- Interim Results Review

Crimsonwing plc published its half-year results to 30 September 2008 following a Board of Directors’ meeting held on 26 November.

Crimsonwing plc generated a turnover of €6.3 million, 45.5% higher than that recorded in the same period last year mainly arising from the integration of the newly acquired company VDA. The Company also recorded higher sales in licences and support which now represent 8% and 10% of revenue respectively compared to 2% and 7% last year. However this rise in revenue figures was dampened by a 31.2% increase in the Company’s direct costs to €2.5 million.  Despite this increase in costs, the Group registered a 56.9% growth in gross profit to €3.8 million over the comparative period last year, representing an increase in gross profit margins from 55.8% to 60%.

The Crimsonwing Group also recorded a substantial rise in administrative expenses to €3.8 million from the €2 million recorded in the six months to September 2007. This increase was mainly due to higher software licence sales and additional costs including increased wages mainly arising from the new acquisition of VDA. Moreover, Crimsonwing provided around 6,000 man hours of training to over 120 employees in view of upcoming projects in the second half of the Company’s financial year. Crimsonwing’s performance was also tainted by the continued weakness of the Sterling against the euro despite increasing the euro proportion of revenue to 45% from 25% as at 31 March 2008.

The Company incurred an operating loss of €33,889 compared to an operating profit of €427,529 in the same period last year. This loss was mainly derived from the loss incurred by two of the operational units of the Company, namely the mid-market ERP Business and Crimsonwing BV, which offset the profits registered by the other operational divisions, namely Crimsonwing Promentum and the UK e-business. This mid-market ERP Business, offered by Crimsonwing UK, was considerably adversely affected by the ongoing financial turmoil as clients postponed their investments resulting in a general slowdown in this market, registering a loss of €112,000. Crimsonwing NL incurred a loss of €130,000 as it had to account for the losses of the newly acquired company VDA. However, the Directors are confident that these operational units will start generating profits from the second half of the Company’s financial year as the restructuring exercise starts to take effect and revenue flows from the order book commence. On the other hand, the Enterprise ERP Business unit, offered by Crimsonwing Promentum BV and Crimsonwing LLC (USA), as well as the e-business & custom solutions provided by Crimsonwing UK both registered profits as the demand for the respective services continued to grow. Moreover, the Company also expects these two business units to continue growing as their respective number of clients increase whilst also expanding their client base to new geographical areas such as Canada and Italy.

Crimsonwing incurred a net interest expense of €22,853 compared to a net income of €14,672 registered in the six months up to 30 September 2007 following the draw down of a loan required to partly finance the VDA acquisition. This resulted in a pre-tax loss of €56,742 in contrast to the pre-tax profit of €442,201 registered in the first half of the previous financial year. After accounting for a tax charge of €1,935 and profit attributable to minority interests of €43,688, the Company registered a loss after tax of €102,365. On the other hand, Crimsonwing had generated a profit after tax of €417,733 in the first half of last year.

On the Balance Sheet side, shareholders’ funds declined 7.1% to €3.8 million compared to the March 2008 figure, resulting in a net asset value per share of €0.147. Meanwhile total assets rose to €7.7 million (March 2008: €6.2 million) as Crimsonwing’s balance sheet now includes the assets of VDA. The Company is for the first time reporting debt on its balance sheet following the VDA acquisition. Crimsonwing now has a net debt of €1.3 million as the Company took out a loan of €1.4 million and used a total of €0.5 million from its cash holdings and retained earnings to finance the €1.9 million VDA acquisition.

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