RS2 plc - Full-Year Results

On 22 April, RS2 Software plc published its full-year results for the financial year ended 31 December 2013.

Performance Overview

During 2013, RS2 generated a record €14.1 million in revenue representing a 32.8% increase over the previous year’s figure. The revenue mix for 2013 was very similar to that of the previous year with 49% of total revenue in 2013 made up of licence fees for the use of BANKWORKS including the initial recognition of €5.5 million in connection with the GBP8.5 million licence sold to Barclays Bank plc. The revenue figure also included the contribution of the first clients on the newly launched managed services.

Given the expansion of the Group and the increase in RS2’s global client base and system implementation, RS2 continued to invest in its infrastructure and human resources leading to a 28.1% increase in cost of sales to €7.4 million. As a result, the gross profit figure amounted to €6.75 million, up 38.3% from the previous year.

Administrative expenses also increased by 53.7% to €2.2 million whilst marketing and promotional expenses eased by 7.9% to €0.49 million. Similarly, capitalised development costs dropped by 11.4% to €0.38 million and net other expenses declined by 15.5% to €0.09 million.

Overall, RS2 registered an operating profit of €4.3 million representing a 34.2% increase over the previous year’s comparable figure. Similarly, the operating profit margin improved marginally to 30.7% from 30.3% in 2012.

After accounting for relatively unchanged net finance costs of €0.08 million, the Group’s pre-tax profit amounted to €4.25 million representing a 35.1% increase over the previous year’s figure. The pre-tax profit margin also improved to 30.1% from 29.6% in 2012.

The income statement of RS2 shows an accounting entry for a tax charge of €1.4 million. However, it is important to highlight that RS2 continued to benefit from investment tax credits and as such the tax charge does not involve any cash payments and is simply an accounting entry reflecting the usage of the aforementioned tax credits. The financial statements of RS2 Software also account for the loss attributable to minority interests (largely with respect to the 74% shareholding in Transworks LLC owned by third parties) of €0.07 million compared to €0.13 million last year. Overall, the net profit attributable to the shareholders of RS2 Software amounted to €2.9 million representing an 18.3% increase over the previous year’s comparable figure. This translates into an earnings per share figure of €0.069 (2012: €0.058).

The Statement of Financial Position shows a 9.1% increase in total assets to €30.3 million mainly reflecting the €1.3 million increase in accrued income to €5.95 million as well as the significant increase in cash balances to €3.6 million. Total liabilities increased by 3.5% to €8.9 million as the 19.1% drop in total borrowings to €4.2 million was mainly offset by a €1.1 million deferred tax liability. Shareholders funds’ also increased by 11.9% to €21.5 million largely reflecting the profit registered during the period under review. This translates into a net asset value per share of €0.506 (2012: €0.452). The pre-tax return on equity improved to 21% (2012: 17.5%) reflecting the higher margins generated on licence sales.

Dividend and Bonus Issue       

The Directors noted that they want to achieve a balance between the investments being undertaken for the continued growth and expansion of the business as well as rewarding shareholders for their loyalty and support. As  such, the Directors recommended an unchanged net dividend of €0.0235 per share to all shareholders as at the close of trading on 7 May. The dividend will be paid on 12 June subject to shareholder approval at the upcoming Annual General Meeting (AGM) scheduled to be held on 11 June.

The Directors also recommended a 1 for 17 bonus share issue to all shareholders as at the close of trading on 7 May.

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RS2 Software plc – Preliminary financial statements for the financial year ended 31 December 2013.