Excellent start to the year for newly listed RS2
RS2 Software plc published its interim results to June 30, 2008, following a Board of Directors' meeting held on August 12. The key highlights are• revenue of €5.3 million (+92 per cent);• EBITDA climbs to €3.1 million with a 57.7 per cent margin;•...
RS2 Software plc published its interim results to June 30, 2008, following a Board of Directors' meeting held on August 12.
The key highlights are
• revenue of €5.3 million (+92 per cent);
• EBITDA climbs to €3.1 million with a 57.7 per cent margin;
• profit for the period up 133.7 per cent to €2.6 million; and
• shareholders' funds of €13.2 million.
RS2 generated total revenue of €5.3 million during the first half of this year, representing a 92 per cent increase when compared to the same period last year, mainly as a result of three new comprehensive package agreements and a surge in licence fees. For the period to June the directors reported that the company concluded three CPAs with existing clients. Revenue from enhanced services (which includes CPAs) increased by 17.9 per cent during the first half of the year to €2.1 million. These agreements are usually for a five-year period, providing clients with licences, maintenance and a specified level of services against an annual predetermined fee thus ensuring a constant stream of revenue to the company. The strongest increase in turnover was generated from licence fees which surged to €2.7 million from only €0.5 million in the first half of 2007. RS2 concluded the sale of two new licences in the first half of the year ‒ one of €600,000 with Transworks LLC of New York and the other relating to the licence element incorporated in one of the comprehensive package agreements. Apart from these two licences, other licence sales were made during the first six months for additional modules to existing clients, including the BankWorks web contract in the Middle East.
At the recent initial public offering the company's directors had forecast total revenue of €8.15 million during 2008. The actual first half results account for over 65 per cent of total forecast revenues.
Cost of sales increased to €2.05 million resulting in a gross profit of €3.3 million, 156 per cent higher than the comparative period (June 2007: €1.3 million). Administrative expenses rose by 13.6 per cent to €0.39 million while capitalised development costs (representing the capitalised expenditure on the development of the company's software solution BankWorks) decreased by 35.1 per cent to €45,651. This resulted in earnings before interest, tax, depreciation and amortisation (EBITDA) of €3.1 million, 124 per cent higher than the figure for the first six months of 2007. The EBITDA margin surged to 57.7 per cent compared to 49.2 per cent in the first half of 2007 and well ahead of the directors' estimates of 48.9 per cent for the full year.
After accounting for depreciation and amortisation totalling €367,671 (2007: €363,030), the company recorded an operating profit of €2.7 million representing a 168.5 per cent rise over the same period last year. This corresponds to an operating profit margin of 61.6 per cent (June 2007: 46.2 per cent).
RS2 Software plc registered a 167.1 per cent increase in its pre-tax profits to €2.6 million. The group recognised a tax expense of €0.27 million while in the first half of 2007 it provided for a tax credit of €26,351. As a result, profit after tax for the period under review was €2.4 million, signifying a 133.7 per cent increase when compared to the same period in 2007.
Total assets as at June 30 amounted to €16.1 million, 57 per cent higher than the level as at December 31 last year, mainly on a sharp rise in cash following the issue of five million new shares at €0.80 each during the May 2008 IPO. Shareholders' funds increased significantly to €13.2 million. Based on the number of shares in issue as at June 30, amounting to 37.5 million shares, the net asset value per share amounts to €0.352.
The company registered significantly higher profitability ratios. The annualised return on equity increased to 35.7 per cent (2007: 24.6 per cent) while the annualised return on assets progressed to 32.5 per cent (2007: 19.1 per cent).
Although the directors stated that the company's performance during the second half is not anticipated to match that of the first half since the sale of licences materialised earlier in the year than anticipated, the directors noted that they are very confident that the full-year forecast will be met. At the time of the IPO the directors estimated a profit after tax of €3 million, placing the equity on a forward P/E of 9.6 times.
