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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Eservglobal Limited | LSE:ESG | London | Ordinary Share | AU000000ESV3 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.45 | 5.40 | 5.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMESG
RNS Number : 5101J
eServGlobal Limited
29 June 2017
eServGlobal Limited (eServGlobal or the "Company")
Results Commentary, Debt Extension and Outlook
Sydney: 29 June 2017
eServGlobal (LSE: ESG.L & ASX: ESV.AX), the provider of innovative mobile financial technology, today presents its results for the six month period ending 30 April 2017.
Homesend is experiencing a sales expansion which it expects to become more significant across the remainder of 2017. HomeSend has now signed agreements with several banks and is supporting further bank agreements through Mastercard Send. Based on the events of the first half of this financial year, the eServGlobal Board expects the value of this investment to significantly increase over the remainder of the financial year.
Revenue in the core business is EUR4.1M for H1 2017 (H1 2016: EUR5.5M). However, the quality and geographical diversity of the pipeline for the Company's core business, positively supported by our efforts to extend our reach beyond a concentrated area of the Middle East, provides a strong outlook for the year giving the Board current visibility of a revenue range of EUR15.0M to EUR19.0M in the 14 months to December 2017 and further prospecting continues. In support of this revenue range, the Board continues to explore opportunities for further cost efficiencies.
HomeSend update
The development of HomeSend's overall bank opportunity has proceeded extremely well. Through the partnerships already signed, there is the potential for significant transaction volumes, the timing of which will become clearer through ongoing implementation. This builds on the major banking partner agreement with KEB Hana Bank, signed late last year, which has achieved its first live transactions with the potential for significant volumes as the corridor roll out progresses. In addition to this, HomeSend is also exploring other potential routes to market, including through e-commerce.
HomeSend revenue to this point has been driven by the continuing increase in service offering to existing signed and announced Mobile Network Operators and Money Transfer Organisations. Volumes are expected to be substantially supplemented by existing and new bank agreements.
The sales opportunity is much larger than originally expected by eServGlobal and is evidenced by current engagements in process in the banking sector which are far more varied than anticipated. The products and services developed are highly applicable to small and medium banks. Current experience with large banks and other organisations, including some significant ongoing contract opportunities, shows that the HomeSend network is even better positioned to address the banking market than the eServGlobal Board had previously anticipated.
Core business update
Revenue is EUR4.1M for H1 2017 (H1 2016: EUR5.5M). This reduction in revenue was mainly due to specific timing challenges around one new and one existing contracts. The effect was partially mitigated around achieving some further cost reductions. The refreshed management team has generated an improving pipeline while continuing the focus on cost saving in the business. We currently have a strong qualified pipeline of EUR39M and our prospecting in H1 2017 has produced four times the volume of opportunities compared with the same period last year. New and significant opportunities also continue to present themselves.
Our channel initiative in Africa announced last year has been re-evaluated and based on experience to date, the Board believes it is not the most efficient way to capitalise on new opportunities being identified. As a result, the Board has decided to exit the relationship. This has resulted in the Company recognising an administrative cost equal to the revenue recognised in FY2016 which was EUR1.8m. Whilst the Company is being prudent in recognising those costs, the economic opportunity remains extant and the Company continues to pursue identified opportunities and expects to realise at least some of the economic benefit of new contracts in due course.
The Company has continued to make good progress with costs and we are now targeting further cost reductions from the previous FY guidance of EUR17M. Year to date total costs for the first half are 30% below the same period in the prior year. Annualised costs for the second six months ended 31 October 2017 are expected to be below EUR16M with an expectation of circa EUR16.5M for the full 12 months and approximately EUR18.5M for the 14 month financial year.
New additional debt funding
A further GBP2.5M (EUR2.8M) tranche of debt has been secured with Lombard Odier (formerly Volantis) (the "New Tranche") to continue further restructuring of the business, to create a more appropriate and long term structure, and for working capital. The New Tranche is on the same commercial terms as the existing debt facility save for the inclusion of an additional covenant applying to the New Tranche only. The additional covenant (the "Net Asset Covenant") requires the Company to disclose in its accounts for FY17 an improvement in net assets over the net assets disclosed in the half year accounts released today (adjusted for the New Tranche as if the New Tranche was funded on 30 April 2017). A breach of the Net Asset Covenant would entitle the lenders to call for repayment of the New Tranche. The first twelve months' interest on the New Tranche accrues from today.
Cash held at the end of the half was EUR2.0M (31 Oct 2016: EUR5.5M). This decrease is due to the expected H2 weighting of this year's revenue, and this is expected to increase in the second half of the year, helped by improving cash collections and decreasing costs.
Lombard Odier is a substantial shareholder in the Company as defined in the AIM Rules for Companies due to having an interest in more than 10% of the Company's issued share capital and as such is deemed to be a related party. Accordingly, the Additional Loan is a related party transaction pursuant to the AIM Rules. The Directors consider, having consulted with finnCap, that the Additional Loan is fair and reasonable insofar as Shareholders are concerned.
Outlook
A strong geographically diversified pipeline outside of the Middle East, together with the continued success of our cost reduction, has generated the opportunity to breakeven by the end of the calendar year. The Board however is continuing to review costs within the core business.
The outlook for HomeSend is extremely positive.
John Conoley, Executive Chairman of eServGlobal, commented:
"The Board's goal in the second half is to achieve greater certainty of outcome in the core business for investors, and that means to achieve breakeven in the core business. The Board expects to find further opportunities for efficiency to support that. In HomeSend, the immediate market opportunity is much larger than previously thought. Current experience with large banks and other organisations, including some significant ongoing contract opportunities, indicates that the HomeSend network is even better positioned to address that market than the Board had previously anticipated."
About eServGlobal
eServGlobal (AIM:ESG, ASX:ESV) offers mobile money solutions which put feature-rich services at the fingertips of users worldwide, covering the full spectrum of mobile financial services, mobile wallet, mobile commerce, recharge, promotions and agent management.
For more than 30 years, eServGlobal has been a source of innovation for telcos and financial institutions. Using carrier-grade, next-generation technology, eServGlobal aligns with the requirements of customers around the globe.
Together with MasterCard and BICS, eServGlobal is a joint venture partner of the HomeSend global payment hub, enabling cross-border money transfer between mobile wallets, cards, bank accounts or cash outlets from anywhere in the world.
For further information, please contact:
Hot Features
Premium
eServGlobal www.eservglobal.com
Tom Rowe, Company Secretary investors@eservglobal.com
Alison Cheek, VP Corporate Communicatons
finnCap Limited (Nomad and Broker) www.finnCap.com
Jonny Franklin-Adams / Anthony T: +44 (0) 20 7220
Adams / Hannah Boros 0500
Alma PR (Financial Public Relations) www.almapr.co.uk
Hilary Buchanan / John Coles T: +44 (0) 208 004
4218
Appendix 4D
eServGlobal Limited
ABN 59 052 947 743
Half-year report and appendix 4D
for the half-year ended 30 April 2017
The half-year financial report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the 31 October 2016 financial report.
Half-year report and appendix 4D
for the half year ended
30 April 2017
Contents
Results for announcement to the market 1
Directors' report 2
Auditor's independence declaration 4
Independent review report 5
Directors' declaration 7
Condensed consolidated statement of profit or loss and other comprehensive income 8
Condensed consolidated statement of financial position 9
Condensed consolidated statement of changes in equity 10
Condensed consolidated statement of cash flows 11
Notes to the condensed consolidated financial statements
12
Results for announcement to the market
Results A$ '000
--------------------------------- ------------------------------------
Revenues Down 29.9% to 5,859
(Loss)/Profit after tax
attributable to members Up 17.0% to (14,403)
Dividends (distributions) Amount per Franked amount
security per security
----------------------
Current period
Interim dividend declared Nil c 0%
Final dividend paid Nil c 0%
--------------------------------- ------------ ----------------------
Previous corresponding period
Interim dividend declared Nil c 0%
Final dividend paid Nil c 0%
--------------------------------- -------------------- --------------
Record date for determining N/A
entitlements to the dividend.
------------------------------------
Brief explanation of revenue, net profit and
dividends (distributions).
The consolidated entity achieved sales revenue
for the period of $5.859 million (2016: $8.363
million) representing a decrease of 29.9% mainly
due to the timing of pipeline conversion. EBITDA
for the period was a loss of $11.870 million
(2016: EBITDA loss $8.809 million).
The net result of the consolidated entity for
the half year ended 30 April 2017 was a loss
after tax and minority interest for the period
of $14.403 million (2016: $12.311 million loss).
Loss per share was 2.3 cents (2016: loss per
share 4.6 cents).
During the period, there was a net cash outflow
of $6.925 million primarily resulting from a
net outflow from operations of $5.538 million,
dividends paid to minority interest of $0.421
million. Cash at 30 April 2017 was $2.861 million.
----------------------------------------------------
Directors' report
The Directors of eServGlobal Limited (the Company) submit herewith the financial report of eServGlobal Limited and its controlled entities (the Group) for the half-year ended 30 April 2017. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:
Directors
The names of the Directors of the Company during or since the end of the half year are:
John Conoley Executive Chairman Andrew Hayward Chief Financial Officer (appointed 21 December 2016) Stephen Baldwin Non-executive Director Thomas Rowe Company Secretary and non-executive Director
Review of Operations
This report is to be read in conjunction with other reports issued contemporaneously.
eServGlobal Limited is a public company listed on the Australian Securities Exchange (ASX:ESV) and the London Stock Exchange (AIM) (LSE:ESG). The eServGlobal group has operations worldwide.
eServGlobal offers mobile money solutions which put feature-rich services at the fingertips of users worldwide, covering the full spectrum of mobile financial services, mobile wallet, mobile commerce, recharge, promotions and agent management features. eServGlobal invests heavily in product development, using carrier-grade, next-generation technology and aligning with the requirements of more than 65 customers in over 50 countries.
eServGlobal also builds on its extensive experience in the telco domain to offer a comprehensive suite of sophisticated, revenue generating Value-Added Services to engage subscribers in a dynamic manner.
The Company is partnering with MasterCard and BICS to build the HomeSend business, the market leading international remittance service based on eServGlobal technology and enabling mobile money transfer in over 50 markets.
eServGlobal has been a source of innovative solutions for mobile and financial service providers for over 30 years.
The consolidated entity achieved sales revenue for the period of $5.859 million (2016: $8.363 million) representing a decrease of 29.9% mainly due to the timing of pipeline conversion. EBITDA for the period was a loss of $11,870 million (2016: EBITDA loss $8.809 million).
The net result of the consolidated entity for the half year ended 30 April 2017 was a loss after tax and minority interest for the period of $14.403 million (2016: $12.311 million loss). Loss per share was 2.3 cents (2016: loss per share 4.6 cents).
During the period, there was a net cash outflow of $6.925 million primarily resulting from a net outflow from operations of $5.538 million, dividends paid to minority interest of $0.421 million. Cash at 30 April 2017 was $2.861 million.
Auditor's independence declaration
The auditor's independence declaration is included on page 4 of the half-year financial report.
Rounding off of amounts
The Company is a Company of the kind referred to in ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191 dated 24 March 2016, and in accordance with this Corporations Instrument amounts in the directors' report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the Directors, made pursuant to s.306(3) of the Corporations Act 2001.
On behalf of the Directors
John Conoley
Executive Chairman
London, 28 June 2017
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
The Board of Directors
eServGlobal Limited
c/- Simpsons Solicitors
Level 2, Pier 8/9
23 Hickson Road
Millers Point NSW 2000
28 June 2017
Dear Board Members,
eServGlobal Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of eServGlobal Limited.
As lead audit partner for the review of the financial statements of eServGlobal Limited for the half year ended 30 April 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
(ii) any applicable code of professional conduct in relation to the review.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor's Review Report
to the Members of eServGlobal Limited
We have reviewed the accompanying half-year financial report of eServGlobal Limited, which comprises the condensed statement of financial position as at 30 April 2017, the condensed statement of profit or loss and other comprehensive income, the condensed statement of cash flows and the condensed statement of changes in equity for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 7 to 18.
Directors' Responsibility for the Half-Year Financial Report
The directors of the company 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 gives a true and fair view and 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 30 April 2017 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 eServGlobal 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.
Auditor's Independence Declaration
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of eServGlobal Limited, would be in the same terms if given to the directors as at the time of this auditor's review report.
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 eServGlobal 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 30 April 2017 and of its performance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.
Material Uncertainty Regarding Going Concern
We draw attention to Note 1(c) Going Concern in the half year financial report, which indicates that the consolidated entity incurred a loss after tax of $14.392 million and had net cash outflows from operations of $5.538 million during the half year ended 30 April 2017. As stated in Note 1(c), these conditions, along with other matters as set forth in Note 1 (c), indicate that a material uncertainty exists that may cast significant doubt on the consolidated entity's ability to continue as a going concern. Our review conclusion is not modified in this respect.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Sydney, 28 June 2017
Directors' declaration
The Directors declare that:
a) based on the matters set out in Note 1(c), in the Directors' opinion, there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable; and
b) in the Directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.
Signed in accordance with a resolution of the Directors made pursuant to s.303(5) of the Corporations Act 2001.
On behalf of the Directors
John Conoley
Executive Chairman
London, 28 June 2017
Condensed consolidated statement of profit or loss and other comprehensive income for the half-year ended 30 April 2017
Consolidated
Half-Year Half-Year
Ended Ended
30 April 30 April
2017 2016
Note $'000 $'000
---------- ----------
Revenue 5,859 8,363
Cost of sales 2 (7,209) (7,910)
---------- ----------
Gross (loss) / profit (1,350) 453
Interest income 24 24
Foreign exchange gain 317 1,878
Research and development
expenses (101) (1,284)
Sales and marketing expenses (2,081) (2,296)
Administration expenses 2 (6,762) (4,933)
Share of loss of associate (1,917) (2,651)
---------- ----------
(Loss)/profit before interest
expense, tax, depreciation
and amortisation (EBITDA) (11,870) (8,809)
---------- ----------
Amortisation expense (1,650) (1,413)
Depreciation expense (34) (48)
Loss before interest expense
and tax (13,554) (10,270)
Finance costs (778) (1,679)
Loss before tax (14,332) (11,949)
---------- ----------
Income tax expense (60) (266)
---------- ----------
Loss for the period (14,392) (12,215)
========== ==========
Other comprehensive income
(loss), net of tax
Items that may be reclassified
subsequently to profit or
loss
Exchange differences arising
on the translation of foreign
operations (nil tax impact) (980) (2,390)
---------- ----------
Total comprehensive (loss)/profit
for the period (15,372) (14,605)
========== ==========
(Loss)/profit attributable
to:
Equity holders of the parent (14,403) (12,311)
Non controlling interest 11 96
---------- ----------
(14,392) (12,215)
========== ==========
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent (15,385) (14,684)
Non controlling interest 13 79
---------- ----------
(15,372) (14,605)
========== ==========
(Loss)/profit per share:
Basic (cents per share) (2.3) (4.6)
Diluted (cents per share) (2.3) (4.6)
Notes to the Financial Statements are included on pages 12 to 18
Condensed consolidated statement of financial position
as at 30 April 2017
Consolidated
-----------------------
31 October
30 April 2016
2017
Note $'000 $'000
----- ---------- -----------
Current Assets
Cash and cash equivalents 2,861 9,375
Trade receivables and work
in progress 2 10,676 14,939
Inventories 70 72
Current tax assets 204 817
Other current assets 1,789 3,037
---------- -----------
Total Current Assets 15,600 28,240
---------- -----------
Non-Current Assets
Investment in associate 10 23,205 24,986
Property, plant and equipment 21 32
Trade receivables 2 778 1,596
Deferred tax assets 936 1,062
Other intangible assets
- capitalised development
costs 4,899 5,598
Total Non-Current Assets 29,839 33,274
---------- -----------
Total Assets 45,439 61,514
---------- -----------
Current Liabilities
Trade and other payables 8,413 11,488
Current tax payables 266 280
Provisions 976 1,009
Deferred revenue 2,321 1,692
---------- -----------
Total Current Liabilities 11,976 14,469
---------- -----------
Non-Current Liabilities
Borrowings 5 13,457 11,759
Provisions 897 890
Deferred revenue 417 -
Total Non-Current Liabilities 14,771 12,649
---------- -----------
Total Liabilities 26,747 27,118
---------- -----------
Net Assets 18,692 34,396
========== ===========
Equity
Issued capital 6 142,276 142,276
Reserves 7 (3,519) (2,626)
Accumulated losses (120,230) (105,827)
---------- -----------
Equity attributable to
owners of the parent 18,527 33,823
Non controlling interest 165 573
Total Equity 18,692 34,396
========== ===========
Notes to the Financial Statements are included on pages 12 to 18
Condensed consolidated statement of changes in equity
for the half-year ended 30 April 2017
Foreign Attributable
Currency Equity-settled to owners
Issued Translation benefits Accumulated of the Non controlling
Capital Reserve Reserve Losses parent Interest Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
--------- ------------- --------------- ------------ ------------- ---------------- ---------
Consolidated
Balance
at 1 November
2016 142,276 (5,666) 3,040 (105,827) 33,823 573 34,396
========= ============= =============== ============ ============= ================ =========
Profit/(loss)
for the
period - - - (14,403) (14,403) 11 (14,392)
Exchange
differences
arising
on translation
of foreign
operations - (982) - - (982) 2 (980)
--------- ------------- --------------- ------------ ------------- ---------------- ---------
Total
comprehensive
income/(loss)
for the
period - (982) - (14,403) (15,385) 13 (15,372)
Payment
of dividends - - - - - (421) (421)
Equity settled
payments - - 89 - 89 - 89
--------- ------------- --------------- ------------ ------------- ---------------- ---------
Balance
at 30 April
2017 142,276 (6,648) 3,129 (120,230) 18,527 165 18,692
========= ============= =============== ============ ============= ================ =========
Balance
at 1 November
2015 116,074 (2,791) 2,965 (83,889) 32,359 412 32,771
========= ============= =============== ============ ============= ================ =========
Profit (loss)
for the
period - - - (12,311) (12,311) 96 (12,215)
Exchange
differences
arising
on translation
of foreign
operations - (2,373) - - (2,373) (17) (2,390)
--------- ------------- --------------- ------------ ------------- ---------------- ---------
Total
comprehensive
income for
the period - (2,373) - (12,311) (14,684) 79 (14,605)
Equity settled
payments - - 5 - 5 - 5
Balance
at 30 April
2016 116,074 (5,164) 2,970 (96,200) 17,680 491 18,171
========= ============= =============== ============ ============= ================ =========
Notes to the Financial Statements are included on pages 12 to 18
Condensed consolidated statement of cash flows
for the half-year ended 30 April 2017
Consolidated
Half-Year Half-Year
Ended Ended
30 April 30 April
2017 2016
$'000 $'000
---------- ----------
Cash Flows from Operating
Activities
Receipts from customers 7,683 10,362
Payments to suppliers and
employees (14,000) (14,969)
Interest and other costs
of finance paid - (92)
Income tax (paid) / refund 779 (864)
Net cash used in operating
activities (5,538) (5,563)
---------- ----------
Cash Flows From Investing
Activities
Proceeds from HomeSend business
divestment - 5,133
Investment in HomeSend joint
venture company - (3,905)
Interest received 24 24
Payment for property, plant
and equipment (26) (22)
Software development costs (964) (1,014)
---------- ----------
Net cash (used in) / from
investing activities (966) 216
---------- ----------
Cash Flows From Financing
Activities
Payment of dividends (421) -
Proceeds from borrowings - 5,845
Repayment of bank loan - (3,000)
---------- ----------
Net cash (used) / from financing
activities (421) 2,845
---------- ----------
Net Decrease In Cash and
Cash Equivalents (6,925) (2,502)
Cash At The Beginning Of
The Period 9,375 4,976
Effects of exchange rate
changes on the balance of
cash held in foreign currencies 411 (477)
---------- ----------
Cash and Cash Equivalents
At The End Of The Period 2,861 1,997
========== ==========
Notes to the Financial Statements are included on pages 12 to 18
Notes to the condensed consolidated financial statements
1. Significant accounting policies
(a) Statement of compliance
The half year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half year financial report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent annual financial report.
(b) Basis of preparation
The condensed consolidated financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.
The Company is a Company of the kind referred to in ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191 dated 24 March 2016, and in accordance with this Corporations Instrument amounts in the directors' report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
The accounting policies and methods of computation adopted in the preparation of the half year financial report are consistent with those adopted and disclosed in the Company's 2016 annual financial report for the financial year ended 31 October 2016, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.
New, revised or amending Accounting Standards and Interpretations adopted
The Group adopted all of the relevant new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the half year ended 30 April 2017 and are not expected to have any significant impact for the full financial year ending 31 October 2017. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Notes to the condensed consolidated financial statements
1. Significant accounting policies (continued)
(c) Going concern
The condensed consolidated statement of profit or loss and other comprehensive income for the financial period ended 30 April 2017 reflects a loss after tax of $14.392 million and the condensed consolidated statement of cash flows reflects net cash outflows from operations of $5.538 million. The Directors have reviewed the cash flow forecast prepared by management for the period through to 30 June 2018. The cash flow forecast indicates that that the Group will have sufficient funding to operate as a going concern during the forecast period based on existing levels of business infrastructure cost outflows and expected inflows from a new shareholders loan (refer below), timely completion, billing and collection of existing work in progress and trade receivable balances, and a probability assessment applied to new business pipeline opportunities. On this basis the Directors have prepared the financial statements on the going concern basis.
The Directors' assessment of the cash flow forecast includes proceeds by the parent entity of GBP 2.5 million ($4.2 million) from a shareholder loan extension with 1798 Volantis Fund Limited (formerly The AlphaGen Volantis Fund Limited) and 1798 Volantis Catalyst Fund Limited (formerly AlphaGen Volantis Catalyst Fund Limited) negotiated subsequent to period end, in June 2017. The purpose of these funds will be to meet the Group's short term working capital requirements. The shareholder loan facility is subject to certain covenant conditions as detailed in Subsequent Events note 11.
If the Group is unable to successfully generate its expected levels of operating performance and cash flows through to 30 June 2018 and meet the covenant conditions relating to the new shareholder loan, and /or if required, is unable to secure additional capital or alternative funding, significant uncertainty would exist as to whether the Group will be able to continue as a going concern and therefore whether it will realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial statements.
The financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.
Notes to the condensed consolidated financial statements
30 April 31 October
2017 2016
$'000 $'000
2. Trade receivables and work
in progress
(a) Current trade receivables
and work in progress
Trade receivables 8,815 8,715
Less : Allowance for doubtful
debts (5,170) (3,733)
---------------------------------------------- --------- -----------
3,645 4,982
Work in progress 13,306 14,723
Less : Allowance for non-recoverability
and losses (6,275) (4,766)
---------------------------------------------- --------- -----------
7,031 9,957
10,676 14,939
---------------------------------------------- --------- -----------
(b) Non-current trade receivables
Trade receivables 2,120 1,596
Less : Allowance for doubtful (1,342) -
debts
----------------------------------------- --------- -----------
778 1,596
---------------------------------------------- --------- -----------
The Group recognises an allowance for doubtful debts in relation to trade receivables whose collectability is considered doubtful. The Group also recognises allowance for non-recoverability and losses in relation to work in progress when there is evidence of dispute with the customers or where prolonged delays are encountered impacting project completion.
The Group's assessment is based on the knowledge of disputes at the reporting date and other relevant factors such as political or regulatory issues in the geographical location of the customer, as well as any change in the credit quality of the customer from the date credit was initially granted up to the reporting date.
Based on a detailed assessment by management, an impairment expense on trade receivables of $2.779 million charged to Administration Expenses, and on work in progress of $1.509 million charged to Cost of Sales was recognised in profit or loss in the current half year.
Notes to the condensed consolidated financial statements
3. Segment Information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.
The Group operates in a single segment being the telecommunications software solutions business. Accordingly, all reported information in the financial report relates to this single segment.
4. Issuances, repurchases and repayment of securities
During the current period the Company did not issue any shares (2016: nil).
The Company issued 6,000,000 share options over ordinary shares to its Executive Chairman and Chief Financial Officer at an option exercise price of $0.21 per share, and the vesting date being the earlier of 13 March 2019 or a change in control of the business or Company. The fair value of the share options at grant date was $0.03 per share.
The Company cancelled 2,175,000 expired share options over ordinary shares under its executive and employee share option plan during the period.
No employee share options were exercised in the period (2016: nil).
5. Borrowings
30 April 31 October
2017 2016
$'000 $'000
Interest bearing loan
Non-current 13,457 11,759
--------- -----------
Non-current borrowings represent loan from related party shareholders 1798 Volantis Fund Limited (formerly The AlphaGen Volantis Fund Limited) and 1798 Volantis Catalyst Fund Limited (formerly AlphaGen Volantis Catalyst Fund Limited). The total borrowings balance as at 30 April 2017 includes principal of $12.1 million (GBP 7 million), accrued interest of 1% per month compounded and impact of foreign exchange movement for the period. The loan is secured by way of a fixed and floating charge over the total assets and undertakings of the Group and is due for repayment, including accrued interest, on 30 June 2019. Subsequent to period end, the Group obtained an additional loan of $4.2 million (GBP 2.5 million) from the Lenders. Refer details in the Subsequent events note 11.
Notes to the condensed consolidated financial statements
6. Issued Capital
31 October
30 April 2017 2016
$'000 $'000
640,183,996 fully paid
ordinary shares 142,276 142,276
-------------- -----------
30 April 2017 31 October
2016
No. $'000 No. $'000
'000 '000
-------- -------- -------- --------
Fully Paid Ordinary Shares
Balance at the beginning
of the financial period 640,184 142,276 265,774 116,074
Shares issued in the period - - 374,410 27,549
Costs of share issue - - - (1,347)
Balance at the end of
the financial period 640,184 142,276 640,184 142,276
7. Reserves
30 April 2017 31 October
2016
$'000 $'000
Employee equity-settled
benefit 3,129 3,040
Foreign currency translation (6,648) (5,666)
-------------- -----------
(3,519) (2,626)
-------------- -----------
8. Financial Instruments
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
8.1 Fair value of the Group's financial assets and financial liabilities that are measured at fair value on a recurring basis
The Group has no financial assets and financial liabilities that are measured at fair value as at 30 April 2017 (October 2016: nil).
8.2 Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required)
The Directors consider that the carrying amounts of the following financial assets and financial liabilities recognised in the condensed consolidated financial statements approximate their fair values:
30 April 31 October
2017 2016
$'000 $'000
Financial assets
Trade receivables - current
and non-current 4,423 6,578
Cash and cash equivalents 2,861 9,375
Deposits and other assets 887 1,888
Financial liabilities
Trade and other payables 8,413 11,488
Borrowings 13,457 11,759
Notes to the condensed consolidated financial statements
9. Dividends
No dividend has been declared in respect of the current or previous financial year.
10. Investment in associate
Details of the material investment in associate at the end of the reporting period are as follows:
Name Principal Place of Proportion of ownership
of associate activity incorporation interest and voting
and principal rights held by the
place of Group
business
--------------- ------------------- ---------------- --------------------------
30 April 31 October
2017 2016
--------------- ------------------- ---------------- ----------- -------------
Provision
Homesend of international
SRCL mobile money Brussels,
(a) services Belgium 35% 35%
--------------- ------------------- ---------------- ----------- -------------
a) HomeSend SRCL was formed on 3 April 2014. The Directors have determined that the Group exercises significant influence over HomeSend SRCL by virtue of its 35% voting power in shareholders meetings and its contractual right to appoint two out of six Directors to the board of Directors of that company. The associate is accounted for using the equity method in these condensed consolidated financial statements.
b) Reconciliation of the carrying amount of the investment in associate:
30 April 31 October
2017
$000 2016
$000
Opening balance 24,986 31,473
Share of current period loss
of the associate (1,917) (4,638)
Effects of foreign currency
exchange movements 136 (1,849)
Closing balance 23,205 24,986
--------- -----------
Notes to the condensed consolidated financial statements
11. Subsequent events
a) Credit Facility Guarantee to Homesend SCRL
On 11 May 2017, the Group agreed to guarantee a EUR5 million ($7.2 million) credit facility to be provided by KBC Bank SA to Homesend SCRL (the Guarantee). The loan facility has been obtained by the associate to support the growth of its business by supplementing the working capital reserves, as and when required, to facilitate transfer settlements.
The Guarantee is provided by all the shareholders of the associate. Based on the pro-rata proportion to its shareholding in Homesend SCRL, the Group's share of the Guarantee is EUR1.75 million ($2.55 million).
The Guarantee is unsecured and may be withdrawn, in respect to future credit, on three months' notice.
Homesend SCRL has agreed to reimburse the guarantors for any payment made under the Guarantee. If Homesend SCRL issues share capital either to reimburse a Guarantor or to satisfy monies owing under the credit facility following a Guarantor failing to meet a demand made against them under the Guarantee, it has been agreed that the capital in Homesend SCRL will be issued at fair market value and a defaulting Guarantor will not participate in the capital raising.
b) Additional debt facility
On 28(th) June 2017 a further GBP2.5 million ($4.2 million) tranche of debt has been secured with Lombard Odier Asset Management (USA) Corp as discretionary investment manager for and on behalf of 1798 Volantis Fund Limited and 1798 Volantis Catalyst Fund Limited (the "New Tranche") to strengthen the Group`s cash position for working capital and also to continue further restructuring of the business to create a more appropriate and long term structure. The New Tranche is on the same terms as the existing debt facility save for the inclusion of an additional covenant applying to the New Tranche only. The additional covenant (the "Net Asset Covenant") requires the Company to disclose in its 31 December 2017 full year accounts an improvement in net assets over the net assets disclosed in the 30 April 2017 half year accounts (adjusted for the New Tranche as if the New Tranche was funded on 30 April 2017). A breach of the Net Asset Covenant would entitle the lenders to call for repayment of the New Tranche. The first twelve months' interest on the New Tranche accrues immediately on execution.
Notes to the condensed consolidated financial statements
Other information required to be given to ASX under listing rule 4.2A.3
Net tangible assets Current period 31 October per security 2016 Net tangible assets 2.2 cents 4.5 cents per security -------------------- --------------- ------------
Dividends
Amount Amount Franked Amount Date paid/
per amount per security payable
security per security of foreign
at 30% source
tax dividend
-----------
Interim dividend: Nil N/A N/A N/A N/A
Current year
Previous period Nil N/A N/A N/A N/A
-----------
Final dividend
paid in respect
of previous financial
year: Nil N/A N/A N/A N/A
Current period:
Final dividend
Previous corresponding Nil N/A N/A N/A N/A
period:
Special dividend
Final dividend
------------------------- ------- ---------- -------------- -------------- -----------
The dividend or distribution plans shown below
are in operation.
N/A.
---------------------------------------------------
The last date(s) for receipt
of election notices for N/A
the dividend or distribution
plans
-------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZMGZVGLKGNZG
(END) Dow Jones Newswires
June 29, 2017 02:01 ET (06:01 GMT)
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