Kofax plc (LSE:KFX) (‘Kofax’ or the ‘Company’), the leading provider of Intelligent Capture & Exchange solutions, today announces audited Preliminary Results for the 12 months ended 30 June 2008.

Reynolds C. Bish, Chief Executive Officer of Kofax said

“We’re pleased with the progress demonstrated by these results, which were achieved during a period of significant reorganisation. Our corporate rebranding and the restructuring of both the Company and our sales organisation have been completed. The changes have better focused all of our resources and should allow us to execute in a more consistent and productive manner throughout the Company and all geographic regions. We’re also pleased to welcome Alan Kerr as our Executive Vice President of Field Operations and are confident that his appointment will further improve our sales management, productivity and visibility. We believe that all of the changes undertaken during the second half of the financial year will greatly assist us in pursuing our previously announced revenue growth strategies.

“Management and the Board are confident we will be able to achieve double digit revenue growth in the Company’s software business in the current financial year and view this as a key objective. Kofax’s solutions typically provide an easily quantified and relatively fast return on investment by eliminating the manual effort that would otherwise be required. This allows our customers to realise significant labour cost savings and other benefits. This is an appealing value proposition in uncertain economic times and, as a result, we remain enthused about the Company’s market opportunities in this and future financial years.”

Webcast

There will be a webcast of Kofax’s analyst presentation available on the Company’s website (http://www.kofax.com) from 2:00 pm today.

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About Kofax plc

Kofax plc (LSE:KFX) is the leading provider of Intelligent Capture & Exchange solutions. For more than 20 years, Kofax has provided award-winning solutions that automate document-driven business processes by managing the transformation and exchange of business-critical information arising in paper, fax and electronic formats in a more accurate, timely and cost-effective manner. These solutions provide a verifiable return on investment to thousands of customers in financial services, manufacturing, retail, government, healthcare, business process outsourcing and other markets. Kofax delivers these solutions through its own sales and service organisations, and a global network of more than 1,200 authorised partners in more than 60 countries throughout the Americas, EMEA and Asia Pacific. For more information, visit http://www.kofax.com/.

Chairman’s Statement

The year ended 30 June 2008 has been one of solid progress for our Company.

Revenue, operating profit and cash generation have shown a healthy improvement on the previous year, our balance sheet is strong, our customers and partners have shown confidence in our offerings and capabilities and our employees have shown great resilience in the face of considerable change.

In November 2007 we welcomed Reynolds Bish as our new CEO and with the support of your Board he has set about making the changes necessary to improve our future prospects. We have rationalised and focused our worldwide organisation in order to be more responsive to market needs; we have changed the Company name, rebranded our product portfolio and refreshed our software product line. We are strengthening our talent pool and building a more appropriate and effective sales capability.

We face the future with confidence, conscious of the need to compete vigorously and with a firm focus on our cost and expense base. A year ago I told you we intended to move resources and make the investments needed to grow our software business lines. We have made good progress in the last year and we will continue to drive our growth plans to produce results you can be pleased with.

Chief Executive's Review

Financial Performance

Kofax’s financial year ended 30 June 2008 concluded positively, with total revenues growing by 6% to £169.9m (2007: £160.2m), our adjusted operating profit growing by 8% to £16.8m (2007: £15.5m) and our adjusted operating profit margin improving slightly to 9.9% (2007: 9.7%).

Our software business revenues grew by 9% (8% in constant currency terms) to £95.9m (2007: £87.6m). This resulted from 17% growth in services revenue, which offset a lower than anticipated 5% growth in license revenue. This result was short of our stated objective to achieve double digit revenue growth (in constant currency terms) and was primarily a direct result of poor sales management and execution in the Asia Pacific region. We have already taken steps to address these issues and are pleased to note that the Company did not experience similar problems or weakness in other geographic regions or any particular vertical markets.

Our hardware business revenues grew by 2% to £74.0m (2007: £72.6m). This is attributable to a 9% growth in hardware services revenues, which was offset by flat distribution revenues. These results reflect both the competitive advantage associated with our offering maintenance services and the increasingly competitive and price sensitive nature of the distribution portion of this business.