The main purpose of the increased share capital during the IPO was to set up a number of regional offices in order to strengthen its marketing activities and support services. The increased growth during the first half of 2008 was purely organic, coming from the company's present structure. The setting up of regional offices in Jordan, Scandinavia and the US should provide further opportunities for growth in the years ahead.
• Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Limited.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
The key highlights are
• revenue of €5.3 million (+92 per cent);
• EBITDA climbs to €3.1 million with a 57.7 per cent margin;
• profit for the period up 133.7 per cent to €2.6 million; and
• shareholders' funds of €13.2 million.
RS2 generated total revenue of €5.3 million during the first half of this year, representing a 92 per cent increase when compared to the same period last year, mainly as a result of three new comprehensive package agreements and a surge in licence fees. For the period to June the directors reported that the company concluded three CPAs with existing clients. Revenue from enhanced services (which includes CPAs) increased by 17.9 per cent during the first half of the year to €2.1 million. These agreements are usually for a five-year period, providing clients with licences, maintenance and a specified level of services against an annual predetermined fee thus ensuring a constant stream of revenue to the company. The strongest increase in turnover was generated from licence fees which surged to €2.7 million from only €0.5 million in the first half of 2007. RS2 concluded the sale of two new licences in the first half of the year ‒ one of €600,000 with Transworks LLC of New York and the other relating to the licence element incorporated in one of the comprehensive package agreements. Apart from these two licences, other licence sales were made during the first six months for additional modules to existing clients, including the BankWorks web contract in the Middle East.
At the recent initial public offering the company's directors had forecast total revenue of €8.15 million during 2008. The actual first half results account for over 65 per cent of total forecast revenues.
Cost of sales increased to €2.05 million resulting in a gross profit of €3.3 million, 156 per cent higher than the comparative period (June 2007: €1.3 million). Administrative expenses rose by 13.6 per cent to €0.39 million while capitalised development costs (representing the capitalised expenditure on the development of the company's software solution BankWorks) decreased by 35.1 per cent to €45,651. This resulted in earnings before interest, tax, depreciation and amortisation (EBITDA) of €3.1 million, 124 per cent higher than the figure for the first six months of 2007. The EBITDA margin surged to 57.7 per cent compared to 49.2 per cent in the first half of 2007 and well ahead of the directors' estimates of 48.9 per cent for the full year.
After accounting for depreciation and amortisation totalling €367,671 (2007: €363,030), the company recorded an operating profit of €2.7 million representing a 168.5 per cent rise over the same period last year. This corresponds to an operating profit margin of 61.6 per cent (June 2007: 46.2 per cent).
RS2 Software plc registered a 167.1 per cent increase in its pre-tax profits to €2.6 million. The group recognised a tax expense of €0.27 million while in the first half of 2007 it provided for a tax credit of €26,351. As a result, profit after tax for the period under review was €2.4 million, signifying a 133.7 per cent increase when compared to the same period in 2007.
Total assets as at June 30 amounted to €16.1 million, 57 per cent higher than the level as at December 31 last year, mainly on a sharp rise in cash following the issue of five million new shares at €0.80 each during the May 2008 IPO. Shareholders' funds increased significantly to €13.2 million. Based on the number of shares in issue as at June 30, amounting to 37.5 million shares, the net asset value per share amounts to €0.352.
The company registered significantly higher profitability ratios. The annualised return on equity increased to 35.7 per cent (2007: 24.6 per cent) while the annualised return on assets progressed to 32.5 per cent (2007: 19.1 per cent).
Although the directors stated that the company's performance during the second half is not anticipated to match that of the first half since the sale of licences materialised earlier in the year than anticipated, the directors noted that they are very confident that the full-year forecast will be met. At the time of the IPO the directors estimated a profit after tax of €3 million, placing the equity on a forward P/E of 9.6 times.
The main purpose of the increased share capital during the IPO was to set up a number of regional offices in order to strengthen its marketing activities and support services. The increased growth during the first half of 2008 was purely organic, coming from the company's present structure. The setting up of regional offices in Jordan, Scandinavia and the US should provide further opportunities for growth in the years ahead.
• Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Limited.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved