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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Xploite | LSE:XPT | London | Ordinary Share | GB00B037D647 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 38.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 4924G
Xploite PLC
02 February 2010
Xploite plc
Final Results for the 12 Months to 31 October 2009
Xploite plc ("Xploite", "the Group", AIM: XPT), the operator and aggregator of
strategic and high growth IT services businesses, publishes its preliminary
results for the 12 months to 31 October 2009.
Highlights
· Adjusted* earnings per share up 26% to 16.22p (2008:12.85p)
· GBP6.3m profit on disposal of Anix
· 39% IRR on disposal of Anix
· GBP12.7m of cash at 31 October 2009
· GBP9.5m of cash to shareholders post year end
· Revised sales and marketing strategy for Storage Fusion resulted in 15
new agreements in Q4 and six new resellers were secured
Ian Smith, Xploite Chief Executive commented: "2009 has been a transitional year
for the business. We successfully sold Anix following which we decided to
return GBP9.5m of cash to shareholders. This takes the total cash returned to
shareholders, since 2003, to GBP19.8m.
The management team continues to review opportunities in line with our strategy
to acquire, consolidate and develop innovative, high growth IT services
businesses."
Enquiries
+-------------------------------------------------------+-----------------------------------------------+
| Xploite plc www.xploite.com | 0870 737 2001 |
+-------------------------------------------------------+-----------------------------------------------+
| Ian Smith, Chief Executive Officer | |
+-------------------------------------------------------+-----------------------------------------------+
| Robert Arrowsmith Finance Director | |
+-------------------------------------------------------+-----------------------------------------------+
| | |
+-------------------------------------------------------+-----------------------------------------------+
| Brewin Dolphin | 0845 213 4217 |
+-------------------------------------------------------+-----------------------------------------------+
| Matt Davis / Neil McDonald | |
+-------------------------------------------------------+-----------------------------------------------+
| | |
+-------------------------------------------------------+-----------------------------------------------+
| Hansard Communications | 020 7245 1100 |
+-------------------------------------------------------+-----------------------------------------------+
| Justine James | 07525 324431 |
+-------------------------------------------------------+-----------------------------------------------+
*Adjusted for add back of integration and strategic costs and amortisation of
intangible assets
Chairman's statement
I am pleased to report total turnover for the year of GBP27.8m (2008: GBP48.0m)
and total profit for the year (after tax) of GBP4.4m (2008: GBP1.5m). These
results have to be understood in the context of significant change for the group
both in the 2009 financial year and in the months that have followed and the
reporting requirements for continuing and discontinued operations. A summary of
the total results for the year and the prior year are shown in the table below:
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
| | 2009 | | 2008 |
+--------------------+-------------------------------------+-----------+-------------------------------------+
| | Continuing | Discontinued | Total | | Continuing | Discontinued | Total |
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
| | | | | | | | |
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
| Sales | 140 | 27,701 | 27,841 | | 1,800 | 46,207 | 48,007 |
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
| Total profit for | (1,833) | 6,263 | 4,430 | | (1,359) | 2,900 | 1,541 |
| the year | | | | | | | |
+--------------------+------------+--------------+---------+-----------+------------+--------------+---------+
Following the sale of Anix in June 2009, the group now comprises our remaining
trading business, Storage Fusion; cash balances of GBP12.7m (as at 31st October
2009 before the completion of the tender offer); the right to deferred
consideration of GBP4.3m (GBP3.1m being the balance due on 12th September 2010
from the sale of Anix); and liabilities of GBP1.8m.
Strategy
In my last annual statement I said that:
"our strategy is to identify, acquire, consolidate and develop innovative, high
growth businesses in the IT services marketplace. We create shareholder value
by identifying and acquiring underperforming businesses, integrating and
developing them, and improving their performance through 'active management'.
Then, at an appropriate time, we will exit these businesses returning profits to
shareholders. We continue to believe this remains a sound strategy,
particularly in the current market where there are significant new opportunities
for consolidation."
In the twelve months to 31st October 2009 we concentrated on and successfully
applied the 'exit' part of that strategy through the disposal of VBHG, our
subsidiary that held Anix; and, just after the year end, we focused on the
'returning profits to shareholders' part of that strategy by means of a tender
offer for a substantial part of our share capital.
Anix
Turning first to Anix, (our managed services division). On 29th May 2009 we
announced that we had sold Anix for a total consideration of GBP31.5m in cash to
ACS BPS, subject to a deduction of GBP3.1m for working capital and the retention
of GBP3.2m in escrow against possible warranty claims. The disposal completed on
12 June 2009 and this resulted in a profit for the group of some GBP6.3m and a
'cash profit' (being the total proceeds received on sale less the total
acquisition cost of the Anix group) of GBP10.0m. This was a highly successful
investment for the group and represented an IRR for the company on the net
invested capital in Anix of 39%.
Capital return
Following receipt of the Anix disposal proceeds, we repaid all outstanding bank
indebtedness and had cash on deposit of GBP12.7m at the 31st October 2009. We
envisaged at the time of the sale of Anix that we would have been able to find
suitable and sizeable acquisitions and thereby re-invest these funds both
profitably and quickly after the sale of Anix. That proved more problematic than
originally envisaged and, therefore, we decided to scale back our plans, pursue
more modest sized acquisitions and return cash to shareholders through the
tender offer referred to above.
On 21st October 2009 we announced our intention to purchase up to 19m shares
(46.57% of our share capital) at 50p per share (in total GBP9.5m). On 20th
November 2009 shareholders were informed that approximately 70% of our share
capital had been tendered in that context representing a clear vindication of
the board's decision to make the tender offer. Under the leadership of Ian
Smith, our CEO, we have been able to return through tenders a total of GBP19.8m
in cash to shareholders since 2003.
Storage Fusion
Following the disposal of Anix, our remaining business is Storage Fusion.
Whilst Storage Fusion has recorded a loss for the year of GBP0.4m the Board has
worked hard to position this business to allow it to exploit the market
opportunities for its product and remains confident about the prospects for this
business.
At the time of the circular to Shareholders on 26 May 2009 prepared as part of
the disposal of Anix, the Board's strategy was to sell the Storage Fusion
software (Storage Resource analysis (SRA)) on an enterprise licence basis. The
directors now believe that this approach has introduced too many obstacles to
deliver significant take up of the software and, accordingly, altered the
marketing and pricing strategy in September 2009. Our strategy now is to
distribute the SRA software to customers using resellers, supported by certain
direct sales activity. Since making the decision to change our marketing
approach we have secured six of the leading resellers addressing this market and
through these resellers have visibility of a pipeline of opportunities, the
majority of which are with blue chip organisations demonstrating the viability
of the SRA product. This pipeline of opportunities is beginning to convert into
actual sales and whilst it is early days, indications are positive and in line
with our revised business plan for our Storage Fusion business.
