Print   



Embargoed 07.00am                            

Thursday, 18 September 2008                    

Macro 4 plc

PRELIMINARY RESULTS FOR THE YEAR ENDED

30 June 2008

Macro 4 plc (LSE:MAO) (the 'Company' or the 'Group'), the global software company, today reports its preliminary results for the year ended 30 June 2008. It is also pleased to provide an update on progress against its strategic growth plan announced in February 2008. 

 

• Total revenue £29.0m (2007 £30.3m)
  
  
• • Recurring revenues up £378k (2%) to £17.9m
  • New business revenue £11.1m (2007 £12.8m)
    
    
• Profit before taxation, amortisation and material one-off items £5.1m (2007 £7.2m)
  
  
• Underlying trading profit £2.5m (2007 £5.2m)
  
  
• Profit after taxation £0.9m (2007 £2.6m)
  
  
• Cash balance £6.0m (2007 £6.6m)
  
  
• Final dividend 5.25 pence per share (2007 5.25 pence per share)
  

Commenting on today's announcement, Ronnie Wilson, Group Chief Executive said:

'Against the backdrop of the most challenging economic conditions for many years, the Company has benefited from its strong, profitable recurring revenue stream and successfully developed important new business partnerships and opportunities. 

Our target markets remain highly competitive and cautious, contributing to elongated decision making processes within our customer organisations and a decline in our new business revenue for the year. This was disappointing but I am pleased that strong cost control and our recurring revenue stream helped the Company deliver a profit after taxation of £0.9m. 

This, and the Board's increased confidence in the future benefits of the operational and restructuring changes we have made, allows the Board to propose an unchanged final dividend of 5.25 pence per share'.

David Smyth, Group Finance Director said:

'These results reflect a difficult year for the market as a whole and a year of significant change for the Company. While our recurring revenues were 2% higher at £17.9m, new business revenues fell 13% to £11.1m, taking total revenue to £29.0m. The second half of the year showed a stronger new business performance than in H1 and represented a higher proportion of the year's total new business revenue than in FY 2007 (52.8% v. 51.4% in 2007). 

Operating costs were tightly controlled and measures were taken to reduce some elements of the overhead base, the full benefit of which will be seen in the 2009 financial year. As it restructured and repositioned itself for the future, the Company incurred £1.7m of material one-off items. 

The combination of the above delivered a Profit After Taxation of £0.9m (2007 £2.6m).'

  

Strategic Update

As previously announced, the Company has undergone significant change and restructuring during the year. The sales force, routes to market, product propositions, branding and product development activities have all been strengthened. New partnerships have been forged with strategically key companies and significant new market sector opportunities have been identified and are being addressed. 

While it is too early to know how successful these will be, initial signs are encouraging. We are engaged in many new and exciting projects and have completed our first contracts under our strategic applications performance focus. Until the economic environment and confidence improves we remain vulnerable to factors outside our control but we are now much better placed to build a stronger pipeline of new business.

The Company operates across four main business areas: Intelligent Archiving Solutions (IAS), Intelligent Printing Solutions (IPS), Application Performance Solutions (APS) and Application Availability Solutions (AAS). The first two of these constitute what we consolidate as the DMS business and the latter two constitute the SMS business.

Intelligent Archiving Solutions

Macro 4's Intelligent Archiving Solutions provide scalable, high performance document and data storage, with on line retrieval, to support a wide variety of core business and IT functions. The rapid growth of data, especially in SAP environments, and the impact of this growth on the applications performance, is driving demand for this type of solution. 

To improve our ability to penetrate this market, Macro 4 has recently teamed with a specialist consultancy to provide a complete archiving solution for the SAP market. Macro 4's technology, paired with our partner's specialist expertise and customer access, is the ideal combination to deliver highly effective solutions to this market. This partnership represents a major new opportunity for us in this large and growing market.

Intelligent Printing Solutions

Macro 4 solutions monitor and optimise the utilisation and cost of office printer fleets in large companies, delivering better asset management and usage, reduced wastage of print related consumables, and a more reliable service to users. Over the last year, Macro 4 has worked hard with the major printer vendors to develop and combine our software with their technology to meet the needs of their customers, and our joint offerings are now being demonstrated to potential customers. Feedback has been very positive and the level of new business being quoted for is encouraging. 

Application Performance Solutions

The reliability and performance of enterprise applications is fundamental to large businesses. A badly performing application can result in lost customers and revenue, as well as increased IT costs in the form of hardware upgrades and IT staff time. This is an area of key strategic focus for us and our solutions quickly get to the root cause of applications performance problems. 

During the year, our Application Performance Portal (A.P.P.) was launched in trials with a number of large organisations and our first contract was secured. A.P.P. is the new generation of applications focused performance solutions, particularly for cross-platform Java applications. Given the exponential growth in such applications and their importance, the potential market for APP is substantial.

