OBJECTIVE CORPORATION LIMITED — Interim / Quarterly Report 2012

Feb 27, 2012

OBJECTIVE CORPORATION LIMITED

ABN: 16 050 539 350

APPENDIX 4D HALF-YEAR REPORT

For the half-year ended 31 December 2011

(Previous corresponding period being the half-year ended 31 December 2010)

Objective

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Objective Corporation Limited
ABN: 16 050 539 350
Page 2

RESULTS FOR ANNOUNCEMENT TO THE MARKET

KEY INFORMATION

	Half-year ended 31-Dec-11 A$'000	Half-year ended 31-Dec-10 A$'000	% Change
Revenue from ordinary activities	20,166	20,913	(4%)
Profit from ordinary activities after income tax attributable to members	2,802	1,170	139%
Net profit for the half-year attributable to members	2,802	1,170	139%

DIVIDENDS

	Amount per security	Franked amount per security
Interim dividend	-	-
Previous corresponding period	-	-

The dividend paid during the half year and shown in the consolidated statement of changes in equity is the final dividend paid in respect of the year ended 30 June 2011.

EARNINGS PER SHARE

	Half-year ended 31-Dec-11	Half-year ended 31-Dec-10
Earnings per share (EPS)	2.4 cents	1.0 cents

NET TANGIBLE ASSETS PER SHARE

	Half-year ended 31-Dec-11	Half-year ended 31-Dec-10
Net tangible assets per share (NTA)	3.7 cents	3.6 cents

The information contained in this report should be read in conjunction with the 30 June 2011 Annual Report of Objective Corporation Limited.

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Objective Corporation Limited
ABN: 16 050 539 350
Page 3

COMMENTS BY DIRECTORS

Objective Corporation (ASX: OCL), a specialist provider of content, collaboration and process management solutions, today announced a 139% jump in net profit after tax to a record $2.8 million for the six months to 31 December 2011 (FY11 H1: $1.2 million).

Revenue was $20.2 million (FY11 H1: $20.9 million). The strong Australian dollar appreciated an average of 9% against the pound sterling and as a result negatively impacted UK revenue.

During the current period, the Company bought back a total of 20 million shares at 20.75 cents per share at a total cost of $4.2 million. Given that this transaction was completed on the 21st December 2011, the earnings per share benefit of the buyback will be realised in the second half of FY12 and beyond.

The company achieved a strong operating cash flow of $6.5 million in the half. At 31 December 2011, and after settling the buyback transaction, the company had $11.6 million in cash and cash equivalents and no debt.

Consistent with prior years, an interim dividend was not declared, however the company expects to return to declaring franked dividends with the full financial year results.

FINANCIAL SUMMARY

Results summary for half year ended	31 Dec 2011	31 Dec 2010	% Change
	$m	$m
Revenue	20.2	20.9	(4%)
Net profit after tax	2.8	1.2	139%
Asia Pacific revenue	16.6	16.7	(1%)
European revenue	3.1	3.6	(14%)
Earnings per share	2.4 cps	1.0 cps	140%
EBITDA	3.7	1.8	106%
R & D Expense	4.5	4.6	(2%)
No interim dividend was declared

Mr Tony Walls, CEO, Objective Corporation said: "Our first half results are solid and I am pleased that strong cash flows and prudent cost control delivered a record first half profit whilst still maintaining our substantial investment in research and development.

"Whilst revenue growth was not a feature of the current half, the Asia Pacific region again performed solidly and our European operation returned to profit, despite the ongoing headwinds of the UK Government's austerity program."

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Objective Corporation Limited
ABN: 16 050 539 350
Page 4

OPERATIONAL HIGHLIGHTS

The company was awarded a strategic long-term contract with the Australian Customs and Border Protection Service to rollout an enterprise-wide ECM solution for 6,000 users. During the half, the company also welcomed many new customers including the South Australian Courts Administration Authority, Australia Pacific LNG and London's Tower Hamlets Council.

The company's research and development continued at a pace. R&D investment was $4.5 million, approximately 22 per cent of revenue (FY11 H1: $4.6 million) and substantially above the industry average.

Our Customers are recognising compelling value from the results of our commitment to R&D, with an unprecedented number of customers around the globe upgrading to Objective ECM 8.