As a result of strong operating cash flow generation of £20.3m (2007: £16.2m), we ended the year with net funds of £34.9m (2007: £38.2m) after spending £11.2m to purchase 5,930,000 of the Company’s ordinary shares.

We are pleased with these results and have maintained momentum in the last financial year while at the same time making some significant positive changes to the business. These include renaming the Company, restructuring the Company and its sales organisation and strengthening our executive management team. These changes have all taken place alongside an increasingly uncertain economic environment. We look forward to building on this momentum and delivering another strong set of results in the current financial year.

Renaming, Reorganisation and Exceptional Charge

As outlined in the interim statement in February 2008, following my arrival as CEO on 5 November 2007, I conducted a thorough review of the branding, structure and strategy of the Company. Following this review it became clear that certain changes were necessary to accelerate the Company’s stated strategy of focusing on the software license and services portion of its business.

Firstly, there was significant confusion both internally and externally over the various brands used by the Company in the past, many of which have arisen through acquisition. Among all brands and products, Kofax clearly emerged as the brand with the highest awareness among stakeholders on a global basis, having been recognised as the leading capture software company for the past twenty years. Furthermore, the respected products and innovations that have emerged from Kofax most closely define the direction in which the Company is now heading. As a consequence, the Board proposed, and on 18 February 2008 our shareholders approved, changing the name of the Company from DICOM Group plc to Kofax plc.

Secondly, the Company’s organisational structure has been reorganised to better align and focus its resources. In the past, most line and staff functions were highly decentralised and widely distributed throughout the world, with both regional and country managers acting as general managers and being responsible for all of these functions as well as revenue generation. With this reorganisation, all line and staff responsibilities have now been consolidated into vertically aligned, worldwide functions under global managers reporting to me. The essential purpose of this change was to enable us to execute in a more consistent and cost effective manner and to focus local management efforts more clearly on revenue generation activities.

Finally, the Company’s sales function has been reorganised to better align and focus these resources. As with the Company in the past, the sales function was also highly decentralised and widely distributed throughout the world, with the regional and country managers being responsible for selling all of the Company’s products. With this reorganisation, the sales function has now been separated into three groups better aligned with our products, markets and customers, namely: (1) applications software, (2) OEM and Point of Sale (“POS”) software, and (3) our European hardware distribution and maintenance business. This has allowed our sales employees to better focus their selling efforts, created clearer lines of authority, responsibility and accountability and should, over time, improve our sales management and sales productivity.

To support the reorganisation of our sales function described above, on 27 May 2008 we recruited Alan Kerr as Kofax’s Executive Vice President of Field Operations. Alan is now responsible for the Company’s customer facing functions on a global basis, including all sales, professional services, maintenance services, channel management, business development and sales operations activities. Alan brings an abundance of relevant experience in enterprise software sales management and hybrid go-to-market models, having previously been at HP Software, Peregrine Systems, Ascential Software and Informix Software. He has an impressive track record of successfully achieving goals and objectives while effecting positive change in a number of companies and will be instrumental in executing our revenue growth strategies.

As a consequence of the renaming and restructurings described above, Kofax made over 50 redundancies, closed certain facilities and recorded an exceptional charge of £4.8m in the second half of this past financial year. These changes will lead to significant cost savings over time, which will permit us to reinvest part of those funds to better grow our software business by hiring key new personnel, improving our corporate infrastructure and supporting the rebranding process.

Operating Highlights

We added more than 2,000 new customers during this past financial year. Major customer wins during the period included Apria, Morgan Keegan, Chesapeake Energy, North Carolina State Employees Credit Union, China Merchant Bank, Emirates Airlines, Deutsche Bank, Dexia Insurance Belgium, Grupo Santander, Intesa Sanpaolo Bank, Prudential, TeamHealth, Tech Data Europe and the United States National Archives and Records Administration (NARA).