To help accelerate our push into this market, Macro 4 has teamed with a specialist consulting partner to offer a complete solution which delivers improved applications performance and lower platform costs to the customer. Our recent contract win with Tesco is the first major example of this partnership working effectively and delivering real benefit. This model has been rolled out across the Company and several significant opportunities are being worked on.

  

Application Availability Solutions

Macro 4's reputation in this area is reflected in the outstanding customer base of global organisations that using our products and support. Customers include many global household names. In this mature market our thrust is to continually innovate and modernise our products, embracing new technology trends appropriate to the on going needs of our customers.

We have invested significant time, resource and money over the last year in getting ourselves to this position and everyone in the Company is focused on delivering growth and success from this investment.

Group Finance Director's Report

In summary, revenues, while disappointing, were in line with our revised expectations, having suffered from the economic climate and the essential activities to restructure and reposition the sales and marketing functions.

Operating costs were tightly controlled and measures, such as the closure or relocation of offices to cheaper premises, and reviewing the expenditure on communications infrastructure were taken to reduce elements of the overhead base. The full benefit of these moves will be seen in the 2009 financial year. 

This year also saw the Company incur £1.7 million of material one-off items as it restructured and repositioned itself for the future. 

The combination of the above delivered a Profit After Taxation of £0.9 million (2007 £2.6 million).

This, and the Board's increased confidence in the future benefits of the operational and restructuring changes we have made, allows the Board to propose an unchanged final dividend of 5.25 pence per share.

Revenue

Total revenue for the year was £29.0 million (2007 £30.3 million), of which £11.1 million (2007 £12.8 million) was from new business and £17.9 million (2007 £17.5 million) recurring revenue.  

			2008			2007
	Recurring	New	Total	Recurring	New	Total
	£m	£m	£m	£m	£m	£m
DMS
Intelligent Printing	5.5	3.2	8.7	5.5	3.7	9.2
Intelligent Archiving	2.3	1.8	4.1	2.1	1.7	3.8
Total DMS	7.8	5.0	12.8	7.6	5.4	13.0
SMS
Application Availability	5.8	2.4	8.2	5.6	3.6	9.2
Application Performance	0.5	0.8	1.3	0.3	1.5	1.8
IBM OEM & Tubes z/OS	0.9	2.0	2.9	0.8	1.7	2.5
Other	2.9	0.9	3.8	3.2	0.6	3.8
Total SMS	10.1	6.1	16.2	9.9	7.4	17.3
Total Group	17.9	11.1	29.0	17.5	12.8	30.3

The Application Availability products remain the largest SMS revenue source, contributing 50.6% or £8.2 million (2007 53.4% or £9.2 million) of the total revenue. Of this, £2.4 million (2007 £3.6 million) was new business while the recurring revenue portion increased from £5.6 million in 2007 to £5.8 million in 2008. The other core strategic SMS solution area, Application Performance generated £1.3 million total revenue (2007 £1.8 million). As previously 
announced, the strategic focus here is to build on the new A.P.P. product set from which the first contract was concluded before the year end and further deals are in discussion. The revenue generated from the IBM OEM & Tubes z./OS products grew by 14% to £2.9 million (2007 £2.5 million). Other SMS products (including iSeries and VM/VSE) generated £3.8 million total revenue (2007 £3.8 million).

These product areas gave total SMS revenue of £16.2 million (2007 £17.3 million). Significant focus is being put on the Application Availability and Application Performance areas and in particular, on building our position in the rapidly growing applications performance market. New partnership agreements and recent product launches are expected to deliver new revenue opportunities throughout the coming year. 

The largest DMS product area is Intelligent Printing, which contributed £8.7 million total revenue (2007 £9.2 million), of which £3.2 million (2007 £3.7 million) was from new business. With an 8% increase in revenue from the Intelligent Archiving area (new business revenue up 6%, recurring revenue up 9%), to £4.1 million total revenue (2007 £3.8 million), total DMS revenues were £12.8 million (2007 £13.0 million). Of this DMS revenue, £5.0 million (2007 £5.4 million) was new business, representing 45% of the total new business for the Group, compared with 42.6% in 2007. 

The various DMS products accounted for 44.2% of the total Group revenue, up from 42.9% in 2007. 

Both of the DMS product suites have benefited from significant investment this year (H2 in particular), with product development, new partnerships and joint (Macro 4/vendor) marketing beginning to demonstrate significant potential opportunities.

Operating expenses

Total operating expenses, including material one-off items, increased by £1.0 million to £28.5 million (2007 £27.5 million).

  

	2008	2007
	£m	£m
Staff costs (including commissions)	14.5	15.2
Other operating costs:
Establishment costs	1.9	1.8
Third party cost of sales	1.5	1.4
Travel and living	1.1	1.1
Depreciation	0.8	0.9
Hardware/software computer costs	0.6	0.5
Marketing	0.6	0.4
Legal and professional	0.5	0.5
Foreign exchange loss	0.5	-
Provision for bad and doubtful debts	0.1	(0.1)
Other	1.9	1.6
Other operating costs	9.5	8.1
Operating expenses before amortisation and material one-off items	24.0	23.3
Amortisation of intangible assets	2.8	3.1
Material one-off items	1.7	1.1
	28.5	27.5

Staff costs, the Group's largest type of expense, decreased by £0.7 million on last year. While the sales, marketing and product development areas were strengthened, this increased cost was offset by no payment of management bonuses and sales commissions also contributed to the reduced staff costs, being £0.2 million lower, in line with the new business revenue.

