clients have the option of a fully hosted solution.  We expect our increased focus on sales and marketing to lead to faster growth in these areas in the future.

Sales of Tikit’s award winning practice management system, Partner for Windows, have been good in the reported period and we were delighted that the Co-operative Group, the UK’s largest mutual business, made a substantial investment in this software. The agreement will include bringing together The Co-operative Banking Group Legal Services and The Co-operative Group Legal Department teams.

Consultancy

In the first half of the year we successfully implemented a number of large consulting projects on both Tikit-owned and third party software. Overall consulting revenues in the period were £2.1 million (H1 2011:  £2.4 million).  Consulting revenues generated from Tikit-owned software increased during the period, however, consulting revenues on third party software declined due mainly to the lower demand for services on InterAction CRM.  We expect consulting on CRM to improve in the future through increased sales of TikitConnect software and we will retain our experienced CRM consulting team to deliver these projects.

Overseas Operations

Business in North America continues to be important and our key focus is selling Tikit’s eMarketing and Carpe Diem software into the North American market where we already support over 300 US law firms as clients, including 61 of the top 100.  We have increased expenditure in sales and marketing activities which has led to us winning a number of new eMarketing and Carpe Diem clients in the first half as well as producing a good pipeline of opportunities for the second half.

Our businesses in France and Spain remain marginally profitable despite very tough trading conditions. Both businesses are the legal technology provider of choice in their respective countries for law firms servicing over 70 clients.

We have also signed two distributor agreements with organisations in Asia to resell Tikit-owned software into local markets.  This is a new strategic move into the Asian market which we anticipate should start to show returns in the future.

Current Trading and Outlook

Since the end of the half year, trading has continued to be in-line with expectations.  We have seen some improvement in market conditions during the first half and the level of interest in Tikit-owned software continues to increase. The outsourcing contracts won in the first half will increase recurring revenues in the second half and we anticipate more firms will be looking to outsource their IT activities.  Tikit is very well positioned to capitalise on these opportunities.

We are optimistic about our future prospects in North America as there remains a significant growth opportunity from further penetration, particularly of Carpe Diem and look forward to converting more of these opportunities into sales in the second half.

The full results are attached as a PDF Interim Statement 2012 Final