Further endorsements came in the form of a remarketing agreement with HP for our intelligent capture & exchange solutions, including our Document Exchange Server software, which has been integrated with HP imaging and printing products to provide a more complete solution for end user customers, and Document Exchange Server achieving compatibility with multifunction products (MFPs) from Ricoh.

During the year we were also pleased to again receive widespread recognition for our market position and products. These accolades included:

• The “Independent Software Vendor of the Year for 2008” award from IBM’s Enterprise Content Management (ECM) Group,
• The “Technology Partner of the Year for 2007” award from Open Text Corporation,
• A “Top Trend-Setting Product of 2007” award for our Document Exchange Server software from KMWorld Magazine,
• An “Editor's Choice Award for 2007” for our Document Exchange Server software from Document Manager Magazine,
• Kofax being named as one of the “100 Companies That Matter in Knowledge Management in 2008” by KMWorld Magazine and
• Kofax being named to Software Magazine's “Software 500” ranking of the world's largest software and service providers.

In this past financial year we also successfully released three new intelligent capture and exchange software products:

• Kofax Capture 8.0, a new release of Ascent Capture, the world's leading information capture platform, which, with this release, was rebranded as Kofax Capture and now includes additional capabilities vital to business-critical applications in enterprise environments.
• Kofax Communication Server 8.0, a new release of the TOPCALL Communication Server which, with this release, was rebranded as Kofax Communication Server and now includes enhanced Fax-over-IP (FoIP) capabilities.
• VirtualReScan (VRS) 4.2 Professional and VRS 4.2 Professional's new Desktop Productivity feature, which enables desktop users to scan, enhance, save and distribute documents directly from within most Microsoft Windows applications, including Exchange.

Corporate Objectives and Strategies

As outlined when we announced our interim results, our objective is to become the leading provider of intelligent capture and exchange solutions in a manner that maximises long-term stakeholder value. Better addressing customer and channel partner needs, recruiting and developing employee talent and maintaining good supplier relationships all foster greater shareholder value.

We plan to accomplish this objective by extending our leadership position in the capture market, augmenting our existing channel partner sales model with an increased focus on direct engagements, ensuring continuous market-driven product innovation to meet the needs of our customers, improving our organisational structure and corporate infrastructure, creating a culture that ensures individual accountability and rewards for performance and, of course, controlling costs in order to meet or exceed operating income growth objectives.

Specific revenue growth strategies include:

1. Increasing our market share by taking advantage of documented growth opportunities in our existing markets and thereby growing our revenues at or exceeding market growth rates. We will seek to maintain and extend our market leader position in batch capture by better leveraging our existing channel partners and installed base of end users and expanding our global network of channel partners. In addition, we will aim to improve our newly secured number two position in the transaction capture market by further leveraging our channel partners and better selling these solutions into our installed base of end users.

2. Establishing a top five position in the front office or ad hoc capture market segment using our Document Exchange Server software and related new software product offerings. These solutions are designed to facilitate the capture and processing of documents where they originate as opposed to in centralised, back office environments, thereby making our customers more competitive and enabling significant cost savings. This allows us to enter a new segment of the capture market with a different and more important value proposition, which we believe is more strategic to both our end user customers and channel partners and will allow us to further leverage these assets.

3. Moving to a “hybrid go-to-market” model to expand our market reach. This will continue to utilise and expand our existing channels of resellers, VARs and system integrators, but also extend our sales efforts to include significantly more direct engagements with larger end user customers at the enterprise level of the market. Direct engagements in these opportunities will allow us to better meet customer needs and strengthen our competitive position while allowing us to still honour the contributions of our channel partners when appropriate.

4. Augmenting our organic revenue growth with carefully selected strategic acquisitions and both rapidly and fully integrating the acquired companies in order to gain competitive advantage.

5. Maintaining our hardware distribution and maintenance business revenues, with a primary focus on increasing its operating income.

We made a great deal of initial progress in these areas during this past financial year and created a solid foundation for more aggressively pursuing these objectives and strategies during the current and future financial years.

Board Changes

On 5 November 2007 I succeeded Rob Klatell as Chief Executive Officer and a member of the Board of Directors. As a result of the reorganisation described above, on 12 February 2008 Urs Niederberger, previously the Company’s Chief Operating Officer, left the Company. Along with the rest of the Board, I would like to thank both Rob and Urs for their efforts on behalf of the Company and wish them well in their future endeavours. During the year we also announced the appointment of William Ty Comfort III as Non-Executive Director of the Board and a member of the Nomination and Remuneration Committee.

Ordinary Share Matters

On 28 August 2007 the Board announced its intention to buy back up to five percent of the issued share capital under the authority given to it at the 2006 Annual General Meeting. At the Annual General Meeting on 13 November 2007 the shareholders again granted the Board the authority to buy back up to ten percent of the issued share capital. During this past financial year the Company bought back and initially held in treasury 5,930,000 of the ordinary shares at a cost of £11.2m.

On 30 June 2008 the Board transferred 3,647,683 of the Company’s ordinary shares held as treasury stock to the trustee of the Kofax plc Employee Share Trust, the Company's employee benefit trust, for no consideration. These shares will be held by the trust and in turn transferred to Company employees upon the release of long-term incentive plan awards and the exercise of stock options.

At the beginning of this financial year Kofax had 88.9m ordinary shares in issue. During the year 0.9m shares were issued to satisfy the exercise of employee share options. On 30 June 2008, the Company therefore had 89.8m ordinary shares in issue, of which 2.1m ordinary shares were held in treasury and 3.6m shares were held in the Company`s employee benefit trust.

Dividend

The Board is pleased to recommend a final dividend of 1.62p per ordinary share, resulting in a total dividend of 2.44p (2007: 2.12p) per ordinary share for the past financial year. This represents an increase of 15% over the previous year. The final dividend will be paid on 12 December 2008 to shareholders on the register as of 14 November 2008. After careful consideration of our future opportunities for the use of cash your Board has decided to suspend the payment of a regular dividend until further notice.

Outlook

The Management team and the Board are confident we will be able to achieve double digit revenue growth in the Company’s software business in the current financial year and view this as a key objective. Kofax’s solutions typically provide an easily quantified and relatively fast return on investment by eliminating the manual effort that would otherwise be required and allow our customers to realise significant labour cost savings and other benefits. This is an appealing value proposition in uncertain economic times and, as a result, we remain enthused about the Company’s market opportunities in this and future financial years.

Thank You

Our performance is a direct result of the dedication and hard work of our valued employees and the continued support of our customers, channel partners and shareholders. I would like to sincerely thank all of these stakeholders for their ongoing contributions to our success.

Chief Financial Officer’s Review

Overview

As noted in the Chairman’s Statement, our financial performance in the year ended 30 June 2008 demonstrated good progress against a backdrop of significant change within the business. Total revenues grew 6% during the period. Our software business reported a growth rate of 9%, signalling a return to growth after a disappointing performance in 2007. Our hardware business, operating in an increasingly competitive market, reported 2% growth. The growth in the hardware business was driven by 9% growth in hardware services and positive currency impacts.

As a result of tight cost control and the reorganisation effected in January 2008 our adjusted operating profits grew 8% to £16.8m. We continue to generate excellent operating cash flows, resulting in an operating cash inflow of £20.3m before reorganisation costs.

Trading Results

Overall, revenues for the year grew by 6% to £169.9m (2007: £160.2m). Revenue growth in constant currency terms amounted to 2%. The software business grew 9% and 8% in constant currency terms. Our software licence revenues grew 5% (4% in constant currencies) and our software services revenues increased by 17% (14% in constant currencies). The growth in software services was largely driven by an increase in our software maintenance revenue. Our total software business (licence and software services revenues) now accounts for £95.9m and represents 56% of total revenue. The remaining revenue is derived from our hardware distribution business which grew 2%.

The shortfall in achieving our stated target of double digit sales growth in our software business is attributable primarily to poor sales management and execution in the Asia Pacific region. The decline in hardware distribution revenues is attributable to an increasingly competitive market, and to the added distraction resulting from the reorganisation affected in January 2008 which had a significantly greater impact on this portion of our overall business.

Adjusted operating profit grew by 8% from £15.5m to £16.8m. Our net operating profit increased to £9.4m versus £8.8m in the previous financial year. Total operating expenses increased from £81.6m to £87.0m, up 7% due to increased reorganisation costs and higher personnel expenses. Amortisation of acquired intangible assets, included under operating expenses, remained at £2.3m. Share-based payment charges decreased to £0.3m compared to £1.1m in the previous year mainly due to performance criteria for the exercise of shares and options not being fully met, which resulted in a reversal of previous year charges. In addition, we incurred a restructuring charge of £4.8m in the year ended 30 June 2008 (2007: £3.2m). This amount is comprised of £3.8m related to redundancies and associated costs, £0.3m related to onerous lease contracts and £0.7m of other costs.

In the first six months, adjusted operating profit was £8.1m, a margin of 9.8% on sales of £82.4m. Results in the second half contributed an adjusted operating profit of £8.7m or 9.9% on sales of £87.5m. This split reflects our seasonal sales pattern with a slow first quarter followed by significantly stronger subsequent quarters.

Adjusted earnings per share (EPS) increased by 4% to 14.4p (2007: 13.8p). A reconciliation of adjusted profit is given in the table below.

Basic earnings per share decreased to 4.0p (2007: 9.1p). Diluted earnings per share decreased to 3.9p (2007: 8.8p).

Software Business Revenue Breakdown

The table below provides a breakdown of the total software business revenues which are split into application software, OEM / POS software and lastly software services which primarily consist of software maintenance and professional services.

Within applications software we differentiate between capture (which includes batch and transaction capture) and communications software. The latter is a more mature business with lower growth prospects. We previously reported batch and transaction capture software revenues separately but we have now discontinued this practice as the two are increasingly sold together in a bundled manner to better address customer requirements.

Application software license revenues grew 11%. Total capture license revenues grew by a strong 13% which was mainly driven by the success of our transaction oriented capture solutions. As expected, revenue from communications software licenses remained essentially flat and reduced overall growth in applications software revenues to 11%.

The OEM / POS business experienced a decline of 9%. This decline can be attributed to two factors. First, the expected decrease in our older image processing products, which declined by 25% and only amounted to £2m. Secondly, as we transition sales of VRS from a channel to an OEM model the increase in revenue from our OEM customers did not yet completely compensate for the decline in POS sales generated from the channel.

Revenue by Geographic Segments

The information set out in the table below provides the breakdown of revenues by geographic segment. Revenue in the Americas increased by only 3%. The decline in OEM / POS revenues, most of which are included in this region, resulted in software license revenues declining by 3%. This was, however, more than offset by a strong 16% increase in services revenue.

Total revenue in EMEA grew by 8%. EMEA had an excellent year with respect to the software business which increased revenues by 18%. Most notably the sales of application software grew by slightly more than 30% as a result of very strong growth in capture software revenues whilst communication software revenues remained essentially flat. Software services grew by 13%. Total hardware sales grew by only 3% with product sales being flat and services growing by 10%.

As indicated in our July 2008 trading update, we experienced a disappointing year in Asia-Pacific. Total revenues in Asia Pacific declined by 9%. The main decline occurred in application software revenues, which decreased by 24%. Mainly as a result of substantial growth in applications software revenues in Financial Year 2007 software services grew by 65%, largely offsetting the decrease in licence sales so that total revenues from the software business in Asia Pacific grew by only 2%. As we phase out the hardware business in Asia Pacific revenues from that business decreased as expected from £1.0m to £0.4m.

Research and Development Expenditures

We continue to invest in the ongoing research and development of our market leading software products. Research and development costs totalled £17.4m (2007: £15.3m) which represents an increase of 14% (2007: 21%). We do not currently expect this level of year over year growth in these expenditures to continue and have taken steps to bring these costs more in line with the growth in our software business.