Other operating costs were £1.4 million higher than last year with increases in particular in marketing costs (corporate rebranding, redesigning the product propositions and developing new partnerships and routes to market). There was an adverse impact from exchange rate movements, in particular the euro.

The £1.7 million charge for material one-off items relates to re-organisational, termination and strategic activities. 

Taxation

The Group benefits from Research and Development tax relief at the rate of 150% of qualifying expenditure. The FY2009 taxation charge will benefit further since as of 1 August 2008 the tax relief increased to 175%. This tax relief helped generate a tax credit for the year of £240k (2007 tax charge of £444k) equivalent to an effective tax rate of (36%). Excluding this tax credit, the Group's marginal rate of tax was 34%.

Group profitability and Earnings Per Share

The Group made an Underlying Trading Profit (UTP) of £2.5 million (2007 £5.2 million). The Board believes that this key performance indicator gives a better understanding of the underlying trading position. This is because it removes from operating profit all the major non-cash expenses, except depreciation, and ensures that product development costs are expensed in the year in which they are incurred. UTP basic earnings per share was 10.6 pence per share (2007 18.5 pence per share).

Under IFRS reporting standards, the Group reported a profit after taxation of £0.9 million for the year (2007 £2.6 million). Fully diluted earnings per share were 4.0p (2007 11.5p).

Dividends

The Company previously declared, and paid, an interim dividend for 2008 of 2.5 pence per share (2007 2.5 pence per share). Given the Board's confidence in the ultimate success of the repositioning activities, an unchanged final dividend of 5.25 pence per share is being proposed. This will take the total declared dividend in respect of 2008 to 7.75 pence per share (2007 7.75 pence per share).

Balance Sheet and cash flow

The Group Balance Sheet continues to be strong, with a healthy cash balance of £6.0 million (v £6.6 million at the end of the 2007 financial year), zero debt and valuable property assets.

Management are reviewing various options, including ways of using the property assets more effectively for the benefit of shareholders. The property market is not favourable at the minute, but all options are being reviewed, bearing in mind the need to achieve the right balance between the cash needs of the business, the support which the property provides to the Balance Sheet and the Profit and Loss impact of any changes.

Cash collections have been improved from the already excellent levels achieved last year. At the end of June 2008, the Group's Days Sales Outstanding (DSOs) were 29 days (2007 33 days), less than our normal credit terms offered to customers. In the UK, DSOs were 23 days.

Other than trading activities (including the material one-off items) and the payment of dividends, there were no significant cash outflows.

Capital structure

At 30 June 2008 the Group had 23,060,285 shares in issue (30 June 2007 23,026,687) with the increase in the shares in issue being the new shares issued under the scrip dividend scheme in place. Included in the issued shares are 868,682 shares held in treasury, mainly to satisfy obligations under the Company's share option scheme. 
The market price of the Company's shares at 30 June 2008 was 99.5 pence per share (30 June 2007 192 pence per share) giving a market capitalisation of £22.9 million (30 June 2007 £44.2 million).

Ends

For more information please contact:

Macro 4 plc                                                   Tel: 020 3142 8700 (until12.30pm today)

Ronnie Wilson, Group Chief Executive Officer    Tel: 01293 872135  (thereafter)

David Smyth, Group Finance Director

Piper Jaffray Ltd

Nigel Daly                                                       Tel: 020 3142 8700

About Macro 4

Macro 4 is a leading software company with operations and customers across the world. It develops world-class business-enabling software in the areas of:

• Application availability, fault analysis and optimisation

• Application performance management

• Document management, warehousing and delivery solutions

Macro 4's market-leading solutions support complex traditional and e-business environments across the world, providing customers with clear competitive and financial advantage. 

With over 40 years' experience, the Company's key strengths lie in its ability to provide organisations worldwide with innovative, scalable and competitive software that is simple to install and operate, but delivers complex solutions and real business and financial benefit.

Its customer base includes many of the world's largest organisations and covers most business sectors, especially Telecoms, energy, financial services, utilities, professional services (legal, accounting) and public sector / government bodies.

The company also provides comprehensive IT professional services, consultancy and educational training through its dedicated consulting arm.

