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Tikit publishes its results for the first six months

The AIM-listed Tikit Group plc today published its Interim Results for the six months ended 30 June 2007 – the figures are another record high. Highlights from the Chairman's report include…

“This is the first set of results announced under IFRS with comparisons against re-stated 2006 interim results. The company is pleased to report that the performance in the first half has produced results in line with the Directors’ expectations. Good organic growth in revenues combined with our continued focus on improving margins has resulted in the planned profit growth over the same period in 2006.

“Total Group revenues of £13.2 million in the first half of 2007 represent organic growth of 16% compared with the first half of 2006. The group has again increased its operating margins, achieving 12.1% in the first half (2006: 11.7%), primarily as a result of better management of overheads. Despite lower utilisation than planned in our consultancy operations during the first half of 2007, the Directors believe that there is scope for further improvement in overall margins as utilisation levels improve.

“Good progress has been made in many areas of the business, with continued solid growth in recurring, contracted support revenues. 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), indicate potentially higher sales of these products in the second half. Our European subsidiaries based in France and Spain had a good first half with new customer wins and increased market share.

“Turnover for the period was £13.19 million (2006: £11.41 million), representing a 16% increase on the same period last year. Our services businesses, in total, increased by 11% to £8.78 million (2006: £7.92 million), with contracted recurring revenues showing strong growth of 15% to £4.94 million (2006: £4.29 million) contributing 37% of total group revenues. Operating margins continue to improve towards our target of 12.5%, achieving 12.1% in the first half (2006: 11.7%).

“The profit before taxation and share option charges was £1.62 million, an increase of 19% over the first half of 2006 (£1.36 million). The provision for share option charges, as required by IFRS, was £118,000. This is a non-cash charge to profits based upon the fair value of the options assessed at the date of grant, and subject to vesting criteria being met. 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 200,000 Tikit Group shares and hold them in treasury. The average price paid for these shares was 245 pence per share.

“The profit before taxation was £1.51 million (2006: £1.29 million), an increase of 17% over the prior year period. Earnings per share before the charge for share based charges were 9.3p (2006: 8.2p), an increase of 12% over the prior year, reflecting the increased tax charge relative to the prior year.

“Cash generated from operations was £0.95 million. In the first half, £1.27m of the Group’s cash resources were used to satisfy final earn-out payments due to LecSoft, our Paris-based subsidiary, under the terms of their earn-out agreement and £0.26m was used to purchase 100,000 shares into treasury, resulting in net cash of £2.81 million at 30 June 2007 (2006: £3.06m).

“Continuing our successful strategy of providing the highest level consultancy and products into the large law firms and accountancy practices we have made further inroads into our target market with more new wins of our leading CRM and DM products – LexisNexis Interaction and Interwoven WorkSite. In addition, we have also secured new clients for our Redwood Business Intelligence and Metastorm eWorks workflow applications. Both the Redwood and Metastorm products require significant business consultancy and this has further established Tikit’s reputation as a true business consulting partner to law firms looking to exploit their investment in information technology.

“Whilst our technical consultancy utilisation and revenues were slightly lower than we had planned for in the first half this was compensated for by the increase in recurring revenues from our contracted onsite support operations. The reason for the lower consultancy was partly down to the reduced number of new sales of Interaction and WorkSite in the mid tier firms although we expect this to change in the second half with the introduction of our fixed price cost of ownership offering for these applications to customers.

“Two new Tikit written and owned software products were launched in the first half of the year to provide an out of the box workflow solution for client matter inception process and a more efficient interface to manage Microsoft Office templates. Both of these products have been well received. Our operations in France and Spain continue to progress and there have been significant new business wins further increasing our presence in these markets.

“Our overall operations continue to show good progress with good pipeline of new opportunities and high consultancy visibility for the first part of the second half of the year.  We expect that our continued investment in the managed support operation will mean that we continue to experience high retention of existing clients whilst adding new clients over the remainder of the year.

“The second half of the financial year for the Group has traditionally been stronger than the first half. With a healthy backlog of consultancy and support, combined with a number of opportunities to secure major projects with some of our larger clients, we believe we are in a good position to continue this profile in 2007.

“Whilst business activity levels remain high and there are currently no indications that the current uncertainty in the financial and M&A markets is resulting in lower confidence levels amongst our clients, we will be somewhat more cautious about our expectations for 2008 and beyond with regards to organic growth opportunities and manage our cost base accordingly. Our experience is that any tightening of project spend by our clients will lead to greater managed services opportunities for Tikit…”