Taxation

The tax charge for the year ended 30 June 2008 of £4.2m reflects a tax rate on profit before tax of 55% (2007: 21%). The increase in the current year tax charge is largely due the fact that the previous year tax charge benefited from the use of previously unrecognised tax losses carried forward. In addition the amortisation of intangible assets, finance instrument expenses and the share based payment expense are, for the most part, not deductible for tax purposes. The effective tax rate on adjusted profit before tax is recorded at 30%, which is at a more sustainable level by comparison to the lower level of 22% in the last financial year. Adjusted profit before tax is defined as profit before tax adding back amortisation of acquired intangible assets, reorganisation charges and financial instruments expenses.

Balance Sheet

The consolidated balance sheet remained very strong with shareholders equity reported at £97.4m (2007: £99.2m). The net funds position was £34.9m (2007: £38.2m), with cash and cash-equivalents of £36.4m (2007: £39.2m) held at the year end. During the year we increased our distributable reserves by £58.6m through a corresponding reduction of the share premium. This will substantially facilitate the ongoing optimisation of our capital structure.

Cash Flow

As a result of a strong focus on cash flow and debtor collections operating cash flow generation also remained strong. During the year ended 30 June 2008, Kofax’s operating activities generated positive operating cash flows of £20.3m (2007: £16.2m), turning 121% (2007: 104%) of adjusted operating profit into operating cash flow. As a result of the reorganisations the Company incurred a cash outflow of £4.1m. The remaining provision amounts to £2.2m of which the majority will be settled in Financial Year 2009.

Dividend

A final dividend of 1.62p has been proposed, making a total dividend payable on ordinary shares for the year of 2.44p (2007: 2.12p), up 15%.

Treasury Management

The Company has continued to generate excellent cash flows with high conversion ratios maintained. Kofax’s policy has been to fund its operations through the use of retained earnings, equity and bank facilities. Material bank borrowing arrangements are negotiated by management and approved by the Board of Directors. Positive cash balances earn floating rate interest based on relevant national interbank rates.

The Company has significant overseas subsidiaries, which operate principally in their local currency. Where appropriate, intra group borrowings are arranged in local currencies to provide a natural hedge against currency exchange risks.

During the current and previous financial year, Kofax used foreign currency swaps to convert the foreign currency exposure on a $25m intercompany loan to Euros. The swaps do not qualify for hedge accounting and therefore gains or losses are recorded in the income statement, which are shown along with the gains or losses arising on the translation of the intercompany loan. The loss recorded in the income statement amounts to £2.7m, which was more than offset by substantial gains of £7.3m on currency asset translation in reserves. The swaps have been closed out since the year end and the intercompany loan re-designated to reduce the currency exposure. As a result, this £2.7m has been added back for the purposes of the adjusted earnings per share, adjusted pre tax profits and the adjusted effective tax rate calculations. As this £2.7m is shown as a finance expense, it is naturally excluded in calculating adjusted operating profit.

Business Risks and Uncertainties

Under the new European Union reporting requirements, the Board is required to comment on risk factors facing the business. As with any business, risks may affect the Company, its results and management’s ability to execute.

One of the key risk factors for the Company is the complex corporate structure and outdated information technology infrastructure currently in place within the Company. We are in the process of simplifying our legal structure and upgrading our current information technology infrastructure, including our financial accounting and sales order processing systems and have recruited experienced managers to lead those projects in addition to clearly defined milestones which will be tracked accordingly.

Our success also depends on our ability to recruit and retain highly skilled personnel. We made substantial progress during the last financial year by better organising and staffing our human resources department and thereby strengthening our recruiting skills and retention capabilities.

Finally, as part of our revenue growth strategies we are moving to a “hybrid go-to-market” model to expand our market reach and augment the revenue generated by our channel of VARs and system integrators with revenue generated by direct sales to end users. We are at the beginning of this process and both have hired and will continue to hire key employees to assist in this process who have the skills and proven track records to successfully manage this transition. This includes Alan Kerr, who joined us as our Executive Vice President of Field Operations in May 2008, and others.