Commenting on the update, Kevin Lomax, Chief Executive, Misys, said:

"We have continued to develop our core businesses of Banking and Healthcare, investing in our product portfolio to align it more closely with the higher-growth opportunities in our markets.  Response to our investment has been positive, demonstrated by significant demand for a number of our key products and by new-name customer wins, but we know there is more to be done to maximise future growth.”    

-          Adjusted basic EPS* expected in the range of 14.1p to 14.6p per share
-          Banking (like for like**): ILF order intake up 8% at £84m, total revenues up 7%
-          Healthcare (like for like**): ILF order intake down 4% at £55m, total revenues up 3%
-          Sesame: strong revenue growth and margin improvement***; additional £16m exceptional charge associated with regulatory reviews and endowment complaints
-          General Insurance: disposal completed for proceeds of £183m, generating a profit of £172m, after taxation
-          Increased resources and investment in product development

We continue to see attractive growth opportunities in our two core markets of banking and healthcare. We are increasingly focusing our product portfolio, through significant investment in product development, to take advantage of higher-growth segments, although we recognise that there is more to do in this regard.  During the year we achieved strong sales to new-name customers, while the continued growth of our recurring revenue streams demonstrated the resilience of our relationships with existing customers.   

Total revenues were up 7%, and on a reported basis, with a favourable movement in exchange rates, revenues were up 9%.   ILF revenues rose 15%.  ILF order intake increased by 8%, with more than 30 new-name wins, against a strong prior year comparable period.

Professional Services revenues fell by 1%, reflecting the impact of the contract deferrals highlighted at the time of our AGM trading update.  Maintenance revenues were up 3%, again demonstrating the stability of our large installed customer base.

Operating margin on a reported basis is expected to be around 14%, in comparison with 16.8% in the prior year. 

The restructuring announced at the time of our interim statement is now complete.  We have brought together our retail and wholesale banking operations as Core Banking, and have integrated the Basel II compliance solution, Almonde, into that business unit.  We are retaining our Risk Vision business and focussing it on serving its existing customers. 

As a result of the restructuring, the division has incurred an exceptional charge of £14m (including a £3m write-off of capitalised development costs relating to Risk Vision), which is within the expected range indicated at the time of our Interim results.  Consequently, we expect to achieve cost savings of about £15m in the financial year ending 31 May 2007 which will largely be reinvested in the business, particularly in product development.

Total revenues were up 3%, and on a reported basis, with the benefit of movement in exchange rates and of acquisitions, revenues were up 9%. During the period our sales teams achieved considerable success in winning new-name customers but new sales to our installed base were below the previous year.

ILF revenues were down 4% and ILF order intake decreased by 4%.  Professional Services revenues showed strong growth, up 10%. Professional Services are becoming more significant in our sales mix as the shift in demand to more complex clinical products continues. Hospital solutions such as Misys CPR have a smaller proportion of ILF revenue and a greater proportion of professional services revenue in comparison with departmental products. 

Maintenance revenues increased by 8%, again demonstrating the strength of our installed base.   Transaction Processing revenues remained flat but increased 8% on a reported basis.

The integration of the Payerpath business, which we acquired in the second half of the year, is going to plan.  This, together with other assets in the physicians market which we acquired towards the end of the year, has given rise to an exceptional acquisition integration charge of £2m, and to an operating loss of £1m in the year to 31 May 2006.  The future growth in profits from these assets is expected to be slow at first, because of the nature of the subscription-based business model.  As a result, we expect these acquisitions to generate further operating losses of £3m in the year to 31 May 2007, thereafter becoming profitable and delivering good growth.

Operating margin on a reported basis is expected to be slightly ahead of the prior year at around 15% compared to 14.6%.

Total revenues in Sesame were 18% higher than in the prior year. This reflects a significant increase in RI productivity, including strong take-up of Sesame’s mortgage and multi-tie offerings.  Encouragingly over 1,000 financial advisers have been recruited into the Sesame Select open multi-tie proposition, with 700 having begun trading, since launch last July.   As expected, a number of these advisers have transferred from our existing propositions, contributing to a reduction in the membership of both Sesame Network and Sesame Direct.  Operating margin improved slightly to just over 2%. 

Costs incurred and changes to the future estimated costs and redress payments associated with regulatory reviews and endowment complaints have resulted in an exceptional charge of £16m in the year.

On 5 May 2006 we completed the sale of our general insurance broking systems business. The gross proceeds from the sale were £183m with a profit on disposal of £172m, after taxation.

The General Insurance business contributed profit before taxation, excluding profits on disposal, of £15m in the year up to the date of disposal and £16m in the prior year, these profits being included within adjusted EPS.

An analysis of exceptional items can be found in the Notes to this trading update.  The exceptional items not referred to above include:

In July 2005, Misys disposed of its 60% investment in AssureWeb Ltd for a cash consideration of £3m, realising a loss on disposal of £3m. 

In August 2005, Misys disposed of its 29% investment in First Software (UK) Ltd for a cash consideration of £9m, realising a profit on disposal of £8m.

Costs related to the terminated disposal process for Sesame amounted to £1m.

Retranslating the results for 2005 using the average exchange rates for 2006 increases 2005 revenues by £17m and operating profit by £2m and this is reflected in the like for like comparative results.  The most significant impact is from the movement in the US dollar, where the average exchange rate in 2006 was US$1.7760:£1 compared to US$1.8586:£1 in 2005.   The US $ exchange rate at 31 May 2006 was US$1.8731:£1. If we were to retranslate our 2006 results at the closing exchange rates at 31 May 2006 instead of the average rates for the year this would result in revenue and operating profit decreasing by approximately £20m and £4m respectively on an adjusted basis.

Net interest payable and other finance costs are between £15m and £17m.

During the year the Group purchased 12m shares held as Treasury shares, in addition 8m shares held in Treasury were cancelled and a further 2m transferred out to meet employee share options.  These transactions together with purchases made last year reduced the average number of shares in issue that is used in the basic EPS calculation to 484m compared with 499m last year.  Adjusted basic EPS for the year is expected to be in the range of 14.1p to 14.6p per share.

During the year the Group disposed of its General Insurance business, which will be disclosed as a discontinued operation within the accounts.  This realised a profit on disposal of £172m after taxation, which is excluded from the adjusted EPS.   The General Insurance business contributed profit before taxation, excluding profit on disposal, of £15m up to the point of disposal, compared to £16m last year, these profits being included within adjusted EPS.

 

 

Alex DeeTel: +44 (0) 20 7368 2336
Mob: +44 (0) 7989 017 979
Email: alex.dee@misys.co.uk

Misys plc (FTSE: MSY.L), the global software company, is one of the world’s largest and longest-established providers of industry-specific software. Founded in 1979, Misys serves the international banking and healthcare industries, combining technological expertise with in-depth understanding of customers’ markets and operational needs. In banking Misys is a market leader with over 1,200 customers, including 49 of the world’s top 50 banks. In healthcare Misys is also a market leader, serving more than 110,000 physicians in 18,000 practice locations, 1,200 hospitals and 600 home care providers. Through Sesame, a wholly-owned subsidiary, the company is also a leading provider of support services to financial advisers in the UK. Misys employs around 6,000 people who serve customers in more than 120 countries. For more information, visit www.misys.com