The Board is confident that the measures adopted to date will have the effect of
significantly increasing the revenue and cash generation of the Storage Fusion
business and it remains the Board's objective to ensure that the Storage Fusion
business is cash positive on a month-to-month basis.
Furthermore, it is the belief of the Board that a higher volume of customers
will, in turn, increase awareness of the software, supporting the continued
growth of the Storage Fusion business and maintaining its recent, improved
performance. Whilst there remains much to be achieved, the Board is confident
today that the prospects for the business are positive and that at this time the
balances carried in the consolidated balance sheet, in particular the goodwill
balance of GBP4.2m, with respect to Storage Fusion remain appropriate.
Future direction
The management team remains committed to continuing our investment strategy. The
disposal of Anix has amply demonstrated their ability to achieve another
successful buy, develop and sell plan for shareholders and I would like to thank
them on your behalf for their efforts and skill in discharging that considerable
responsibility. As outlined in the tender offer announcement, all board members
have now reduced their employment costs to the group until further corporate
activity warrants a review of this policy.
We are now focused on another period of growth and development and look forward
to advising shareholders how that will be achieved over the next few months.
Chairman
1 February 2010
Financial review
These results have been prepared under International Financial Reporting
Standards (IFRS) as adopted by the EU.
Total group profit for the year was GBP4.4m. During the year the group disposed
of its main trading subsidiary Anix, under current accounting rules the results
of this subsidiary is shown under "discontinued operations". Revenue from
continuing operations for the year ended 31 October 2009 as reported in the
consolidated income statement was GBP0.1m. This represents the revenue generated
by the remaining business of Storage Fusion.
A summary of the trading results of the continuing and discontinued activities
is set out below:
+--------------------------------+-------------+------------+---+-----------+----------+--+----------+------+---------+----+---------+
| Sales and gross margin | | | | | | |
+----------------------------------------------+------------+---+-------------------------+-----------------+--------------+---------+
| | 2009 | | 2008 |
+--------------------------------+------------------------------------------+----------+---------------------------------------------+
| | Continuing | Discontinued | Total | | Continuing | Discontinued | Total |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| | | | | | | | |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| Sales | 140 | 27,701 | 27,841 | | 1,800 | 46,207 | 48,007 |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| Cost of sales | (12) | (20,157) | (20,169) | | - | (34,085) | (34,085) |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| Gross margin | 128 | 7,544 | 7,672 | | 1,800 | 12,122 | 13,922 |
+--------------------------------+-------------+----------------+-----------+----------+-------------+----------------+--------------+
| | | | | | | | | | | | |
+--------------------------------+-------------+------------+---+-----------+----------+--+----------+------+---------+----+---------+
The trading business included in continuing operations for both 2009 and 2008 is
Storage Fusion. The 2009 discontinued operations relate to Anix and the 2008
discontinued operations relate to Anix and Itheon Ltd. These operations and the
total profit for the year of GBP4.4m (2008: GBP1.5m) can be summarised as
follows:
+-------------------------------+------------+---------------+-----------+----------+----------+------------+---------------+-----------+
| | 2009 | | 2008 |
+-------------------------------+----------------------------------------+----------+---------------------------------------------------+
| |Continuing | Discontinued | Total | | Continuing | Discontinued | Total |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| | | | | | | | |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Adjusted*EBITDA - Trading | (342) | 2,752 | 2,410 | | 1,625 | 4,300 | 5,925 |
| businesses | | | | | | | |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Adjusted*EBITDA - Central | (1,916) | - | (1,916) | | (2,192) | 583 | (1,609) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Adjusted* EBITDA | (2,258) | 2,752 | 494 | | (567) | 4,883 | 4,316 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Less depreciation | (70) | (913) | (983) | | (60) | (1,036) | (1,096) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Adjusted* EBITA | (2,328) | 1,839 | (489) | | (627) | 3,847 | 3,220 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Less amortisation | (237) | (673) | (910) | | - | (2,177) | (2,177) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Adjusted* EBIT | (2,565) | 1,166 | (1,399) | | (627) | 1,670 | 1,043 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Integration and strategic | - | (1,142) | (1,142) | | (85) | (1,171) | (1,256) |
| costs | | | | | | | |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Operating (loss)/profit | (2,565) | 24 | (2,541) | | (712) | 499 | (213) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Net finance cost | (418) | (64) | (482) | | (585) | (56) | (641) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| (Loss)/profit before tax | (2,983) | (40) | (3,023) | | (1,297) | 443 | (854) |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Tax on ordinary activities | 1,150 | 107 | 1,257 | | (62) | 875 | 813 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| (Loss)/profit for the period | (1,833) | 67 | (1,766) | | (1,359) | 1,318 | (41) |
+-------------------------------+------------+---------------+-----------+---------------------+------------+---------------+-----------+
| Gain on disposal | - | 6,196 | 6,196 | | - | 1,582 | 1,582 |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| Total (loss)/profit for the | (1,833) | 6,263 | 4,430 | | (1,359) | 2,900 | 1,541 |
| year | | | | | | | |
+-------------------------------+------------+---------------+-----------+----------+-----------------------+---------------+-----------+
| | | | | | | | | |
+-------------------------------+------------+---------------+-----------+----------+----------+------------+---------------+-----------+
+---------------------------------------------------+-------+--------------------+--------------------+
| *Adjusted for integration and strategic costs. | | | |
| These are costs added back by management to | | | |
| enable and understanding of the underlying | | | |
| profitability of the business. | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
The disposal of Anix resulted in a profit of GBP6.2m. The impact of this on the
earnings per share, the cash and the balance sheet is discussed below.
Earnings per share (EPS)
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| | 2009 | 2008 |
+----------------------------+-------------------------------------+--------------------------------------+
| | Continuing | Discontinued | Total | Continuing | Discontinued | Total |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Profit attributable to | (1,833) | 6,263 | 4,430 | (1,359) | 2,900 | 1,541 |
| equity holders | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Adjustments: | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Amortisation of intangible | 237 | 673 | 910 | - | 2,177 | 2,177 |
| assets | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Integration and strategic | - | 1,142 | 1,142 | 85 | 1.171 | 1,256 |
| costs | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Adjusted* (loss)/profit | (1,595) | 8,077 | 6,482 | (1,274) | 6,248 | 4,974 |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| | Pence | Pence | Pence | Pence | Pence | Pence |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Basic (loss)/earnings per | (4.59) | 15.67 | 11.08 | (3.51) | 7.49 | 3.98 |
| share | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Diluted (loss)/earnings | (4.59) | 15.12 | 10.53 | (3.51) | 7.27 | 3.76 |
| per share | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Adjusted* basic | (3.99) | 20.21 | 16.22 | (3.29) | 16.14 | 12.85 |
| (loss)/earnings per share | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
| Adjusted* diluted | (3.99) | 19.50 | 15.51 | (3.29) | 15.66 | 12.37 |
| (loss)/earnings per share | | | | | | |
+----------------------------+------------+--------------+---------+------------+--------------+----------+
Basic earnings per share was up 178.4% from 3.98p to 11.08p.
Adjusted, basic earnings per share was up 26.1% from 12.85p per share to 16.22p
per share.
The Chairman's statement refers to a cash profit some GBP10.0m (being the total
proceeds received on sale less the total acquisition cost of the Anix group).
This calculation is summarised below:
+--------------------------------------+----------+
| | GBPm |
+--------------------------------------+----------+
| Sales price | 31.5 |
+--------------------------------------+----------+
| Less working capital adjustment | (3.1) |
+--------------------------------------+----------+
| Less original cost of businesses | (18.4) |
| acquired | |
+--------------------------------------+----------+
| | 10.0 |
+--------------------------------------+----------+
The Board believes that given the cash returned to shareholders via the Tender
Offer of GBP9.5m in November 2009, that retention and re-investment of the
remaining capital will be beneficial for shareholders and, accordingly, will not
be paying a dividend.
Cash flow
Net cash used in operations was GBP6.9m (2008: generated GBP2.4m).
The continuing operations used GBP3.4m of cash, the majority of which is
consumed by loss for the year. An analysis of the loss is shown in the segmental
information note (note 5). The discontinued operations used GBP3.5m of cash.
Cash generated from investing activities was GBP18.6m. An analysis of this
figure is shown in the consolidated cash flow statement. The most significant
constituent of this figure was the GBP24.0m cash received on the disposal of the
Anix group which is the gross proceeds of GBP31.5m less deferred consideration
and working capital adjustments of GBP6.2m, cash balance of GBP0.4m and costs of
disposal of GBP0.9m.
Following the disposal of Anix, the group paid down its bank borrowings at the
date of sale of GBP5.1m. This payment, together with payments on finance leases
prior to the disposal contributed to a cash outflow on financing activities of
GBP6.7m.
Taking the three activities together, operations, investing and financing, cash
increased by GBP5.0m producing a cash balance at 31 October 2009 of GBP12.7m and
debt reduced from GBP7.9m to GBP0.1m at 31 October 2009.
Balance sheet
At 31 October 2009 the Group had total shareholder's equity of GBP22.5m, an
increase of GBP5.2m on the previous year.
A small amount of additional equity has been raised in the year from the
exercise of share options (GBP0.4m).
The sale of Anix, means that the balance sheet consists mainly of the investment
in the Storage Fusion subsidiary, cash held in escrow following the disposal and
the balance of deferred consideration due on the disposal of Itheon and the cash
at bank.
Key Performance Indicators (KPIs)
The Board is focussed on a number of KPIs that are used to measure performance.
All of these measures are recorded below as these will be used when the group
starts another round of its buy and build strategy. However with the sale of
Anix and this being the first year of Storage Fusion, it is not meaningful to
report on all the figures.
a.) Financial measures
Reporting measures:
Adjusted basic earnings per share - 26.1% growth
IRR on business sold - 39% from the sale of the Anix business
Measures for future accounting periods:
Growth in recurring revenues, growth in total gross margin, growth in total
adjusted EBITA and growth in total adjusted EBITDA
b.) Commercial measures
These measures will be decided in the light of the characteristics of the
business sector chosen for the next buy and build round.
Group prospects and future developments
The management team remains committed to continuing our investment strategy.
Year ended 31 October 2009
+---------------------------------------------------+-------+--------------------+--------------------+
| | Note | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Revenue | | 140 | 1,800 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cost of sales | | (12) | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Gross profit | | 128 | 1,800 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Administrative expenses | | (2,693) | (2,512) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Adjusted* EBITDA | | (2,258) | (567) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Less: depreciation | | (70) | (60) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Adjusted* EBITA | | (2,328) | (627) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Less: amortisation and impairment of intangible | | (237) | - |
| assets | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Less: integration and strategic costs | | - | (85) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Operating loss | | (2,565) | (712) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance income | | 3 | 87 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance costs | | (421) | (672) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance costs - net | | (418) | (585) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Loss before tax | | (2,983) | (1,297) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Tax credit/(charge) | | 1,150 | (62) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Loss for the year from continuing operations | | (1,833) | (1,359) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Discontinued operations | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Profit for the year from discontinued operations | | 6,263 | 2,900 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Profit for the year attributable to equity | | 4,430 | 1,541 |
| shareholders of the company | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Earnings per ordinary share | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| - basic | | 11.08 | 3.98 |
+---------------------------------------------------+-------+--------------------+--------------------+
| - diluted | | 10.69 | 3.76 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Loss per ordinary share from continuing | | | |
| operations | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| - basic | | (4.59) | (3.51) |
+---------------------------------------------------+-------+--------------------+--------------------+
| - diluted | | (4.59) | (3.51) |
+---------------------------------------------------+-------+--------------------+--------------------+
+---------------------------------------------------+-------+--------------------+--------------------+
| *Adjusted for integration and strategic costs | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
Consolidated balance sheet
As at 31 October 2009
+-----------------------------------------------+-------+----------------------+----------------------+
| | Note | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Assets | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Non-current assets | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Intangible assets | | 6,256 | 29,432 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Property, plant and equipment | | 366 | 2,496 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Deferred tax assets | | - | 188 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Trade and other receivables | | - | 6,259 |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | 6,622 | 38,375 |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Current assets | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Trade and other receivables | | 694 | 15,077 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Deferred consideration on disposals | | 4,258 | 1,120 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Cash and cash equivalents | | 12,707 | 7,749 |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | 17,659 | 23,946 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Liabilities | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Current liabilities | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Trade and other payables | | (978) | (23,765) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Deferred consideration on acquisitions | | - | (3,119) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Current tax liabilities | | (351) | (1,323) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Borrowings | | (27) | (2,247) |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | (1,356) | (30,454) |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Non-current liabilities | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Borrowings | | (76) | (5,656) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Trade and other payables | | - | (6,531) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Deferred tax liabilities | | (322) | (2,312) |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | (398) | (14,499) |
+-----------------------------------------------+-------+----------------------+----------------------+
| Net assets | | 22,527 | 17,368 |
+-----------------------------------------------+-------+----------------------+----------------------+
| | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Shareholders' equity | | | |
+-----------------------------------------------+-------+----------------------+----------------------+
| Called up share capital | | 4,080 | 3,952 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Share premium account | | 1,919 | 1,647 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Retained earnings | | 16,133 | 11,439 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Share based payment reserve | | 395 | 330 |
+-----------------------------------------------+-------+----------------------+----------------------+
| Equity shareholders funds | | 22,527 | 17,368 |
+-----------------------------------------------+-------+----------------------+----------------------+
Consolidated statement of changes in equity
Year ended 31 October 2009
+---------------------------------------------------------+----------------------+----------------------+
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------------+----------------------+----------------------+
| | | |
+---------------------------------------------------------+----------------------+----------------------+
| Shareholders' equity at beginning of year | 17,368 | 15,688 |
+---------------------------------------------------------+----------------------+----------------------+
| Profit for the year | 4,430 | 1,541 |
+---------------------------------------------------------+----------------------+----------------------+
| Share based payment charge | 329 | 139 |
+---------------------------------------------------------+----------------------+----------------------+
| Shares issued in the year | 400 | - |
+---------------------------------------------------------+----------------------+----------------------+
| Shareholders' equity at end of year | 22,527 | 17,368 |
+---------------------------------------------------------+----------------------+----------------------+
Consolidated cash flow statement
Year ended 31 October 2009
+---------------------------------------------------+-------+--------------------+--------------------+
| |Notes | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash flows from operating activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash (used in)/generated from operations | (a) | (6,584) | 2,184 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Interest received | | 13 | 87 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Interest paid | | (452) | (502) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Tax received | | 112 | 666 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash (used in)/generated from operating | | (6,911) | 2,435 |
| activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash flows from investing activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Acquisition of subsidiaries (net of cash | | (97) | (123) |
| acquired) | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Deferred consideration paid on prior period | | (3,062) | - |
| acquisitions | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Disposal of subsidiaries (net of cash disposed) | 4 | 23,978 | 1,875 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Purchase of intangible assets | | (1,356) | (669) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Purchase of property, plant and equipment | | (938) | (597) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Proceeds from sale of property, plant and | | 39 | - |
| equipment | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash generated from investing activities | | 18,564 | 486 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash flows from financing activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net proceeds from issue of ordinary share capital | | 400 | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net proceeds from issue of bank loan | | - | 2,970 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance lease principal payments | | (1,947) | (2,015) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Repayment of borrowings | | (5,148) | (352) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash (used in)/generated from financing | | (6,695) | 603 |
| activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net increase in cash and cash equivalents | | 4,958 | 3,524 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash and cash equivalents at start of year | | 7,749 | 4,225 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash and cash equivalents at end of year | (b) | 12,707 | 7,749 |
+---------------------------------------------------+-------+--------------------+--------------------+
Cash flows from discontinued operations can be summarised for each of the main
cash flow headings as follows:
+---------------------------------------------------+-------+--------------------+--------------------+
| | | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash flows from operating activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash (used in)/generated from operating | | (3,534) | 2,319 |
| activities | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
Cash flows from investing activities
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash generated from investing activities | | 20,190 | 1,241 |
+---------------------------------------------------+-------+--------------------+--------------------+
Cash flows from financing activities
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash used in investing activities | | (630) | (572) |
+---------------------------------------------------+-------+--------------------+--------------------+
Notes to the consolidated cash flow statement
(a) Cash (used in)/generated from operations
+---------------------------------------------------+-------+--------------------+--------------------+
| | | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Continuing operations | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Loss before tax | | (2,983) | (1,297) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Adjustments for: | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance cost - net | | 418 | 585 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Depreciation charge | | 70 | 60 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Loss on property plant and equipment | | 4 | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Amortisation and impairment | | 237 | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Share based payment charge | | 65 | 139 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Increase in trade and other receivables | | (525) | 491 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Decrease in trade and other payables | | (288) | (419) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash used in continuing operations | | (3,002) | (441) |
+---------------------------------------------------+-------+--------------------+--------------------+
+---------------------------------------------------+-------+--------------------+--------------------+
| Discontinued operations | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net (loss)/profit before tax | | (40) | 443 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Adjustments for: | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Finance cost - net | | 64 | 56 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Depreciation charge | | 913 | 1,036 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Amortisation and impairment | | 673 | 2,177 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Share based payment charge | | 264 | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Decrease in inventories | | - | 20 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Decrease/(increase) in trade and other | | 13,906 | (5,145) |
| receivables | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| (Decrease)/increase in trade and other payables | | (19,362) | 4,038 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash (used in)/generated from discontinued | | (3,582) | 2,625 |
| operations | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash (used in)/generated from operations | | (6,584) | 2,184 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
(b) Reconciliation of net cash flow to movement in net funds/(debt)
+---------------------------------------------------+-------+--------------------+--------------------+
| | | 2009 | 2008 |
| | | GBP'000 | GBP'000 |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Increase in cash in the year | | 4,958 | 3,524 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net cash inflow/(outflow) in respect of bank loan | | 5,148 | (2,618) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash outflow in respect of finance leases | | 1,947 | 2,015 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Changes resulting from cash flows | | 12,053 | 2,921 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Non cash changes: | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Amortisation of loan interest costs | | (43) | (12) |
+---------------------------------------------------+-------+--------------------+--------------------+
| New finance leases | | (890) | (3,915) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Disposal of subsidiary - finance leases | | 1,638 | - |
+---------------------------------------------------+-------+--------------------+--------------------+
| Change in net funds/(debt) | | 12,758 | (1,006) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net (debt)/funds at beginning of year | | (154) | 852 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net funds/(debt) at end of year | | 12,604 | (154) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Analysis of net funds/(debt) | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
| Cash and cash equivalents | | 12,707 | 7,749 |
+---------------------------------------------------+-------+--------------------+--------------------+
| Hire purchase and finance lease obligations | | (103) | (2,798) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Bank loan | | - | (5,105) |
+---------------------------------------------------+-------+--------------------+--------------------+
| Net funds/(debt) | | 12,604 | (154) |
+---------------------------------------------------+-------+--------------------+--------------------+
| | | | |
+---------------------------------------------------+-------+--------------------+--------------------+
Notes to the preliminary announcement for the year ended 31 October 2009
1. Basis of preparation
The preliminary results for the year ended 31 October 2009 have been prepared
in accordance with the accounting policies set out in the interim report for the
six months ended 30 April 2009.
These policies have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs as adopted by the
EU), IFRIC interpretations and the Companies Act 1985 applicable to companies
reporting under IFRS. The consolidated results have been prepared under the
historical cost convention, as modified for any financial assets which are
stated at fair value through profit or loss.
2. Segmental information
The segment information provided to the Board for the reportable segments for
the year ended 31 October 2009 is as follows:
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| 31 October 2009 | Hardware | Services | Total | Software | Central | Total |
| | | | hardware | | | |
| | | | and | | | |
| | | | services | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Continuing operations | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Revenue | - | - | - | 140 | - | 140 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: intersegment sales | - | - | - | - | - | - |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total revenue from third parties | - | - | - | 140 | - | 140 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Cost of sales | - | - | - | (12) | - | (12) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Gross profit | | | | 128 | - | 128 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total administrative expenses | | | - | (474) | (2,219) | (2,693) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITDA | | | - | (342) | (1,916) | (2,258) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: depreciation | | | - | (4) | (66) | (70) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITA | | | - | (346) | (1,982) | (2,328) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: amortisation and impairment of | | | - | - | (237) | (237) |
| intangible assets | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: Integration and strategic costs | | | - | - | - | - |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total operating loss | | | - | (346) | (2,219) | (2,565) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance income | | | - | - | 3 | 3 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost | | | | - | (421) | (421) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost - net | | | - | - | (418) | (418) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Loss before tax | | | - | (346) | (2,637) | (2,983) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Tax (charge)/credit | | | - | (48) | 1,198 | 1,150 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Loss for the year from continuing | | | - | (394) | (1,439) | (1,833) |
| operations | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit for the year from discontinued | | | 536 | - | 5,727 | 6,263 |
| operations | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total profit/(loss) for the period | | | 536 | (394) | 4,288 | 4,430 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Discontinued operations | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Revenue | 12,667 | 15,344 | 28,011 | - | - | 28,011 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: intersegment sales | - | (310) | (310) | - | - | (310) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total revenue from third parties | 12,667 | 15,034 | 27,701 | - | - | 27,701 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Cost of sales | (10,609) | (9,548) | (20,157) | | | (20,157) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Gross profit | 2,058 | 5,486 | 7,544 | - | - | 7,544 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total administrative expenses | | | (6,867) | - | (653) | (7,520) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITDA | | | 2,752 | - | - | 2,752 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: depreciation | | | (913) | | | (913) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITA | | | 1,839 | - | - | 1,839 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: amortisation and impairment of | | | (20) | - | (653) | (673) |
| intangible assets | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: Integration and strategic costs | | | (1,142) | - | - | (1,142) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Total operating profit/(loss) | | | 677 | - | (653) | 24 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance income | | | 10 | - | - | 10 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost | | | (74) | - | - | (74) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost - net | | | (64) | - | - | (64) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) before tax | | | 613 | - | (653) | (40) |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Tax (charge)/credit | | | (77) | - | 184 | 107 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Post tax profit/(loss) from | | | 536 | - | (469) | 67 |
| discontinued activities | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Gain on disposal of trade and assets | | | - | - | 6,196 | 6,196 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit from discontinued operations | | | 536 | - | 5,727 | 6,263 |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+----------------------------------------+----------+----------+------------+----------+---------+----------+
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| 31 October 2008 | Hardware | Services | Total | Software | Central | Total |
| | | | Hardware | | | |
| | | | and | | | |
| | | | Services | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Continuing operations | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Revenue | - | - | - | 1,800 | - | 1,800 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: intersegment sales | - | - | - | - | - | - |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total revenue from third parties | - | - | - | 1,800 | - | 1,800 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Cost of sales | - | - | - | - | - | - |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Gross profit | - | - | - | 1,800 | - | 1,800 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total administrative expenses | | | | (175) | (2,337) | (2,512) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITDA | | | - | 1,625 | (2,192) | (567) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: depreciation | | | - | - | (60) | (60) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITA | | | - | 1,625 | (2,252) | (627) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: amortisation and impairment of | | | - | - | - | - |
| intangible assets | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: Integration and strategic costs | | | - | - | (85) | (85) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total operating profit/(loss) | | | - | 1,625 | (2,337) | (712) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance income | | | - | - | 87 | 87 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost | | | - | (1) | (671) | (672) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost - net | | | - | (1) | (584) | (585) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) before tax | | | - | 1,624 | (2,921) | (1,297) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Tax credit | | | - | (62) | - | (62) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) for the year from | | | - | 1,562 | (2,921) | (1,359) |
| continuing operations | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) for the year from | | | 2,180 | 450 | 270 | 2,900 |
| discontinued operations | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total profit/(loss) for the year | | | 2,180 | 2,012 | (2,651) | 1,541 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Discontinued operations | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Revenue | 21,754 | 22,901 | 44,655 | 1,779 | - | 46,434 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: intersegment sales | - | (140) | (140) | (87) | - | (227) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total revenue from third parties | 21,754 | 22,761 | 44,515 | 1,692 | - | 46,207 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Cost of sales | (18,458) | (15,232) | (33,690) | (395) | - | (34,085) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Gross profit | 3,296 | 7,529 | 10,825 | 1,297 | - | 12,122 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total administrative expenses | | | (8,675) | (847) | (2,101) | (11,623) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITDA | | | 4,300 | 583 | - | 4,883 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: depreciation | | | (1,009) | (27) | - | (1,036) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Adjusted EBITA | | | 3,291 | 556 | - | 3,847 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: amortisation and impairment of | | | (22) | (54) | (2,101) | (2,177) |
| intangible assets | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Less: Integration and strategic costs | | | (1,119) | (52) | - | (1,171) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Total operating profit/(loss) | | | 2,150 | 450 | (2,101) | 499 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance income | | | 60 | - | - | 60 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost | | | (116) | - | - | (116) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Finance cost - net | | | (56) | - | | (56) |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) before tax | | | 2,094 | 450 | (2,101) | 443 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Tax credit | | | 86 | 8 | 781 | 875 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Post tax profit/(loss) from discontinued | | | 2,180 | 458 | (1,320) | 1,318 |
| activities | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| (Loss)/gain on disposal of subsidiary | | | - | (8) | 1,120 | 1,112 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Taxation | | | - | - | 470 | 470 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Net gain on disposal | | | - | (8) | 1,590 | 1,582 |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| Profit/(loss) from discontinued | | | 2,180 | 450 | 270 | 2,900 |
| operations | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
| | | | | | | |
+------------------------------------------+----------+----------+------------+----------+---------+----------+
3. Integration and strategic costs
In accordance with the group's policy for integration and strategic costs, the
following charges were included in this category for the year:
+--------------------------------------------------------------+-----------------+-----------------+
| | 2009 | 2008 |
+--------------------------------------------------------------+-----------------+-----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------------+-----------------+-----------------+
| Costs of integration | | |
+--------------------------------------------------------------+-----------------+-----------------+
| - Staff redundancy costs and compromise agreements | 1,142 | 1,086 |
+--------------------------------------------------------------+-----------------+-----------------+
| - Other costs | - | 85 |
+--------------------------------------------------------------+-----------------+-----------------+
| Other strategic costs | | |
+--------------------------------------------------------------+-----------------+-----------------+
| - Costs of aborted acquisitions | - | 35 |
+--------------------------------------------------------------+-----------------+-----------------+
| - Costs of potential disposals | - | 50 |
+--------------------------------------------------------------+-----------------+-----------------+
| | 1,142 | 1,256 |
+--------------------------------------------------------------+-----------------+-----------------+
The 2008 'other costs' include costs incurred with re-structuring the Network
Operation Centres at Yate and Altrincham.
4. Business Combinations
On 15th December 2008, the group acquired 100% of the share capital of Blue
River Systems Limited and the trade and assets of three managed IT services
businesses from Cantono plc. Details of net liabilities acquired and goodwill
are as follows:
+-----------------------------------------------------------------+-----------------+
| | GBP'000 |
+-----------------------------------------------------------------+-----------------+
| | |
+-----------------------------------------------------------------+-----------------+
| Purchase consideration | |
+-----------------------------------------------------------------+-----------------+
| - Release of debt due to subsidiary of Xploite plc from | 1,904 |
| Cantono plc | |
+-----------------------------------------------------------------+-----------------+
| - Costs in relation to the acquisition - cash paid | 97 |
+-----------------------------------------------------------------+-----------------+
| Total consideration | 2,001 |
+-----------------------------------------------------------------+-----------------+
| Provisional fair value of net liabilities acquired (see below) | 1,028 |
+-----------------------------------------------------------------+-----------------+
| Provisional goodwill | 3,029 |
+-----------------------------------------------------------------+-----------------+
The goodwill is attributable to the synergies expected to arise as a result of
its acquisition by the group.
The assets and the liabilities arising from the acquisition are as follows:
+--------------------------------------------------+-----------------+----------------+
| | Acquirees | Provisional |
| | carrying amount | fair value |
+--------------------------------------------------+-----------------+----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+-----------------+----------------+
| | | |
+--------------------------------------------------+-----------------+----------------+
| Property, plant and equipment | 545 | 261 |
+--------------------------------------------------+-----------------+----------------+
| Inventory | 20 | - |
+--------------------------------------------------+-----------------+----------------+
| Trade and other receivables | 1,060 | 784 |
+--------------------------------------------------+-----------------+----------------+
| Trade and other payables | (1,170) | (2,073) |
+--------------------------------------------------+-----------------+----------------+
| | 455 | (1,028) |
+--------------------------------------------------+-----------------+----------------+
From the date of acquisition to 31 October 2009, Blue River Systems Limited
contributed GBP1,457,000 to turnover, GBP366,000 to adjusted* EBITDA and
GBP202,000 to a loss before tax.
*adjusted for integration and strategic costs
Issues of dispute have arisen with regard to the sale and purchase agreement
between the Group and Cantono plc arising from the above acquisition. The
dispute has arisen over GBP1m of deferred consideration that was due to be paid
to Cantono on 15th March 2009. This amount is in dispute as a result of the
balance sheet adjustments identified by Xploite plc subsequent to the
acquisition. These adjustments reduce the acquired balance sheet by an amount
in excess of GBP1m and therefore the Board believes that no further deferred
consideration is due.
5. Discontinued operations
On 12 June 2009, the group sold its 100% interest in the share capital of the
VBHG group (the Anix disposal) to ACS BPS. A summary of the gain on disposal is
set out below:
2009
+----------------------------------------------+--------+---------+------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------------+--------+---------+------------+
| | | | |
+----------------------------------------------+--------+---------+------------+
| Gross proceeds received | | | 31,500 |
+----------------------------------------------+--------+---------+------------+
| Working capital adjustment (subject to final | | (3,115) |
| agreement ) | | |
+-------------------------------------------------------+---------+------------+
| Net proceeds* | | | 28,385 |
+----------------------------------------------+--------+---------+------------+
| Costs of disposal | | | |
+----------------------------------------------+--------+---------+------------+
| Professional fees | | (325) | |
+----------------------------------------------+--------+---------+------------+
| Directors' disposal bonus | | (508) | |
+----------------------------------------------+--------+---------+------------+
| Other disposal costs | | (350) | |
+----------------------------------------------+--------+---------+------------+
| | | | (1,183) |
+----------------------------------------------+--------+---------+------------+
| Net consideration | | | 27,202 |
+----------------------------------------------+--------+---------+------------+
| | |
+-----------------------------------------------------------------+------------+
| Net book value of acquired intangibles disposed | 26,651 |
+-----------------------------------------------------------------+------------+
| Deferred tax on intangibles disposed | | | (1,854) |
+----------------------------------------------+--------+---------+------------+
| Other net liabilities disposed | | | (3,791) |
+----------------------------------------------+--------+---------+------------+
| | | | 21,006 |
+----------------------------------------------+--------+---------+------------+
| | | | |
+----------------------------------------------+--------+---------+------------+
| Profit on disposal | | | 6,196 |
+----------------------------------------------+--------+---------+------------+
| | | GBP'000 | GBP'000 |
| | | | |
| *Net proceeds can be split as follows: | | | |
| | | | |
| | | | |
| | | | |
+----------------------------------------------+--------+---------+------------+
| | | | |
+----------------------------------------------+--------+---------+------------+
| Cash receivable on completion | | | 25,235 |
+----------------------------------------------+--------+---------+------------+
| Fair value of deferred consideration (note 10) | | 3,150 |
+-------------------------------------------------------+---------+------------+
| Net proceeds | | | 28,385 |
+----------------------------------------------+--------+---------+------------+
| | | | |
+----------------------------------------------+--------+---------+------------+
| |
| Reconciliation to consolidated cash flow statement |
+------------------------------------------------------------------------------+
| Proceeds received | | | 25,235 |
+----------------------------------------------+--------+---------+------------+
| Costs of disposal | | | (833) |
+----------------------------------------------+--------+---------+------------+
| Cash disposed | | | (424) |
+----------------------------------------------+--------+---------+------------+
| | | | 23,978 |
+----------------------------------------------+--------+---------+------------+
6. Tax credit
+--------------------------------------------------------------+-----------------+-----------------+
| | 2009 | 2008 |
+--------------------------------------------------------------+-----------------+-----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------------+-----------------+-----------------+
| Continuing operations | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Current tax | (1,198) | - |
+--------------------------------------------------------------+-----------------+-----------------+
| Deferred tax | 48 | 62 |
+--------------------------------------------------------------+-----------------+-----------------+
| | (1,150) | 62 |
+--------------------------------------------------------------+-----------------+-----------------+
| Discontinued operations | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Current tax | 77 | (252) |
+--------------------------------------------------------------+-----------------+-----------------+
| Deferred tax | 184 | (1,093) |
+--------------------------------------------------------------+-----------------+-----------------+
| | 107 | (1,345) |
+--------------------------------------------------------------+-----------------+-----------------+
| | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Total tax credit | (1,257) | (1,283) |
+--------------------------------------------------------------+-----------------+-----------------+
The tax on the group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the
consolidated entities as follows:
+--------------------------------------------------------------+-----------------+-----------------+
| | 2009 | 2008 |
+--------------------------------------------------------------+-----------------+-----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------------+-----------------+-----------------+
| Loss before tax - continuing operations | (2,983) | (1,297) |
+--------------------------------------------------------------+-----------------+-----------------+
| (Loss)/profit before tax - discontinued operations | (40) | 443 |
+--------------------------------------------------------------+-----------------+-----------------+
| Profit before tax - gain on sale of company - discontinued | 6,196 | 1,112 |
| operations | | |
+--------------------------------------------------------------+-----------------+-----------------+
| | 3,173 | 258 |
+--------------------------------------------------------------+-----------------+-----------------+
| | 888 | 75 |
| Profit before tax multiplied by the average effective rate | | |
| of tax in the UK of 28% (2008: 28.9%) | | |
+--------------------------------------------------------------+-----------------+-----------------+
| | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Timing differences between depreciation and capital | 32 | 5 |
| allowances | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Items disallowed for tax | 130 | 88 |
+--------------------------------------------------------------+-----------------+-----------------+
| Unrecognised losses not utilised carried forward | 742 | - |
+--------------------------------------------------------------+-----------------+-----------------+
| Profit on disposal of subsidiaries | (1,938) | (838) |
+--------------------------------------------------------------+-----------------+-----------------+
| Enhanced research and development expenditure | - | (49) |
+--------------------------------------------------------------+-----------------+-----------------+
| Other timing differences | 10 | - |
+--------------------------------------------------------------+-----------------+-----------------+
| Movement on deferred tax asset | - | (79) |
+--------------------------------------------------------------+-----------------+-----------------+
| Prior year adjustment | (1,121) | (252) |
+--------------------------------------------------------------+-----------------+-----------------+
| Change in rate of deferred tax from 30% to 28% | - | (233) |
+--------------------------------------------------------------+-----------------+-----------------+
| | (1,257) | (1,283) |
+--------------------------------------------------------------+-----------------+-----------------+
7. Earnings per ordinary share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the company by the weighted average number of ordinary shares
in issue during the year.
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | 2009 | | | | 2008 | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | Continuing | Discontinued | Total | | Continuing | Discontinued | Total |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| (Loss)/profit attributable to | (1,833) | 6,263 | 4,430 | | (1,359) | 2,900 | 1,541 |
| equity holders | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Adjustments: | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Amortisation of intangible | 237 | 673 | 910 | | - | 2,177 | 2,177 |
| assets | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Integration and strategic | - | 1,142 | 1,142 | | 85 | 1,171 | 1,256 |
| costs | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Adjusted (loss)/profit | (1,596) | 8,078 | 6,482 | | (1,274) | 6,248 | 4,974 |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | Pence | Pence | Pence | | Pence | Pence | Pence |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Basic (loss)/earnings per | (4.59) | 15.67 | 11.08 | | (3.51) | 7.49 | 3.98 |
| share | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Diluted (loss)/earnings per | (4.59) | 15.12 | 10.53 | | (3.51) | 7.27 | 3.76 |
| share | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Adjusted basic (loss)/ | (3.99) | 20.21 | 16.22 | | (3.29) | 16.14 | 12.85 |
| earnings per share | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Adjusted diluted | (3.99) | 19.50 | 15.51 | | (3.29) | 15.66 | 12.37 |
| (loss)/earnings per share | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | Number | Number | Number | | Number | Number | Number |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Basic weighted average number | 39,977,614 | 39,977,614 | 39,977,614 | | 38,715,830 | 38,715,830 | 38,715,830 |
| of shares | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Impact of share options | 1,456,929 | 1,456,929 | 1,456,929 | | 1,184,719 | 1,184,719 | 1,184,719 |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
| Diluted weighted average | 41,434,543 | 41,434,543 | 41,434,543 | | 39,900,549 | 39,900,549 | 39,900,549 |
| number of shares | | | | | | | |
+-------------------------------+------------+--------------+------------+----------+-------------+--------------+-------------+
Where there is a loss per share from continuing operations, the share options
are not dilutive and hence the diluted earnings per share is the same as the
basic.
8. Intangible assets
+--------------------------+------------+------------+------------+------------+-------------+----------+
| At 31 October 2009 | Goodwill | Brands | Customer | Software | Development | Total |
| | | | and | | costs | |
| | | | related | | | |
| | | | contracts | | | |
+--------------------------+ + + + + + +
| | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Cost | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| At 1 November 2008 | 21,122 | 3,152 | 6,690 | 561 | 327 | 31,852 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Additions (note 4) | 3,029 | - | - | 961 | 395 | 4,385 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Disposals - sale of | (19,943) | (3,152) | (6,282) | (267) | - | (29,644) |
| subsidiary | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| At 31 October 2009 | 4,208 | - | 408 | 1,255 | 722 | 6,593 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Amortisation and | | | | | | |
| impairment | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| At 1 November 2008 | - | 960 | 1,386 | 74 | - | 2,420 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Amortisation | - | 100 | 610 | 82 | 118 | 910 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Disposals - sale of | - | (1,060) | (1,881) | (52) | - | (2,993) |
| subsidiary | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| At 31 October 2009 | - | - | 115 | 104 | 118 | 337 |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| Net book amount at | 4,208 | - | 293 | 1,151 | 604 | 6,256 |
| 31 October 2009 | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
| | | | | | | |
+--------------------------+------------+------------+------------+------------+-------------+----------+
Impairment tests for goodwill
Goodwill is allocated to the group's cash-generating units (CGUs) identified.