Over recent years the company has invested heavily in cloud based solutions. Today, Objective boasts one of the UK's largest government focused cloud based applications, with over 5,000 public sector employees across 200 public sector organisations using the solution to deliver an average 33% efficiency gain in collaborative policy development and community consultation. Over the last year, this application was also used by over 580,000 UK citizens to contribute over 2 million comments on 23,000 consultation and engagement events, thereby ensuring that key stakeholders, the general public and local communities are engaged in the decision making processes of government.

At a strategic level, we have held a long term vision and desire to securely connect the information silos of government. Public sector culture and technology have now matured sufficiently and at our international customer conference, Collaborate 2011, the company unveiled the Objective Connect vision. Objective Connect is a unique cloud based suite of applications that enables secure, accountable and auditable information sharing and process management across government agency boundaries.

OUTLOOK

Mr Walls said: "The company has an outstanding reputation for delivering results for customers and our competitive position appears to be strengthening.

"We remain cautiously optimistic for the next half as we continue to invest in a stronger sales and marketing engine.

"A significant focus for the remainder of this financial year is to bring Objective Connect to life in all regions and we are confident that it will be game changing for all of our stakeholders."

The board and management of Objective Corporation would like to thank the company's customers, employees and shareholders for their commitment and valuable contributions to the success of the company.

AUDIT REVIEW

The half-year financial report has been subject to review and the independent auditor's review report is attached to the report.

The remainder of the information requiring disclosure to comply with listing rule 4.2A.3 is contained in the attached half-year financial report.

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Objective Corporation Limited
ABN: 16 050 539 350
Page 5

HALF-YEAR FINANCIAL REPORT

OBJECTIVE CORPORATION LIMITED AND ITS CONTROLLED ENTITIES

ABN 16 050 539 350

31 DECEMBER 2011

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Objective

DIRECTORS' REPORT

Your directors present their report together with the financial statements of the consolidated entity consisting of Objective Corporation Limited and the entities it controlled, for the half-year ended 31 December 2011 and the independent auditor's review report thereon.

DIRECTORS

The following persons were directors of Objective Corporation Limited at any time during or since the end of the half-year:

• Tony Walls
• Gary Fisher
• Leigh Warren
• Nick Kingsbury

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the half-year were the supply of information technology software and services. There was no significant change in the nature of the consolidated entity's activities during the half-year.

REVIEW OF OPERATIONS

Revenue

The consolidated revenue from sales and services for the half was $19,691,000 (FY10 H1: $20,378,000). Asia Pacific operations revenue from sales and services decreased to $16,551,000 (FY10 H1: $16,677,000). European operations revenue from sales and services decreased to $3,061,000 (FY10 H1: $3,514,000). Total revenue for the half was $20,166,000, which decreased from $20,913,000 in the previous corresponding period.

Operating Result

The consolidated operating result after tax attributable to members for the half was a profit of $2,802,000 (FY10 H1: $1,170,000).

AUDITOR'S INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration is provided with this report.

ROUNDING OF AMOUNTS

The Company is of a kind referred in ASIC Class Order 98/100 and in accordance with that Class Order, amounts in the financial report and directors' report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors.

Tony Walls
Director
28 February 2012

Objective Corporation Limited
ABN: 16 050 539 350
Page 6

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Objective Corporation Limited

ABN: 16 050 539 350

Page 7

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED INCOME STATEMENT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

| | Note | Half-year ended
31-Dec-11
$'000 | Half-year ended
31-Dec-10
$'000 |
| --- | --- | --- | --- |
| Revenue | 2 | 20,166 | 20,913 |
| Cost of sales | | (400) | (795) |
| Gross profit | | 19,766 | 20,118 |
| Distribution expenses | | (9,099) | (10,177) |
| Administrative expenses | | (2,534) | (3,620) |
| Research and development expenses | | (4,470) | (4,580) |
| Net gain on financial asset at fair value through profit or loss | | - | 293 |
| Foreign exchange gain/(loss) | | 97 | (368) |
| Finance expenses | | (59) | (93) |
| Profit from continuing operations before income tax | | 3,701 | 1,573 |
| Income tax expense | | (899) | (403) |
| Profit after tax attributable to members of the Company | | 2,802 | 1,170 |
| | | Cents | Cents |
| Basic earnings per share | 5 | 2.4 | 1.0 |
| Diluted earnings per share | 5 | 2.4 | 1.0 |

The above consolidated income statement should be read in conjunction with the accompanying notes.