Macro 4 is listed on the London stock exchange ('MAO').

www.macro4.com

Consolidated Financial Statements

Consolidated Income Statement

 for the year ended 30 June 2008

		2008	2007
	Note	£000	£000
Revenue
License rentals		3,021	3,347
Maintenance		14,882	14,178
Recurring revenue		17,903	17,525
License sales		7,741	9,441
Agents' royalties		1,335	1,404
Professional services and other revenue		1,987	1,910
New business revenue		11,063	12,755
Total revenue	2	28,966	30,280
Operating expenses before amortisation and material   one-off items	3	(24,039)	(23,309)
Amortisation of intangible assets	3	(2,778)	(3,060)
Material one-off items	5	(1,675)	(1,114)
Total operating expenses		(28,492)	(27,483)
Other operating income		28	109
Operating profit		502	2,906
Interest receivable		163	174
Interest payable		-	(38)
Profit before taxation		665	3,042
Taxation	7	240	(444)
Profit for the year		905	2,598
Earnings per share
Basic	9	4.1p	11.7p
Diluted	9	4.0p	11.5p
Dividend per share	8	7.75p	7.5p

All the above figures related to continuing operations.

Underlying Trading Profit
		2008	2007
		£000	£000
Profit before taxation		665	3,042
Add: Amortisation of intangible assets	3	2,778	3,060
Add: Material one-off items	5	1,675	1,114
Profit before taxation, amortisation and material one-off items (PBTae)		5,118	7,216
Add: IFRS2 share-based payments		218	745
Less: Capitalised product development costs	10	(2,828)	(2,739)
		2,508	5,222

  Consolidated Balance Sheet

as at 30 June 2008

		2008	2007
	Note	£000	£000
Assets
Non-current assets
Property, plant and equipment	11	6,227	6,636
Intangible assets	10	18,517	18,184
Deferred tax assets		1,336	998
Trade and other receivables	12	113	108
Total non-current assets		26,193	25,926
Current assets
Trade and other receivables	12	6,504	6,294
Current income tax assets		690	1,471
Cash and cash equivalents		6,023	6,560
Total current assets		13,217	14,325
Total assets		39,410	40,251
Liabilities
Non-current liabilities
Trade and other payables	13	(278)	(217)
Deferred tax liabilities		(1,810)	(1,693)
Total non-current liabilities		(2,088)	(1,910)
Current liabilities
Trade and other payables	13	(5,308)	(5,656)
Deferred income	14	(10,300)	(10,017)
Current income tax liabilities		(34)	(475)
Total current liabilities		(15,642)	(16,148)
Total liabilities		(17,730)	(18,058)
Net assets		21,680	22,193
Equity
Called up share capital		1,153	1,151
Share premium account		2,492	2,455
Merger reserve		6,948	6,948
Capital redemption reserve		162	162
Own shares reserve		(2,055)	(1,944)
Translation reserve		(24)	(259)
Retained earnings		13,004	13,680
Total equity		21,680	22,193

  

Consolidated Statement of Changes in Shareholders' Equity 

for the year ended 30 June 2008

	Share capital £000	Own  shares £000	Translation reserve £000	Retained earnings £000	Other reserves £000	Total equity £000
Balance at 1 July 2006	1,117	(740)	(101)	12,232	9,567	22,075
Profit for the period	-	-	-	2,598	-	2,598
Foreign exchange adjustment	-	-	(158)	-	-	(158)
Total recognised income for the period	-	-	(158)	2,598	-	2,440
IFRS2 credit in respect of share options	-	-	-	11	-	11
IFRS2 credit in respect of EDSIP	-	-	-	734	-	734
EDSIP share capital	34	-	-	(34)	-	-
Purchase of own shares	-	(1,328)	-	-	-	(1,328)
Cash settlement of share options	-	-	-	(303)	-	(303)
Share option cash received	-	58	-	-	-	58
Transfer from own shares on exercise of share    options	-	66	-	(66)	-	-
EDSIP and share options deferred taxation adjustment	-	-	-	173	-	173
Scrip dividend - share premium account	-	-	-	-	(2)	(2)
Dividend paid	-	-	-	(1,665)	-	(1,665)
Balance at 30 June 2007	1,151	(1,944)	(259)	13,680	9,565	22,193
Profit for the period	-	-	-	905	-	905
Foreign exchange adjustment	-	-	235	-	-	235
Total recognised income for the period	-	-	235	905	-	1,140
IFRS2 credit in respect of share options	-	-	-	15	-	15
IFRS2 credit in respect of EDSIP	-	-	-	233	-	233
Purchase of own shares	-	(147)	-	-	-	(147)
Cash settlement of share options	-	-	-	(7)	-	(7)
Share option cash received	-	19	-	-	-	19
Transfer from own shares on exercise of share    options	-	17	-	(17)	-	-
EDSIP and share options deferred taxation       adjustment	-	-	-	(85)	-	(85)
Scrip dividend - share premium account	2	-	-	-	37	39
Dividend paid	-	-	-	(1,720)	-	(1,720)
Balance at 30 June 2008	1,153	(2,055)	(24)	13,004	9,602	21,680

  

