August 11, 2003 -- Interim results from TripleArc plc, the UK based provider of technology led print procurement solutions.
Commenting on the results, Jason Cromack, Chief Executive Officer stated: “The first half has seen further substantial progress within TripleArc with revenue in the half year over 60% higher than the previous six months to December 2002. We have achieved our first Operating Profit before non-cash items and are generating cash. Revenue and gross profit are greater in the first six months of this year than the full twelve months of last year, and our R&D costs are down considerably.
“Both divisions are performing well, reflecting the efforts and expertise of our staff. The print management market continues to provide exciting opportunities for growth. Our performance to date demonstrates that the Group’s print management expertise backed up with our CWS technology solution is gaining traction and success in the market. We have made a fantastic start to the year, and look forward to continued successful growth during 2003.”
The Board of TripleArc plc, the UK based provider of technology driven print management and procurement solutions, announces its interim results for the six months ended 30 June 2003.
Financial performance improved significantly in the first half of 2003 with substantial increases in revenue and gross profit over the prior period. Revenue for the six month period was £7.1m (2002: £2.6m) Gross profit was £1.1m (2002: £0.35m). The increase in revenue and gross profit was mainly attributable to the strong performance at gl2, the Group’s print management division. A number of account wins in the second half of 2002 and increased turnover with existing customers account for the significant increase in gl2 revenues. Both the print management and technology divisions are performing well, with revenues in both divisions already exceeding the full twelve months figures in 2002.
Research and development costs were £0.046m in the period compared to £0.45m in the prior period. As announced at the time of the Group’s 2002 results in June, this steep downward trend in software development spend commenced in the second half of 2002. With the completion of the initial design and development phase of the Group’s software, development effort is now focussed on new customer driven functionality and enhancements to completed products.
Selling and distribution costs in the period of £0.18m (£0.36m) were 50% below that of the prior period. The bulk of the reduction arose from the technology division where marketing and selling costs associated with the launch of the Group’s technology products in the first half of 2002 did not recur in 2003.
Administration expenses of £0.83m (2002: £0.8m) were 5% higher than the prior period.
Amortisation of intangible assets was £0.18m during the period (2002: £0.13m). The increase arose from the amortisation of intellectual property capitalised on the acquisition of the software business of ControlP which was acquired in September 2002. A non-cash share option compensation expense of £0.09m was incurred in the period (2002: £0.54m). This arose on share options granted prior to TripleArc’s listing on AIM in December 2001 where the exercise price of the option was below the prevailing market price at the date of grant. Substantially all of this expense was charged to the Profit and Loss account during 2001 and 2002 hence this item has declined significantly in 2003.
Strong performance at gl2, increasing technology revenue streams and the steep decline in development expenditure have resulted in the Group’s first operating profit, before amortisation of intangible assets and share option compensation expense, of £0.02m during the first half (2002: loss £1.3m). The Group’s positive net cashflow during the period of £0.02m (2002: negative £1.5m) represents a significant milestone for the group, reflecting its movement from its investment and development phase during 2001 and 2002 to the beginning of its growth phase in 2003. After charging non-cash share option compensation of £0.09m and amortisation of intangible assets of £0.18m, the loss before tax was £0.25m (2001: £1.9m).
The loss per ordinary share was 0.78 pence for the period ending 30 June 2003 (2002: 2.93 pence).
Print management is the fastest growing sector of the print industry. The commercial printing market is one of the largest custom manufacturing processes in the world and, in an increasing trend to eliminate non-core activities, businesses are looking to outsource their print buying requirements to experts in this field. The result is a significant increase in demand for print management solutions. With the size of contracts increasing, scale is important and the Group is well positioned to take advantage of this trend. It is not only able to provide the expertise required to procure print competitively but also has leading technology solutions, which are a pre-requisite to being awarded these large contracts, as they streamline the business process, reduce transaction costs and deliver sustainable lower prices.
