Portrait Software plc (London: PST), a leading provider of Customer Interaction software announces its financial results for the 6 months ended 30 September 2005.
- Turnover of £4.8 million (2004: £8.0 million including a £2.0 million release of deferred revenue).
- Positive adjusted EBITDA, being earnings before interest, tax, depreciation, amortisation and exceptional items, of £0.2 million (2004: £1.3 million including benefit of £2.0 million deferred licence revenue release).
- Operating loss of £0.2 million before exceptional charges of £0.2 million (2004: operating profit of £0.9 million before exceptional income of £0.8 million). 2004 numbers include the £2.0 million revenue item referred to above. Pre-tax loss of £0.5 million (2004: pre-tax profit £1.6 million) after exceptional items.
- Diluted loss per share of 0.77p (2004: earnings per share 2.87p). Adjusted diluted loss per share of 0.29p (2004: earnings per share of 1.58p) excluding exceptional items and goodwill amortisation.
- Share placing in June 2005 strengthened the balance sheet, with £4.75 million raised net of expenses.
- Key appointments from within industry to enhance sales functions.
- Portrait now live in a major UK Emergency Call Handling centre; at the Chinese Automobile Association in Beijing; at Chelsea Building Society; Cheshire Building Society and as a compliance solution for a leading telecommunications provider and a retail organisation.
- Currently 15 Portrait installations and more than 150 customers worldwide.
- FiServ has recently engaged with Portrait Software for the development of further enhancements to the Aperio Enterprise Sales and Service platfor (powered by Portrait)
Nick Randall, Chief Executive of Portrait Software plc, said today: "We are repositioning our business to be a high margin, software driven business by exploiting our powerful Portrait technology. This has had an impact on sales in the short term as we restructure our business, but with the high calibre individuals we now have in place and our strengthened financial position, there are considerable grounds for optimism going forward."
We have made progress in the first half of the financial year including the strengthening of the management team and our finances. These are steps towards establishing a high margin, software driven business, fully exploiting our powerful Portrait technology. This change in our business model resulted in sales in the first half of the year being less than last year. However, this performance was broadly in line with our own internal expectations as we were able to benefit from significant reductions in our overhead base.
Sales revenue in the first half year was £4.8 million. This compares to £8.0 million revenues, which included a £2.0 million release of deferred revenue, for the equivalent period in 2004. Services revenue accounted for £2.0 million (2004: £2.1 million).
Adjusted EBITDA was £0.2 million (being operating profit before depreciation, amortisation and exceptional items totalling £0.5 million), (2004: £1.3 million before equivalent net income totalling £0.5 million).
Our operating loss was £0.2 million before exceptional charges of £0.2 million (2004: operating profit of £0.9 million before exceptional income of £0.8 million). Pre-tax loss was £0.5 million (2004: pre-tax profit £1.6 million) after exceptional items. It should be noted that 2004 profit numbers include the £2.0 million revenue item referred to above.
Exceptional rebranding and reorganisation costs of £0.45 million were offset by £0.28 million exceptional income from releases of provisions no longer required.
Diluted loss per share was 0.77p (2004: diluted earnings per share 2.87p). Adjusted diluted loss per share was 0.29p (2004: adjusted diluted earnings per share 1.58p) excluding exceptional items and goodwill amortisation.
We completed a share placing in June 2005 which substantially improved our balance sheet by raising £4.75 million cash net of expenses. In parallel with the fund raising we restructured the residual legacy bank debt remaining from the IMA acquisition completed in September 2001. We now have a simple long term debt facility which enables repayment of the final £4.5 million to be made progressively over the next five years. Cash balances at the end of the period stood at £4.6 million.
During the period, we indicated that we were planning to move to a much more indirect sales model involving the establishment of an international network of partners to exploit our powerful Portrait technology. A key development in this regard is our collaboration with Fiserv CBS Worldwide, a division of Fiserv, Inc. (Fiserv). This collaboration has involved Portrait helping Fiserv develop a new sales and service platform for the retail banking industry, called Aperio Enterprise (powered by Portrait). The first installation is now live in a major US Fiserv customer.
Fiserv has built a significant global pipeline and is also actively collaborating with other Fiserv companies to introduce Aperio to their client base, further expanding the market reach of Aperio. Fiserv has recently engaged with Portrait Software for the development of further enhancements to Aperio for a US banking customer with over $5 billion in assets.
Our new Emergency and Non Emergency Call Handling System is now live within a major UK Police Force. We are pleased to report that the live system is being very well received by the operational users, which means we are now able to use this as a key reference site for both UK and international prospects.
Most recently we went live with our first Asian site in Beijing, China. This is a new operational system for the China Automobile Association (CAA) a wholly owned company of IAG, one of Australia's largest insurance companies, who are already a Portrait Software customer. We went live on time and to budget and the customer reports regarding benefits are very encouraging. We expect a phase two initiative next year.
Leading providers in telecommunications and retail have gone live with a Portrait compliance hosted service. This service verifies an individual's identity in seconds and is designed to combat identity fraud; the UK's fastest growing criminal activity. This solution is applicable to many sectors especially Financial Services and therefore we expect to further exploit the market's compliance needs in this area.
The next objective in the development of Portrait Software's business is to exploit the potential for our range of Portrait products in various vertical market sectors. For instance, we launched this month in London a partnership with Swiss Re, one of the leading global reinsurers, to create a joint solution for streamlining new business acquisition in insurance. This combines Swiss Re's underwriting system, Magnum, with Portrait's front end, process management and integration software. We believe this new partnership is a superb endorsement of Portrait. We expect our vertical market focus will enable the Company to return to a profitable growth path with returns more typical of a successful software business. We believe that we are now starting to see this vision come to life, building on our 150+ customers worldwide, who recognise the benefits that can be obtained through the use of a flexible Process Platform and Service Oriented Architecture.
We have also launched the "Insight" programme, which is a new suite of packaged pre-implementation consultancy services, aimed at customers and prospective customers to facilitate and demonstrate the business and technical justification for installations of Portrait technology.
Our Client Services business has produced a solid return in the period and has continued to provide excellent levels of technical consulting and support to our 150+ customers, with negligible customer attrition as a result. Installations such as the award winning project at Nationwide Building Society have gone from strength to strength in the period.
In order to accelerate the transformation to a high margin software business, we have strengthened our team, particularly in the Sales, Marketing and Partner Enablement areas.
We are pleased to report we have now increased to seven the number of management and staff who were previously part of the successful Staffware Group. In June this year we announced John O'Connell's appointment as Chairman and Robin Martin 's appointment as COO; Robin has now been with us for four complete months and he is already having a very positive impact on our sales activities. This month Kuljit Bawa joined as head of our Applications Division. Kuljit was previously the highest achieving sales person at Staffware and for the last three years led the rapid growth of their US business. We have also made key appointments of ex-Staffware personnel in Product Marketing, Sales Support and Partner Management.
The Company has now firmly established its core Portrait technology on an international basis in two key industries, Financial Services and Emergency Call Handling. We now intend to leverage our 150+ strong customer base in conjunction with our growing network of partners, both by seeking further opportunities in the Financial Services and Public Services markets and by entering into new industry verticals
We are confident that the initiatives we have taken, such as the strengthening of our finances and of our management team, will ensure we can achieve our goal of returning the Company to a growth path and become a higher margin, software driven business.
John O'Connell Nick Randall
Chairman Chief Executive
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