Consolidated Cash Flow Statement

for the year ended 30 June 2008

		2008	2007
	Note	£000	£000
Cash flows from operating activities
Profit after taxation		905	2,598
Adjustments for:
Depreciation of property, plant and equipment	3	836	896
Amortisation of purchased software	10	501	617
Amortisation of product development	10	2,277	2,443
Share option charge		15	11
EDSIP charge		233	734
Foreign exchange adjustment		172	6
Loss on sale of fixed assets	3	5	7
Interest receivable		(163)	(174)
Interest payable		-	38
Taxation (credit)/charge	7	(240)	444
Cash generated from operations before changes in working capital		4,541	7,620
Decrease/(increase) in trade and other receivables		409	(139)
(Decrease)/increase in deferred income		(443)	368
Decrease in trade and other payables		(547)	(862)
Cash generated from operations		3,960	6,987
Income tax refunded/(paid)		275	(571)
Net cash generated from operating activities		4,235	6,416
Cash flows from investing activities
Purchase of property, plant and equipment	11	(402)	(564)
Proceeds from sale of property, plant and equipment		4	-
Purchase of intangible assets	10	(266)	(1,093)
Payment of deferred consideration on intangible assets		-	(1,542)
Capitalised product development costs	10	(2,828)	(2,739)
Interest received		163	174
Net cash used in investing activities		(3,329)	(5,764)
Cash flows from financing activities
Dividends paid		(1,727)	(1,669)
Purchase of own shares		(147)	(1,328)
Interest paid		-	(38)
Scrip dividend legal costs written off share premium account		(3)	(12)
Cash paid in lieu of unapproved share option schemes		(7)	(303)
Share option cash received		19	58
Net cash used in financing activities		(1,865)	(3,292)
Net decrease in cash and cash equivalents		(959)	(2,640)
Cash and cash equivalents at the beginning of period		6,560	9,452
Effect of exchange rate fluctuations in cash held		422	(252)
Cash and cash equivalents at end of period		6,023	6,560

  

Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

Macro 4 plc (the 'Company') is a company incorporated in England and Wales. The financial statements are presented in Pounds Sterling, rounded to the nearest thousand. 

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). There are no associates or joint ventures to be consolidated.

• Basis of preparation

The Group's financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU-IFRS').

No material impact is anticipated from the future application of accounting standards in issue, but not adopted by the EU.

  

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2008 or 2007. Statutory accounts for 2007 have been delivered to the registrar of companies, and those for 2008 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 237 (2) or (3) of the Companies Act 1985. 

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries for the year ended 30 June 2008.

Subsidiaries are entities controlled by the Group.  Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

On acquisition of a subsidiary, all of the subsidiary's assets and liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date. All changes to those assets and liabilities, and the resulting gains and losses, that arise after the Group has gained control of the subsidiary, are charged to the post acquisition Income Statement.

The preparation of financial statements in conformity with EU-IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. 

 

Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

2   Segment reporting

Segment information is presented in respect of the Group's geographical and divisional segments. The primary format, geographical segments, is based on the Group's corporate and internal reporting structure.

Revenue by geography

	2008 Destination		2008 Origin		2007 Destination		2007 Origin
	£000	%	£000	%	£000	%	£000	%
United States of America	8,354	28.8	7,274	25.1	9,000	29.7	8,183	27.0
United Kingdom	6,883	23.8	10,462	36.1	6,312	20.8	10,028	33.1
Rest of Europe	6,045	20.9	4,974	17.2	6,124	20.2	4,949	16.3
Germany	3,431	11.8	3,680	12.7	3,703	12.2	3,981	13.2
France	2,655	9.2	2,576	8.9	3,174	10.5	3,139	10.4
Rest of World	1,598	5.5	-	-	1,967	6.6	-	-
	28,966	100.0	28,966	100.0	30,280	100.0	30,280	100.0

Segmental analysis by geography

Year ended 30 June 2008	UK £000	USA £000	Germany £000	France £000	Rest of Europe £000	Consol adjustment £000	Total £000
Segment revenue (origin)	10,462	7,274	3,680	2,576	4,974	-	28,966
Segment result	(1,363)	3,823	1,069	615	2,454	-	6,598
Intangible amortisation							(2,778)
General business costs							(1,480)
Material one-off items							(1,675)
Profit before taxation							665
Segment assets	26,372	4,032	1,814	1,031	2,829	3,332	39,410
Segment liabilities	(8,301)	(2,965)	(2,125)	(1,383)	(2,956)	-	(17,730)

Year ended 30 June 2007	UK £000	USA £000	Germany £000	France £000	Rest of Europe £000	Consol adjustment £000	Total £000
Segment revenue (origin)	10,028	8,183	3,981	3,139	4,949	-	30,280
Segment result	(648)	4,512	1,508	1,373	2,559	-	9,304
Intangible amortisation							(3,060)
General business costs							(2,088)
Material one-off items							(1,114)
Profit before taxation							3,042
Segment assets	26,801	4,305	1,635	1,360	2,818	3,332	40,251
Segment liabilities	(9,320)	(2,894)	(1,862)	(1,323)	(2,659)	-	(18,058)

 Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

2   Segment reporting continued

Segmental analysis by division

			2008				2007
	DMS £000	SMS £000	Total £000		DMS £000	SMS £000	Total £000
Revenue
License rentals	842	2,179	3,021		949	2,398	3,347
Maintenance	6,987	7,895	14,882		6,614	7,564	14,178
Recurring revenue	7,829	10,074	17,903		7,563	9,962	17,525
License sales	2,779	4,962	7,741		3,518	5,923	9,441
Agents' royalties	405	930	1,335		278	1,126	1,404
Professional services and other revenue	1,799	188	1,987		1,637	273	1,910
New business revenue	4,983	6,080	11,063		5,433	7,322	12,755
Gross revenue	12,812	16,154	28,966		12,996	17,284	30,280
Direct third party costs	(853)	(690)	(1,543)		(529)	(870)	(1,399)
Gross margin	11,959	15,464	27,423		12,467	16,414	28,881
Sales related commissions	(241)	(405)	(646)		(350)	(469)	(819)
Net revenue	11,718	15,059	26,777		12,117	15,945	28,062
Other direct operating expenses   excluding amortisation and material   one-off items	(6,724)	(5,589)	(12,313)		(6,784)	(5,196)	(11,980)
Gross contribution	4,994	9,470	14,464		5,333	10,749	16,082
Indirect operating expenses excluding    amortisation and material one-off items			(8,029)				(6,914)
Net contribution			6,435				9,168
General business costs			(1,480)				(2,088)
Net interest receivable			163				136
Profit before taxation, amortisation   and material one-off items			5,118				7,216
Amortisation			(2,778)				(3,060)
Profit before taxation and material    one-off items			2,340				4,156
Material one-off items			(1,675)				(1,114)
Profit before taxation			665				3,042

Due to the Group's corporate and internal reporting structure, segment assets and liabilities for divisional segments cannot be reported.

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

3  Operating expenses 

	2008	2007
	£000	£000
Staff costs
Sales, marketing and professional services
Sales related commissions	646	819
Fixed staff costs	5,418	5,456
Total Sales, marketing and professional services	6,064	6,275
Development	1,146	876
Support	2,579	2,400
General and administration	4,710	5,629
Total staff costs	14,499	15,180
Depreciation of tangible assets	836	896
Auditors' remuneration for audit	168	155
Operating lease rentals:
Hire of plant and machinery	431	377
Other operating leases	843	848
Loss on sale of tangible assets	5	7
Foreign exchange loss/(gain)	549	(21)
Direct third party costs	1,543	1,399
Other operating charges	5,165	4,468
Operating expenses before amortisation and material one-off items	24,039	23,309
Amortisation of intangible assets	2,778	3,060
Material one-off items	1,675	1,114
Total operating expenses	28,492	27,483

4   Research and development

	2008 £000	2007  £000
Expenses incurred including staff, computer and associated costs	5,252	5,126
Product development costs capitalised in the year	(2,828)	(2,739)
Amortisation of product development costs	2,277	2,443
Amortisation of purchased software	501	617
	5,202	5,447

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

5   Material one-off items

	2008	2007
	£000	£000
Termination costs (including associated legal and professional fees)	700	657
Corporate restructuring and strategy costs	345	140
Compensation for loss of office for former directors (inc. associated legal and professional fees)	327	317
Legal fees in respect of an aborted bank facility for acquisition funds	155	-
Cost of recruitment of new Board directors	148	-
	1,675	1,114

During the year the Group embarked on an extensive restructuring of the organisation and a planned strategy of acquisitions.  This included strengthening the Board; terminating a number of senior managers; replacing a high proportion of the sales force; working on a potential change to the corporate structure and a potential bank facility for acquisition funds.  As a result of these activities, a significant amount of cost was incurred, none of which is expected to recur.  

6    Share-based payments 

A full description of each type of share-based payment to employees will be set out in the Directors' Remuneration Report section of the Annual Report. All share incentives are over ordinary shares of the Company.  No share incentives were granted during the year ended 30 June 2008 but in previous years the Group has granted share incentives to employees in the form of share options and share bonuses. The fair value of all share options granted since 7 November 2002 and not vested at 30 June 2008 is recognised as a staff cost with a corresponding increase in equity. The employee expense is recognised equally over the time from grant until vesting of the incentive. The employee expense in 2008 was £15,000 (2007 £11,000).  The fair values have been measured using the binomial model.  The expected volatility is based on the historic volatility adjusted for any expected changes to future volatility.  

