Electronic Data Processing : Preliminary Results for the year ended 30 September 2016

20 December 2016

Electronic Data Processing PLC (EDP) Preliminary results for the year ended 30 September 2016

EDP is an IT solution provider to the UK wholesale distribution industry and a supplier of CRM and Business Intelligence software more widely.

Highlights:

	Turnover £4.96 million (2015: £5.16 million)
	Contracted recurring revenues remain strong, representing 82% of total revenues (2015: 79%)
	Hosting revenues amounted to 59% of total revenues (2015: 51%), strengthening our recurring revenues and therefore visibility
	Adjusted operating profit broadly maintained at £430,000 after margin improvements and targeted overhead savings (2015: £459,000), giving an operating margin of 8.7% (2015: 8.9%)
	Pre-tax profit of £244,000, after one-off charges of £114,000 in relation to property disposed of after the year end (2015: £347,000)
	R&D expenditure was £982,000 in the year (2015: £1,067,000) reflecting continuing enhancement of Quantum VS and Vecta products
	Strong debt-free balance sheet; cash balances of £5.40 million at 30 September 2016 (2015: £5.55 million)
	Last remaining surplus freehold property sold after the year end for £1.2 million
	A strategic review of the business is continuing. The conclusions of the review will be reported to shareholders in due course.
	Final dividend 3.0p per share, meaning overall dividend maintained at 5.0p for the full year

Sir Michael Heller, Chairman of EDP, said:

"With a robust, cash generative business model and a strong debt-free balance sheet I remain confident about the future"

For further information please contact:

Julian Wassell Chief Executive 0114 2622010

James Storey Finance Director 0114 2622010

Toby Mountford Citigate Dewe Rogerson 020 7638 9571 07710 356611

www.edp.co.uk

Chairman's Statement

Turnover for the year to 30 September 2016 was £4.96 million compared with £5.16 million the previous year. This resulted from a quiet end to the financial year as decisions on a discrete number of sales opportunities were delayed by customers. This is dealt with further in the Chief Executive's statement.

Adjusted operating profit (which excludes non-cash IFRS items and exceptional non-trading costs and is reconciled to statutory profit before tax in note 3 to the consolidated financial statements) was £430,000, compared with £459,000 last year. The reduction in turnover was largely offset by improved margins and lower overheads.

Statutory pre-tax profit for the year was £244,000 (2015: £347,000) after charges of

£114,000 in relation to property matters which are referred to below.

Contracted recurring revenues, which comprise income from annual software licence fees and hosting subscription charges, amounted to 82% of total revenue compared with 79% in the previous year. Revenues generated through the hosting centre also increased to 59% of total revenues, up from 51%.

R&D expenditure for the year was £982,000 (2015: £1,067,000) as we continued to enhance our key products, Quantum VS and Vecta.

I am pleased to confirm that since the year end we have completed the sale of our surplus freehold property in Milton Keynes for £1.2 million. Net of disposal costs the proceeds amounted to £1.17 million. This resulted in a £10,000 reduction in the carrying value of the property at the year end. As reported at the half year stage, we incurred an exceptional charge of £104,000 relating to repairs to the roof of this property following storm damage.

This sale completes a process that we started some years ago, to dispose of six freehold properties which had become surplus to operating requirements. Overall this process has generated more than £7 million of cash which has supported distributions to shareholders totalling £11 million over the same period.

Operating cash flows were strong and at the year end cash and short-term deposits (classified as investments in the balance sheet) totalled £5.4 million (2015: £5.55 million). This is after dividends paid during the year of £631,000 but this does not include the cash from the property disposal which was received after the year end.

Net assets at 30 September 2016 were £3.19 million compared to £4.96 million at 30 September 2015. The reduction is due to a further increase in the liability relating to our defined benefit pension scheme under IAS19. Net of deferred tax we have made a non-cash provision during the year of £1.4 million following a further significant decrease in the discount rate used to value liabilities under IAS19. This is discussed further in the Chief Executive's Statement.

The Directors are proposing to pay a final dividend of 3p per share (2015: 3p) giving a total dividend for the year of 5.0p, the same as last year. Total cash dividends paid to shareholders will therefore amount to £631,000. If approved by shareholders, the final dividend will be paid on 6 April 2017 to those shareholders on the register at 10 March 2017. The shares will be ex-dividend on 9 March 2017.

We announced earlier in the year that we are carrying out a strategic review of the business and that process is continuing. We will report the conclusions of the review to shareholders in due course.

I would like to thank all our members of staff and my colleagues on the Board for their contribution during the year.

With a robust, cash generative business model and a strong debt-free balance sheet I remain confident about the future.

Sir Michael Heller Chairman

19 December 2016

Chief Executive's Statement

Total revenue for the year was £4.96 million, a 4% reduction from last year. From a sales point of view, the end of the financial year was a little disappointing with a small number of customers delaying orders. Whilst each opportunity had a specific and understandable reason for the delay, it is also possible that caution over wider economic factors played a part in these instances. These opportunities have not been lost and we are continuing to work to expedite them. The first of the delayed orders was converted in October and so far in the current financial year we are slightly ahead of the previous year in overall revenue terms.

Our adjusted operating profit for the year was £430,000 compared with £459,000 in 2015. Ordinarily we would expect a reduction in turnover to have a similar pound for pound impact on operating profit, as our overall gross margin is typically well over 90%. We were, however, able to maintain our adjusted operating profit at a level broadly similar to last year due to an improvement in margins and targeted overhead savings. Hardware related revenue was £116,000 compared with £184,000.

We have for many years pursued a strategy to strengthen the relationship with our customers by growing the proportion of our revenues delivered through our hosting centre in Milton Keynes. Last year was no exception as hosting revenues amounted to 59% of total revenues, up from 51% the previous year, strengthening our recurring revenues and therefore visibility.

We strengthened our new business sales team last year and are currently looking to invest further in this area. We continue to manage the migration process to Quantum VS carefully, recognising that while Quantum VS provides an excellent solution for the majority of users of our older legacy products, the migration process itself inevitably leads to higher levels of customer churn than we have historically seen. We have continued to sign new orders during the year and at 30 September 2016, we had 40 customers signed up for our Quantum VS product with a further 113 still using our older applications.

The first customers for our new Quantum VS e-business module went live during the year and we have further customers currently in the implementation process. Quantum VS e- business allows us to offer a single product which can be implemented on an incremental basis starting with a simple website, through on-line catalogue access, to a sophisticated e- business solution fully integrated into their back-office application. It is also compatible with our legacy applications which assists the migration process.

In the short-term, we would expect to see the proportion of our total revenues represented by Vecta start to increase due to the fact that its sales cycle is much shorter than that for an ERP solution such as Quantum VS.

Strategy

Our two main products, Quantum VS and Vecta deliver software solutions that offer clear business benefits to our customers helping them to generate sales growth or to create efficiencies and drive down costs. Quantum VS and Vecta are complementary with many of our customers using both.

Quantum VS is an ERP application focussed on a number of verticals within the distribution sector including builders and timber merchants, suppliers of fixings and fastenings, industrial