Technology solutions are recognised as playing a pivotal role in allowing organisations to manage and reduce printing costs. Job Definition Format (“JDF”) technology remains at the heart of TripleArc’s products and the Group is benefiting from the increasing adoption of JDF within the print industry which is continuing to gain momentum. In the run up to the DRUPA trade fair next year, the world’s largest print exhibition, there is an increasing focus on JDF that reinforces the positive outlook for TripleArc’s technology products. The ControlP acquisition and a number of new customer implementations in the last quarter of 2002 and the first part of 2003 have established a growing technology revenue stream for the Group.
Print Management Services
The Group provides print management services through gl2 directly to print buying customers that include the retail, marketing agencies and publishing sectors. gl2 saves its customers time and expense by utilising its expertise in project management, purchasing print and managing suppliers and allowing customers to outsource some or all of the complex process of buying print.
gl2 offers an effective outsourced print buying solution by taking advantage of TripleArc’s proprietary Collaborative Workflow System (“CWS”). The efficiencies of using CWS have been demonstrated and the technology has helped gl2 win key new customers.
Highlights for the print management division include:
• The focus has been on leveraging gl2’s use of the Group’s industry leading technology to drive new business and growth of existing business. The excellent growth in revenue and gross profit generated in the first six months of the year demonstrates the success of this approach. Technology solutions are a pre-requisite to being awarded print management contracts and the board believes CWS provides a major competitive advantage for gl2.
• The CWS technology has allowed us to increase efficiency and control operating costs. Since deployment of the CWS into gl2, gross profit has almost trebled whilst the overhead required to manage this additional volume has only had to increase by half.
• Despite the large increase in revenue, gross margins have improved to 13.6% (2002: 13%). This is the result of a number of initiatives to concentrate on margin management. CWS has empowered management and staff to drill into expected and actual margins on a job by job level. A bonus scheme introduced at the start of the year designed to incentivise the team in hitting targeted margins, has also been successful.
gl2 was among the first print management companies to recognise the benefits of e-commerce. The original concept of CWS was to allow gl2 to: develop new and existing business; grow rapidly without having to significantly increase the associated overhead; and to provide it with a clear value-added offering for its customers. The Group is pleased to report that CWS is achieving all these objectives.
Print Procurement Solutions
The successful integration of the ControlP acquisition into the Group’s technology division in the last quarter of 2002 was followed by a management review of the merged technology division’s costs and synergies during the first quarter of 2003.
This has resulted in a number of actions to reduce costs. These, combined with increasing technology revenue streams, and the decline in research and development costs, has had a significant impact in allowing the Group to become cashflow positive in the first half.
TripleArc’s approach to providing an end-to-end online procurement solution for the print industry consists of three components; the Collaborative Workflow System, edit2print and iPMS.
Collaborative Workflow System (“CWS”)
CWS provides an online procurement solution to streamline and project manage the complex print buying and production process. It allows all parties in the supply chain to collaborate on a secure network.
edit2print is an advanced print ordering system allowing users to edit, proof and order marketing collateral online. The system allows users without design experience to upload files and vary graphics and text at will themselves.
iPMS is a workflow management tool for ordering print that allows print buyers and print managers to increase the efficiency in their ordering process.
We have seen several new customer wins in the first six months of this year, including a personalised version of edit2print for one of the UK’s largest print management companies, following an extensive technical due diligence process.
These products place TripleArc at the leading edge of print procurement technology. Our collaborative partnership with Hewlett-Packard is aiding our marketing effort to promote the edit2print and iPMS solutions into large corporates. CWS is one of the first fully JDF compliant print procurement solutions in an industry that is rapidly moving to adopt the format. JDF is a data exchange standard that acts as an electronic “job ticket”, allowing the integration of products from diverse vendors into seamless workflow solutions, enabling every part of the process, including customers, designers as well as printers, to communicate more effectively throughout the completion of a print job.
TripleArc has experienced an excellent start to 2003 with the Group achieving its first Operating Profit before non-cash charges. This reflects the Group’s successful transition from a development focused business to a services orientated business enhanced by technology.
Demand for print management services among corporates is strong, providing opportunities for significant growth in this market. TripleArc’s technology solutions provide a key pre-requisite to winning print management business with larger corporates as well as generating cross selling opportunities between the print management and technology divisions of the Group.
These results show a strong start to the year and the Directors expect to report further progress throughout the second half of the year.
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