The fair values and the related material inputs into the model were:

	Grant Date
	9 Sep 2003	29 Sep 2003	3 Nov 2003	4 Nov 2003	5 Nov 2003	14 Oct 2004	13 Sep 2005	3 Apr 2006
Fair value	43p	40p	53p	54p	53p	79p	74p	61p
Share price at grant	116p	107.5p	108.5p	109.5p	109.5p	190.5p	287.5p	253p
Exercise price	114p	113p	108p	108p	108p	193p	300p	256p
Expected volatility	60.90%	60.00%	60.00%	59.90%	59.40%	45.80%	32.48%	27.17%
Risk free interest rate	4.45%	4.15%	4.16%	4.16%	4.16%	4.68%	4.18%	4.52%
Dividend yield	2.11%	2.11%	2.11%	2.11%	2.11%	2.11%	2.98%	2.98%
Vesting period	3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years
Lapse rate	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%
Actual lapse rate	53%	0%	0%	17%	21%	62%	n/a	n/a

The lapse rates in the table above have been calculated by taking the number of options which were forfeit due to option holders leaving the Group and dividing it by the total number of options granted in each tranche.  For the two tranches of options which have not yet reached their vesting date, an estimated lapse rate of 5% has been used in the model for the calculation of the share option expense. 

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

6    Share-based payments continued

Share options have been granted over ordinary shares of 5 pence each under The Macro 4 plc 2001 Executive Share Option Scheme. At 30 June 2008 822,459 options were in issue (2007 886,459 options) and represented 3.57% of the shares in issue (2007 3.85%). The Company's share price at 30 June 2008 was 99.5 pence (30 June 2007 192 pence) therefore none (2007 777,459) of the share options granted had a notional gain at that date (2007 £641,168) and 822,459 (2007 109,000) of the share options granted had a notional loss of £202,077 (2007 £86,090 loss) at that date.

The table below shows the movement in the year in share options granted under The Macro 4 plc 2001 Executive Share Option Scheme:

Subscription price	Number of options at 30 June 2007	Exercised	Lapsed	Number of options at 30 June 2008	Period during which option is exercisable
125p	10,000	-	-	10,000	2005-2012
114p	157,459	-	(1,000)	156,459	2006-2013
113p	15,000	-	-	15,000	2006-2013
108p	595,000	(30,000)	-	565,000	2006-2013
193p	9,000	-	(4,000)	5,000	2007-2014
300p	50,000	-	(25,000)	25,000	2008-2015
256p	50,000	-	(4,000)	46,000	2009-2016
	886,459	(30,000)	(34,000)	822,459

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

7    Taxation

	2008	2007
	£000	£000
United Kingdom corporation tax at 28% (2007 30%)
Current taxation charge on income for the period	-	(552)
Over provision in respect of prior years	(154)	(55)
	(154)	(607)
Overseas taxation
Current taxation charge on income for the period	251	229
(Over)/under provision in respect of prior years	(33)	34
	218	263
Total current taxation charge/(credit)	64	(344)
Deferred taxation
Current year     - United Kingdom	(279)	821
- Overseas	4	46
	(275)	867
Over provision in respect of prior years	(29)	(79)
Total deferred taxation (credit)/charge	(304)	788
Taxation (credit)/charge on profit on ordinary activities	(240)	444

Tax reconciliation

	2008	2008 £000	2007	2007 £000
Profit before taxation		665		3,042
United Kingdom corporation tax charge	28%	186	30%	913
Rate adjustments relating to overseas profits		87		68
Rate adjustment relating to deferred tax		(30)		(90)
Unrelieved overseas taxation		38		51
Bad debt provision disallowed		23		(3)
Sundry disallowed expenses		74		36
Tax losses utilised		-		(10)
Adjustment in respect of prior years		(187)		(9)
United Kingdom research and development relief		(434)		(431)
US deferred tax asset re change of tax basis		(137)		(90)
EDSIP tax adjustment		139		-
Other timing differences		1		9
Total taxation (credit)/charge	-36%	(240)	15%	444

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

8      Dividends

A final dividend of 5.25 pence per share (2007 5.25 pence per share), subject to approval by the shareholders at the forthcoming Annual General Meeting will be paid on 24 November 2008 to shareholders on the register on 3 October 2008.  Under IFRS these financial statements do not reflect this dividend payable.

		Per share
	2008 pence		2007 pence	2008  £000	2007  £000
Ordinary shares of 5 pence each
Final 2006	-		5.00	-	1,110
Interim 2007	-		2.50	-	555
Final 2007	5.25		-	1,167	-
Interim 2008	2.50		-	553	-
	7.75		7.50	1,720	1,665

9    Earnings per share

Earnings per share have been calculated by dividing profit attributable to shareholders by the weighted average number of shares in issue during the year, details of which are below. The diluted earnings per share have been calculated using an average share price of 151 pence per share (2007 216 pence per share) for the year.