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Objective

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

| | Half-year ended
31-Dec-11
$'000 | Half-year ended
31-Dec-10
$'000 |
| --- | --- | --- |
| Profit for the period | 2,802 | 1,170 |
| Other comprehensive income | | |
| Foreign currency translation differences for foreign operations, net of tax | (13) | 230 |
| Total comprehensive income for the period | 2,789 | 1,400 |
| Attributable to members of the Company | 2,789 | 1,400 |

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Objective Corporation Limited
ABN: 16 050 539 350
Page 8

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Objective Corporation Limited

ABN: 16 050 539 350

Page 9

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

| | Note | 31-Dec-11
$'000 | 30-Jun-11
$'000 |
| --- | --- | --- | --- |
| Current Assets | | | |
| Cash and cash equivalents | | 11,620 | 10,709 |
| Receivables | | 9,138 | 10,055 |
| Total Current Assets | | 20,758 | 20,764 |
| Non Current Assets | | | |
| Property, plant and equipment | | 972 | 1,105 |
| Deferred tax assets | | 616 | 630 |
| Intangible assets | | 8,556 | 8,684 |
| Total Non Current Assets | | 10,144 | 10,419 |
| Total Assets | | 30,902 | 31,183 |
| Current Liabilities | | | |
| Payables | | 4,688 | 6,005 |
| Current tax liabilities | | 1,016 | 152 |
| Interest bearing liabilities | | - | 21 |
| Provisions | | 413 | 418 |
| Other | | 10,934 | 8,062 |
| Total Current Liabilities | | 17,051 | 14,658 |
| Non Current Liabilities | | | |
| Other | | 659 | - |
| Provisions | | 317 | 412 |
| Total Non Current Liabilities | | 976 | 412 |
| Total Liabilities | | 18,027 | 15,070 |
| Net Assets | | 12,875 | 16,113 |
| Equity | | | |
| Contributed equity | 4 | 1,826 | 2,186 |
| Retained profits and reserves | | 11,049 | 13,927 |
| Total Equity | | 12,875 | 16,113 |

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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Objective Corporation Limited

ABN: 16 050 539 350

Page 10

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

| | Half-year ended
31-Dec-11
$’000 | Half-year ended
31-Dec-10
$’000 |
| --- | --- | --- |
| Balance at 1 July | 16,113 | 14,537 |
| Profit for the half-year | 2,802 | 1,170 |
| Exchange differences on translation of foreign operations | (13) | 230 |
| Total comprehensive income for the half-year | 2,789 | 1,400 |
| Transactions with members in their capacity as members: | | |
| Acquisitions of equity, net of transaction costs | (4,216) | - |
| Dividends provided for or paid | (1,811) | (1,570) |
| Total equity at the end of the half-year | 12,875 | 14,367 |

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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Objective Corporation Limited

ABN: 16 050 539 350

Page 11

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

CONSOLIDATED CASH FLOW STATEMENT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

| | Half-year ended
31-Dec-11
$'000 | Half-year ended
31-Dec-10
$'000 |
| --- | --- | --- |
| Cash flow from operating activities | | |
| Receipts from customers | 25,861 | 25,529 |
| Payments to suppliers and employees | (19,741) | (23,983) |
| Interest received | 435 | 352 |
| Interest paid | (59) | (95) |
| Income tax refund | 3 | 3 |
| Net cash provided in operating activities | 6,499 | 1,806 |
| Cash flow from investing activities | | |
| Payments for plant & equipment | (96) | (83) |
| Net cash used in investing activities | (96) | (83) |
| Cash flow from financing activities | | |
| Share Buy Back | (3,647) | - |
| Finance lease payments | (21) | (152) |
| Cash dividend paid | (1,811) | (1,570) |
| Net cash used in financing activities | (5,479) | (1,722) |
| Net increase in cash held | 924 | 1 |
| Cash at the beginning of the half-year | 10,709 | 11,560 |
| Net foreign exchange differences | (13) | 328 |
| Cash at the end of the half-year | 11,620 | 11,889 |

The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

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Objective

OBJECTIVE CORPORATION LIMITED AND CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

Note 1. Basis of preparation of the half-year financial report

This general purpose financial report for the interim half year reporting period ended 31 December 2011 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by Objective Corporation Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

Note 2. Revenue

| | Half-year ended
31-Dec-11
$’000 | Half-year ended
31-Dec-10
$’000 |
| --- | --- | --- |
| Sales and services revenue | 19,691 | 20,378 |
| Interest receivable / received | 435 | 352 |
| Sundry revenue | 40 | 183 |
| Total revenue | 20,166 | 20,913 |

Objective Corporation Limited
ABN: 16 050 539 350
Page 12

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Objective Corporation Limited

ABN: 16 050 539 350

Page 13

Note 3. Segment information

(a) Geographic segments

| For half-year ended | Asia/Pacific
$'000 | Europe
$'000 | Unallocated
$'000 | Consolidated
$'000 |
| --- | --- | --- | --- | --- |
| 31 December 2011 | | | | |
| Segment Revenue | | | | |
| Sales to external customers | 16,551 | 3,061 | 79 | 19,691 |
| Interest revenue | - | - | 435 | 435 |
| Other revenue | 40 | - | - | 40 |
| Total Revenue | 16,591 | 3,061 | 514 | 20,166 |
| Expenses(not including R & D) | 8,480 | 2,728 | 728 | 11,936 |
| Profit(loss) before R & D | 8,111 | 333 | (214) | 8,230 |
| R & D expenses | - | - | 4,470 | 4,470 |
| Interest Expense | - | - | 59 | 59 |
| Income tax expense | - | - | 899 | 899 |
| Net profit (loss) | 8,111 | 333 | (5,642) | 2,802 |
| For half-year ended | Asia/Pacific
$'000 | Europe
$'000 | Unallocated
$'000 | Consolidated
$'000 |
| 31 December 2010 | | | | |
| Segment Revenue | | | | |
| Sales to external customers | 16,677 | 3,514 | 187 | 20,378 |
| Interest revenue | - | - | 352 | 352 |
| Other revenue | 72 | 111 | - | 183 |
| Total Revenue | 16,749 | 3,625 | 539 | 20,913 |
| Expenses (not including R & D) | 8,422 | 4,221 | 2,024 | 14,667 |
| Profit (loss) before R & D | 8,327 | (596) | (1,485) | 6,246 |
| R & D expenses | - | - | 4,580 | 4,580 |
| Interest Expense | | | 93 | 93 |
| Income tax expense | - | - | 403 | 403 |
| Net profit (loss) | 8,327 | (596) | (6,561) | 1,170 |

(b) Industry segments

The consolidated entity operates in the information technology software and services industry.

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Objective Corporation Limited
ABN: 16 050 539 350
Page 14

Objective

Note 4. Contributed equity

| | 31-Dec-11
Number | 30 June 11
Number | 31-Dec-11
$'000 | 30 June 11
$'000 |
| --- | --- | --- | --- | --- |
| Ordinary Shares | 100,753,277 | 120,753,277 | 1,826 | 2,186 |
| Total contributed equity¹ | 100,753,277 | 120,753,277 | 1,826 | 2,186 |

¹During the current financial year, the Company bought back a total of 20,000,000 shares at $0.2075 per share. The total cost was $4,216,000 including transaction costs.

Options issued during the year

During the half-year ended 31 December 2011, no options in the Company were issued pursuant to the Employee Incentive Plan. No options were exercised and no options were cancelled during the period.

