Ann: Half Yearly Report and Accounts, page-2

Not too many surprises in this result, given the trading update provided in January. My quick notes:

- Confirmation that the skew between 1H and 2H results won't be as pronounced as in prior years, which was always likely in my mind as 1H17 represented a big step up from prior years.
- R&D held at 20%, but finally starting to see operating leverage on the distribution costs. Admin costs are a question mark - see below.
- Euro segment profit looks to have taken a decent Brexit-related currency hit - commentary was that ECM licence revenue grew in Europe, yet segment result shows revenue going backward from $4.2m to $3.7m (albeit offset by bigger decline in expenses). Suspect this cost OCL around $200k EBIT for the half.
- Keystone still on track for profitability by end of FY17. I see broadening the customer base from local UK councils, to UK financial services firms (as has been done in Aus) as the FY18 goal.
- Slight disappointment in Connect uptake in 1H. That was also inferred in their January trading update (given the slowing in growth observable between AGM commentary and Jan trading update), and i commented as such at the time. Will be paying close attention to see what happens in 2H as they say that leads look good for 2H conversions.
- I'm a little confused as to what's going on with the jump in admin expenses to $5.4m, when they were previously running at ~$3m per half. I know they moved offices at a cost of ~$3m, but that shows up in the cash flow statement as the purchase of PPE. I suspect it has to do with the fact that 704k employee options were exercised for $415k (versus market value of those shares of ~$1.5m), but does anyone actually know? ~$2m gap up from the prior run rate is a big number, need to understand what part of this line item change is recurring vs. non-recurring.