Highlights

• Recurring annualised software revenue up by 20% to £10.10 million (2004: £8.41 million)
• Recurring software revenue in the year of £9.13 million (2004: £7.49 million) represents 85% of total revenue (2004: 83%)
• Successful acquisition of Delve Limited, a supplier of enterprise reporting solutions in July 2005
• Strong free cash flow (cash generated from operations less internally generated intangible assets) of £1.42 million (2004: £1.46 million)
• Year end 2005 net cash position doubled to £1.82 million (2004: £0.90 million)
• Maiden dividend as a public company of 0.5p per share (final and total for year) proposed (2004: nil)

The AIM rules require AIM listed companies to adopt International Financial Reporting Standards (IFRS) commencing on or after 1 January 2007 at the latest. The Board has decided to adopt IFRS early in 2005 in order to follow best practice. Therefore, these preliminary results are being reported, and the comparative results for 2004 have been restated, under IFRS.

Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: "We believe that 2006 will be another year of solid progress for StatPro. We have our largest ever pipeline of prospects, and a large and growing number of clients to service with our broadest ever range of existing and new products. Market conditions are the best for a number of years, and although volatile, are currently supported by new regulations, which are a major market driver for us. The fixed income market also presents an excellent opportunity and product demand plays to our strengths."

Chief Executive's Review

Highlights

In 2005 StatPro delivered its best financial performance ever. Revenues have grown by 19% to £10.79 million (2004: £9.07 million) and more importantly operating profit has risen by 64% to £1.66 million (2004: £1.02 million). As stated in our interim report, we are aiming to achieve 20% net operating margin over the next few years as we benefit from the operational gearing of the business; the net operating margin has already improved markedly in 2005 with an increase to 15.4% from 11.2% in 2004. The rate of software sales has increased and 2006 has started with a strong new business pipeline. This is undoubtedly due to the fact that we are now able to offer our existing and potential clients a broader range of analytical products.

We continue to seek to build long term relationships with our clients and, at the end of 2005, 53% of our contracts now extend for more than one year, representing an increase from 44% in 2004. 85% of revenues are recurring and the annualised value of software contracts has risen to £10.10 million at the end of 2005 from £8.41 million at the end of 2004.

Acquisition of Delve

On 1 July 2005 we acquired Delve Ltd., a business that provides an enterprise reporting solution (SER) for asset managers. The annualised recurring revenue acquired with Delve was £0.17 million from 7 clients; at the end of December 2005 this had increased to £0.27 million from 9 clients. In the first quarter of 2006, we have signed new contracts for SER with several more clients. We believe that we will increase sales of SER during 2006 as we market the product to our client base and prospects. It is clear that being able to offer a high quality reporting solution for our clients is seen as a very beneficial offering by them.

New business

Existing clients accounted for around half of new sales of software products by value thus underlining the importance of our cross-selling strategy. Once again sales were strongest in continental Europe, with Germany and Italy achieving a particularly strong growth. The UK had a positive year with sales performing strongly in the second half. Performance in the US was weak in 2005 although a number of key deals were achieved. However, sales in the US in the first quarter of 2006 have improved and we expect this to continue for the rest of the year.

New business in 2005 was led by our Risk product, SRM, which is performing strongly as a result of increased regulation in Europe. Recurring revenue relating to SRM amounted to £1.60 million at the end of December 2005, up from £0.93 million in 2004. We have also made good progress with SRM in the first quarter of 2006 and the pipeline continues to grow. We launched our new product, StatPro Fixed Income (SFI), in January 2006, but prior to the formal launch, we undertook stringent test trials for six months with various clients. The result is that at the start of 2006 we already have a number of clients contracted for SFI with annualised revenues amounting to £0.28 million. We believe that there is significant demand for a fixed income attribution system that can assist bond managers model their portfolios and analyse performance according to their chosen investment strategy. We believe that based on market feedback from the UK, continental Europe and the US, SFI meets that demand and we are therefore confident that we will see good SFI revenue growth in 2006.

Revenues from StatPro's original core products, StatPro Performance & Attribution (SPA) and StatPro Composites (SC), are also growing, but at more modest levels. It is becoming clear that many potential clients are interested in buying products from just one provider and the combination of supplying SFI or SRM, with SPA and SC is very compelling. Our new product range will also help us win clients with legacy performance systems who need a catalyst to make the change from one system to another.

Sales of professional services also improved in 2005 increasing to £1.40 million(2004: £1.21 million). We anticipate that professional services will continue to grow in 2006, especially related to SER projects, where there is demand from clients for consulting services to configure reports and websites.

Strategy

Our strategy continues to be to build strong client relationships with asset managers and increase the number of products used by each client. We have preferred to acquire new products and invest in them, rather than develop from scratch as we have felt that this reduces our risk and also brings us critical expertise in the domain of each product.

It is also clear that StatPro now has a very strong team of professionals at all levels within the business. Our expertise in analytics is now widely recognised and a number of our team have written and published books and articles on a wide range of industry topics. We continually seek to improve our offering on analytics and try to solve challenging problems faced by the industry in an efficient way. We believe that by demonstrating our expertise to our clients, coupled with excellent products and service, we will be able to build a very strong and profitable business.

We intend to continue our strategy of making small tactical acquisitions but we are also considering larger opportunities, that might enable us to extend our product portfolio or to increase our critical mass in certain markets, such as North America. Our criteria for acquisitions is that they should enhance shareholder value.

Dividend

We are very pleased to be able to propose our maiden dividend as a public company of 0.5p per share to be paid on 31 May 2006. Our strong cash generation over the last few years has made this possible so that our balance sheet is now markedly stronger than it was a few years ago.

Going forward we intend to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and the growth in underlying cash and earnings per share.

Outlook

We expect that 2006 will be another year of solid progress for StatPro. We have our largest ever pipeline of prospects, and a large and growing number of clients to service. Market conditions are the best for a number of years, and although volatile, are currently supported by new regulations (such as Sarbanes-Oxley and UCITS III), which are a major market driver for us. The fixed income market also presents an excellent opportunity and product demand plays to our strengths.

None of this is possible without the dedication and excellence of our employees and I would like to thank them once again for another year of hard work and I look forward to even better results in 2006.

Justin Wheatley
Chief ExecutiveDownload the document now 45.3 kb (Adobe Acrobat Document)