Options on issue at balance date	31-Dec-11		31-Dec-10
	Number	Expiry Date	Number	Expiry Date
Employee Options exercisable at $0.50	50,000	02/10/2012	50,000	02/10/2012
Employee Options exercisable at $1.00	100,000	30/06/2012	100,000	30/06/2012
Employee Options exercisable at $1.00	790,000	30/06/2014	1,300,000	30/06/2014
Employee Options exercisable at $1.00	100,000	30/06/2014	100,000	30/06/2014
Employee Options exercisable at $0.50	100,000	30/06/2014	100,000	30/06/2014
Employee Options exercisable at $0.50	500,000	31/12/2014	1,000,000	31/12/2014
Employee Options exercisable at $0.50	300,000	30/06/2015	300,000	30/06/2015
Employee Options exercisable at $0.50	500,000	01/11/2015	500,000	01/11/2015
Employee Options exercisable at $0.50	1,200,000	15/07/2016	-	-
Employee Options Exercisable at $0.50	657,000	01/09/2016	-	-
Employee Options Exercisable at $0.50	200,000	25/10/2016	-	-
Total options on issue	4,497,000		3,450,000

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Objective Corporation Limited
ABN: 16 050 539 350
Page 15

Objective Corporation

Note 5. Earnings per share

| | Half-year ended
31-Dec-11
Cents | Half-year ended
31-Dec-10
Cents |
| --- | --- | --- |
| Basic earnings per share | 2.4 | 1.0 |
| Diluted earnings per share | 2.4 | 1.0 |
| | $'000 | $'000 |
| Net profit used in calculating basic and diluted earnings per share | 2,802 | 1,170 |
| Weighted average number of shares used as the denominator in
calculating basic earnings per share | Number
118,796,755 | Number
120,753,277 |
| Weighted average number of shares used as the denominator in
calculating diluted earnings per share | Number
118,796,755 | Number
120,753,277 |

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Objective Corporation Limited
ABN: 16 050 539 350
Page 16

DIRECTORS' DECLARATION

The directors declare that the attached financial statements and notes thereto:

(a) comply with Australian Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001; and
(b) gives a true and fair view of the consolidated entity's financial position as at 31 December 2011 and of its performance, as represented by the results of its operations and its cash flows, for the half-year ended on that date.

In the directors' opinion

(a) the financial statements are in accordance with the Corporation Act 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Dated 28 February 2012

Tony Walls
Director

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PITCHER PARTNERS
ACCOUNTANTS AUDITORS & ADVISORS

Level 22 MLC Centre
19 Martin Place
Sydney NSW 2000
Australia

Postal Address:
GPO Box 1615
Sydney NSW 2001
Australia

Tel: +61 2 9221 2099
Fax: +61 2 9223 1762

www.pitcher.com.au
partners@pitcher-nsw.com.au

Pitcher Partners, including Johnston-Roike, is an association of independent firms:
Melbourne | Sydney | Perth | Adelaide | Brisbane

AUDITOR'S INDEPENDENCE DECLARATION

To the Directors of Objective Corporation Limited

I declare that, to the best of my knowledge and belief there have been:

(i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.

M A GODLEWSKI
Partner

PITCHER PARTNERS

Sydney
28 February 2012

An Independent New South Wales Partnership ABN 35 415 759 892
Liability limited by a scheme approved under Professional Standards Legislation
an independent member of
BAKER TILLY
INTERNATIONAL

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PITCHER PARTNERS
ACCOUNTANTS AUDITORS & ADVISORS

| Level 22 MLC Centre
19 Martin Place
Sydney NSW 2000
Australia | Postal Address:
GPO Box 1615
Sydney NSW 2001
Australia |
| --- | --- |
| Tel: +61 2 9221 2099
Fax: +61 2 9223 1762 | |
| www.pitcher.com.au
partners@pitcher-nsw.com.au | |
| Pitcher Partners, including Johnston Rorke,
is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane |

INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF OBJECTIVE CORPORATION LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Objective Corporation Limited and controlled entities, which comprises the consolidated statement of financial position as at 31 December 2011, and the consolidated statement of comprehensive income, consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration.

Directors' Responsibility for the Half-Year Financial Report

The directors of the Objective Corporation Limited are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Objective Corporation Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

An independent New South Wales Partnership ABN 35 415 759 892
Liability limited by a scheme approved under Professional Standards Legislation
An independent member of BAKER TILLY INTERNATIONAL

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PITCHER PARTNERS

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Objective Corporation Limited is not in accordance with the Corporations Act 2001 including:

(a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

M A GODLEWSKI
Partner

PITCHER PARTNERS
Sydney

28 February 2012