A summary of the goodwill allocation is presented below.
+----------+---------------+------------+------------+----------+------------+------------+------------+
| | | 2009 | | 2008 |
+----------+---------------+-------------------------+----------+--------------------------------------+
| | | Software | Total | | Hardware | Software | Total |
| | | | | | and | | |
| | | | | | services | | |
+ + + + +----------+ + + +
| | | | | | | | |
+----------+---------------+------------+------------+----------+------------+------------+------------+
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+----------+---------------+------------+------------+----------+------------+------------+------------+
| | | | | | | | |
+----------+---------------+------------+------------+----------+------------+------------+------------+
| Goodwill | | 4,208 | 4,208 | | 17,717 | 3,405 | 21,122 |
| | | | | | | | |
+----------+---------------+------------+------------+----------+------------+------------+------------+
Basis for calculation recoverable amount
The Group has prepared, and
formally approved, a detailed three year plan for each CGU. The software CGU has
recently implemented a new business model and revenue growth is forecast in the
three year plan, based on the sales pipeline from new relationships formed with
six resellers. This is the plan used in the value in use calculation. Cash flow
projections beyond this timeframe are extrapolated by applying a growth rate
over the following two years. This growth rate does not exceed the long-term
average growth rate for the business in which the CGU operates
The key assumptions used for value-in-use calculations are as follows:
+------------------------------------------+------------+----------+------------+------------+
| | 2009 | | 2008 |
+------------------------------------------+------------+----------+-------------------------+
| | Software | | Hardware | Software |
| | | | and | |
| | | | services | |
+ + +----------+ + +
| | | | | |
+------------------------------------------+------------+------------------------------------------+------------+------------+
| | GBP'000 | | GBP'000 | GBP'000 |
+------------------------------------------+------------+----------+------------+------------+
| | | | | |
+------------------------------------------+------------+----------+------------+------------+
| Growth rate* | 2% | | 2% | 2% |
+------------------------------------------+------------+----------+------------+------------+
| Discount rate** | 17% | | 16% | 17% |
+------------------------------------------+------------+----------+------------+------------+
* Growth rate used to extrapolate cash flows beyond the budget period.
** Pre tax discount rate applied to the cash flow projections
These assumptions have been used for the analysis of each CGU within the
business segment. The growth rates used are consistent with the forecasts
included in industry reports. The discount rates used are pre-tax and reflect
specific risks relating to the relevant segments.
The forecasts, which the Board believes have been prepared on a conservative
basis, are most sensitive to changes in prospective revenue growth rates in the
first three years of the forecast period. Revenues would have to be more than 5%
lower than currently projected before a possible impairment charge would be
recognised.
No impairment has been recognised in the income statement (2008: nil).
9. Deferred consideration on disposals
+--------------------------------------------------------------+-----------------+-----------------+
| | 2009 | 2008 |
+--------------------------------------------------------------+-----------------+-----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------------+-----------------+-----------------+
| Deferred consideration on disposals - Fujin Technology | 35 | 35 |
| Trading Limited | | |
+--------------------------------------------------------------+-----------------+-----------------+
| Deferred consideration on disposals - Itheon Limited | 1,073 | 1,085 |
+--------------------------------------------------------------+-----------------+-----------------+
| Deferred consideration on disposals - VBHG Limited (Anix | 3,150 | - |
| disposal) | | |
+--------------------------------------------------------------+-----------------+-----------------+
| | 4,258 | 1,120 |
+--------------------------------------------------------------+-----------------+-----------------+
+----------------------------------------------------------+-------+-------------+--------------------+-------+-------+-------+-------+-------+-------+-------+--------------------------+
| Of the above total balance, the deferred consideration due from ACS BPS of GBP3,150,000 is fully performing and due |
| on 12 September 2010 and is currently being held in ESCROW. There are no earn out conditions |
+----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| to be met prior to release of the deferred consideration. However, there is a working capital adjustment of GBP3,115,000 |
| to be finalised (see note 5). The finalisation of this number will affect the 2010 numbers if the adjustment |
| is deemed to be different to GBP3,115,000. |
+----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| |
| The deferred consideration of GBP35,000 from Fujin Technology Trading Ltd was due on 14 August 2009 |
+----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| and therefore is not fully performing. However, no provision has been made as a payment plan has | | | | | | | | |
| been put in place which will satisfy the debt in full by July 2010. | | | | | | | | |
+-----------------------------------------------------------------------------------------------------+-------+-------+-------+-------+-------+-------+-------+--------------------------+
| | | | | | | | | | | | |
+----------------------------------------------------------+-------+-------------+--------------------+-------+-------+-------+-------+-------+-------+-------+--------------------------+
| The deferred consideration of GBP1,073,000 from the sale of Itheon was due on 31 October 2009 and |
| therefore is not fully performing. However, no provision has been made as a revised payment plan has been |
+----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| put in place which will satisfy the debt in full by March 2010. | | | | | | | | |
+-----------------------------------------------------------------------------------------------------+-------+-------+-------+-------+-------+-------+-------+--------------------------+
| | | | | | | | | | | | |
+----------------------------------------------------------+-------+-------------+--------------------+-------+-------+-------+-------+-------+-------+-------+--------------------------+
10. Post balance sheet events
On 21 October 2009, the company sent a circular to its shareholders detailing
proposals in relation to an invitation by Brewin Dolphin to qualifying
shareholders to tender up to 19,000,000 ordinary shares for sale to Brewin
Dolphin (the "Tender Offer") and repurchase by the company of the Ordinary
Shares purchased by Brewin Dolphin pursuant to the Tender Offer. On 20 November
2009, the company announced the result of the Tender Offer which was that a
total of 18,999,901 Ordinary Share representing approximately 46.57% of the
issued share capital (and 100% of the maximum number of Ordinary Share that
Brewin Dolphin offered to purchase under the Tender Offer) were validly
tendered. With an offer price of 50p per share an amount of approximately
GBP9.5m was paid out to shareholders following this tender offer.
11. Status of preliminary announcement
The financial information set out in the announcement does not constitute the
group's statutory accounts for the year ended 31 October 2009.
The statutory accounts for the year ended 31 October 2009 will be finalised on
the basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
Statutory accounts for the year ended 31 October 2008 have been delivered to the
Registrar of Companies and the auditors' report on these accounts was
unqualified and did not contain a statement under either Section 237(2) or (3)
of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFFDFEILIII
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