RS2 plc - Full-Year Results

On 21 April, RS2 Software plc published its preliminary financial statements for the year ended 31 December 2014.

Performance Overview

During the year under review, RS2 registered a 7.9% increase in revenue to a record €15.24 million largely reflecting the 84% increase in service fees and the 26% increase in processing fees which offset the 46% drop in income from licence fees. Licence fees have dropped in comparison to 2013 solely due to differences in the recognition of such licences which largely depends on the nature of the licence contract. In 2013, the nature of the major licence agreement signed during the year resulted in a recognition of a lump sum whereas that signed in 2014 for a total value of €12 million is being split over the finite term of the licence.

RS2 Software also incurred a 13.7% increase in cost of sales to €8.39 million reflecting increased wages as the Group continues to strengthen its staff complement to meet existing and anticipated demands of its clients. This led to a gross profit of €6.85 million representing a 1.5% increase over the previous year’s comparable figure. However, the gross profit margin dropped by 2.82 percentage points to 44.92%.

Meanwhile, administrative expenses dropped by 8% to €2.04 million. The preliminary profit statement noted that administrative expenses actually increased in line with the growing business activity of the Group which was offset by the non-reoccurrence of one-off expenses incurred in 2013 in connection with the employee share option scheme. Marketing and promotional expenses also dropped 32.8% to €0.33 million whilst capitalised development costs increased by 2.9% to €0.39 million.

RS2 also reported other income of €0.73 million (2013: €0.01 million) largely reflecting realised and unrealised gains on exchange rate movements related to its contracts denominated in US Dollar and Sterling. On the other hand, other expenses amounted to €0.99 million (2013: €0.1 million) mainly relating to an impairment provision on one of its receivables.

Overall, the RS2 Group registered a 6.5% increase in operating profit to €4.6 million. Excluding the depreciation and amortisation charge of €1.5 million (2013: €1.4 million), the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to €6.13 million representing a 6.5% increase over the previous year’s comparable figure.

Net finance costs increased to €0.42 million compared to €0.08 million in 2013 mainly reflecting the treatment of discounted future contracted income streams to present value as finance costs in line with international reporting standards.

The 2014 pre-tax profit of RS2 amounted to €4.2 million which represents a 1.5% drop from the previous year’s comparable figure. After accounting for a tax charge of €1.4 million (2013: €1.4 million) and minority interest of €0.1 million (2013: €0.07 million), the Group’s net profit amounted to €2.88 million compared to €2.93 million in the previous financial year.

The Statement of Financial Position shows a 6.1% increase in total assets mainly due to the 48.5% increase in trade receivables to €4.2 million. Meanwhile, total liabilities only increased by 3.2% to €9.2 million as the current tax payable of €1.4 million was partly offset by the €0.74 million reduction in bank borrowings to €3.4 million. Overall, the Group’s total equity increased by 6.7% to €22.9 million which translates into a net asset value per share of €0.51 (2013: €0.477).

The post-tax return on equity dropped by 117 basis points to 12.53% and the post-tax return on assets contracted by 87 basis points to 9.2%.

Dividend

The Directors recommended a final net dividend of €0.044 per share compared to the €0.022 dividend per share paid out in respect of the 2013 financial year. Shareholders as at close of trading on Wednesday 6 May will be entitled to receive this dividend on 15 June subject to shareholder approval at the upcoming Annual General Meeting scheduled to be held on Tuesday 9 June.

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RS2 Software plc – Preliminary profit statement for the year ended 31 December 2014.