	2008	2007
	£000	£000
Profit attributable to ordinary shareholders	905	2,598
Amortisation of intangible assets adjusted for taxation	1,993	2,426
Capitalised development costs adjusted for taxation	(2,036)	(2,236)
EDSIP and share options adjusted for taxation	305	492
Material one-off  items adjusted for taxation	1,176	823
Underlying Trading Profit after taxation attributable to ordinary shareholders	2,343	4,103
	Number	Number
Weighted average number of shares (net of own shares)	22,182,180	22,166,247
Effect of dilutive share options	207,948	506,772
Adjusted diluted weighted average	22,390,128	22,673,019
Earnings per share
Basic	4.1p	11.7p
Diluted	4.0p	11.5p
Basic - Underlying Trading Profit	10.6p	18.5p
Diluted - Underlying Trading Profit	10.5p	18.1p

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

10   Intangible assets

	Goodwill  on purchase of  subsidiary undertakings £000	Purchased software £000	Product development £000	Total £000
Cost
At 1 July 2006	24,891	6,159	13,205	44,255
Foreign exchange adjustment	(417)	-	-	(417)
Additions	-	1,093	2,739	3,832
At 30 June 2007	24,474	7,252	15,944	47,670
At 1 July 2007	24,474	7,252	15,944	47,670
Foreign exchange adjustment	49	-	-	49
Additions	-	266	2,828	3,094
At 30 June 2008	24,523	7,518	18,772	50,813
Accumulated amortisation
At 1 July 2006	13,212	3,853	9,650	26,715
Foreign exchange adjustment	(289)	-	-	(289)
Charge for the year	-	617	2,443	3,060
Transfer	36	(36)	-	-
At 30 June 2007	12,959	4,434	12,093	29,486
At 1 July 2007	12,959	4,434	12,093	29,486
Foreign exchange adjustment	32	-	-	32
Charge for the year	-	501	2,277	2,778
At 30 June 2008	12,991	4,935	14,370	32,296
Net book value
At 30 June 2008	11,532	2,583	4,402	18,517
At 30 June 2007	11,515	2,818	3,851	18,184

  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

11   Property, plant and equipment

	Freehold land and buildings £000	Computer installation and  equipment £000	Office fixtures, fittings and equipment £000	Motor vehicles £000	Total £000
Cost
At 1 July 2006	7,854	5,032	2,033	171	15,090
Foreign exchange adjustment	-	(110)	(77)	(5)	(192)
Additions	3	530	31	-	564
Disposals	-	(33)	(41)	-	(74)
Transfer	-	(3)	3	-	-
At 30 June 2007	7,857	5,416	1,949	166	15,388
At 1 July 2007	7,857	5,416	1,949	166	15,388
Foreign exchange adjustment	-	104	88	28	220
Additions	-	314	88	-	402
Disposals	-	(108)	(179)	(49)	(336)
At 30 June 2008	7,857	5,726	1,946	145	15,674
Accumulated depreciation
At 1 July 2006	2,379	4,020	1,555	139	8,093
Foreign exchange adjustment	-	(100)	(66)	(5)	(171)
Charge for the year	265	489	130	12	896
Disposals	-	(31)	(35)	-	(66)
Transfer	-	(1)	1	-	-
At 30 June 2007	2,644	4,377	1,585	146	8,752
At 1 July 2007	2,644	4,377	1,585	146	8,752
Foreign exchange adjustment	-	89	73	24	186
Charge for the year	266	421	142	7	836
Disposals	-	(106)	(175)	(46)	(327)
At 30 June 2008	2,910	4,781	1,625	131	9,447
Net book value
At 30 June 2008	4,947	945	321	14	6,227
At 30 June 2007	5,213	1,039	364	20	6,636

  

Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

12   Analysis of trade and other receivables

	2008	2007
	£000	£000
Non-current assets
Other receivables	113	108
	113	108
Current assets
Trade receivables	5,531	5,290
Prepayments	866	957
Other receivables	107	47
	6,504	6,294
Total receivables	6,617	6,402
Trade and other receivables analysis
Days sales outstanding	29 days	33 days
Total trade receivables	5,531	5,290
Total other receivables	1,086	1,112
Total receivables	6,617	6,402

Days sales outstanding reflect the number of days of invoiced revenue included in the normal trade receivables calculated on a first-in-first-out (FIFO) basis.  Notes to the Consolidated Financial Statements - IFRS

for the year ended 30 June 2008

13   Analysis of trade and other payables

	2008	2007
	£000	£000
Non-current liabilities
Staff severance pay	271	207
Other payables	7	10
	278	217
Current liabilities
Accruals	3,071	3,238
Other taxation and social security	1,280	1,236
Trade and other payables	957	1,182
	5,308	5,656
Total trade and other payables	5,586	5,873

14   Deferred income

	2008	2007
	£000	£000
Amounts falling due within one year	9,018	8,913
Amounts falling due after more than one year	1,282	1,104
	10,300	10,017

15    Foreign exchange rates

	2008	2007
The following exchange rates have been used for translation of period end balances into Sterling:
US dollars	1.99	2.01
Euro	1.26	1.49
Swiss francs	2.03	2.46
The following exchange rates have been used for translation of period Income Statement into Sterling:
US dollars	2.01	1.95
Euro	1.34	1.48
Swiss francs	2.17	2.39

16    Financial calendar

Final dividend 2008    - ex-dividend date	1 October 2008
- record date	3 October 2008
- scrip date	5 November 2008
- payment date	24 November 2008
Financial year end	30 June 2009

ENDFR IFFILASIDLIT