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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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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 |
RNS Number:1800N XploiTe PLC 04 February 2008 4 February 2008 Xploite plc Preliminary results 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 twelve months to 31 October 2007. Highlights * Turnover £31.2m (2006: £29.5m) * £5.5m increase in adjusted operating profit* to £1.2m (2006: loss £4.3m) * £10.3m cash returned to shareholders * £5.8m cash inflow from operations (2006: outflow £4.5m) * 4 Acquisitions completed to begin new phase of buy and build cycle: Posetiv, Anix, Red Squared plc and Itheon * Disposal of Fujin Technology Trading * Major new contract wins including £5m infrastructure project for Camelot and £1.1m managed service contract with AG Thames * Discussions with third parties which may lead to an offer are continuing * Encouraging start to trading and increases in managed services contracts in current financial year Ian Smith, Xploite Chief Executive commented, "Having returned substantial funds to shareholders, we have made good progress in rapidly building a new IT services group with a strong emphasis on lengthy managed service contracts. We have seen 40% year on year organic growth within our managed service operation and have secured £10m of new contracts over the last five months." Enquiries Xploite plc www.xploite.com 0870 737 2001 Ian Smith, Chief Executive Officer Robert Arrowsmith Finance Director KBC Peel Hunt Ltd 0207 418 8900 Oliver Scott/Nicholas Marren College Hill 020 7457 2020 Adrian Duffield / Jon Davies *Refer to reconciliation on page 8 Chairman's statement Xploite is a company that identifies, acquires, consolidates and develops businesses in the IT services sector. The Group creates shareholder value by identifying and acquiring businesses that have a good strategic fit, integrating and consolidating operations, reducing costs and developing recurring revenue streams through the efficient deployment of people, processes and technologies. Overview I am very pleased to report on a successful year for the Group. In the year to 31 October 2007, we completed both the last phase of our previous buy and build cycle and embarked on a new one and so the year may be viewed as one of transition from one phase to another. Following the disposal of Matrix Communications and completion of the associated earn out with its acquirer Calyx Group plc, we returned £10.3m to shareholders. Since February the Board has been implementing a buy and build strategy to acquire and build scale and depth in the managed services and storage sectors of the IT services market. To date the Group has made four acquisitions Month Company Cash Deferred Maximum Consideration February Posetiv Limited £4.2m - £4.2m April Anix Holdings Limited £11m - £11m October Red Squared plc £3.2m - £3.2m October Itheon Limited £3.6m £3.2m £6.8m Since these acquisitions were made, Posetiv, Anix and Red Squared, all businesses that are focussed on managed services and storage, have been consolidated under the Anix brand. Successful consolidation of these businesses in the second half of the year has given the Group a very strong customer base with significant recurring revenues. Itheon remains as a standalone business focused on the supply of network assurance software. Anix is both a customer and channel to market for Itheon's innovative software. The Group expects operational and other synergies from the acquisition of Red Squared and Itheon to be realised over the course of the next year. The full benefits of the acquisitions will only be apparent as the current year unfolds. Results Our results have to be considered in the context of strategic transition. Revenues for the year to 31 October 2007 were £31.2m (2006: £29.5m) and we recorded an operating loss of £0.9m (2006: loss £7.5m) an adjusted operating profit of £1.2m (2006: loss £4.3m), and a loss per share of (1.4p) (2006:profit 26.2p). Comparing our results for 2007 with those of 2006 is complicated by the following factors: * The 2006 results comprised the Equip distribution business for three months, the Integration division for seven and a half months and Fujin Technology Trading for twelve months. * The 2007 figures reported herein include Fujin Technology Trading for ten months up to its disposal, Posetiv Limited for nine months, Anix Group for seven months and Red Squared Plc and Itheon Limited for two weeks each following their respective acquisitions. * In November 2006 we returned 26p per share to shareholders. As a result of the acquisitions and the disposal of Fujin, the Group now has two trading brands, Anix and Itheon. Anix Anix now comprises two divisions encompassing managed services and the resale of software and hardware for data storage solutions. Anix is one of four Platinum partners to IBM and one of two Platinum partners to NetApp. It is also a Microsoft Gold partner and holds many other vendor accreditations. This is in line with our strategy of building strong relationships with best of breed vendors. Through the successful consolidation of Anix and Posetiv and the acquisition of Red Squared, Anix is now positioned as one of the UK's strongest mid market managed services specialists, Itheon owns the software required to deliver these services creating further opportunities for the Group. Ovum predicts that this market will be worth $41.5Bn by 2009 and that the fastest growing region in the world is Europe, Middle East and Africa (EMEA). When taken over the last twelve months of our acquired companies' trading, the managed services billing grew at an annualised rate of 40% year on year with new total contract margin signings growing by 51% through the focus on the mid market. We are expecting similar growth this year. Since 1 November 2007 Anix has signed or is negotiating contracts with total contract values in excess of £10m. Anix now owns two data centres with a total capacity for 100 racks of which 50% is currently occupied. Further space is sublet from national suppliers. The Group has chosen to focus on higher value managed services rather than simple low margin co-location or server hotel activities. The market has seen much activity in this area recently with the successful public offering of Telecity and the acquisition of IX Europe by Equinix. This area of the business typically generates higher margins than the server hotel activity. The Group currently services approximately 220 customers across two network operating centres in Bristol and Manchester and expects to build out these operations as the customer base grows. Hardware sales of Anix remains important to the Group; were it not for this side of the business we would not enjoy the benefits of top tier vendor relationships and accreditations. However, by its very nature this source of revenue is harder to predict. Anix saw some softening in this area in 2007 but early cost and operational control has meant that this side of the business will continue to deliver strong results for the Group. Indeed toward the end of the year the Group was delighted to report a large contract with Camelot worth some £5m, of which £4m has been recognised in the current year. Itheon The Group was delighted to complete the acquisition of Itheon. This modular based software enables us to replicate an IBM Tivoli(TM) or HP Openview(TM) style of monitoring and reporting for our services customers. Traditionally, Itheon has sold its software through third parties and it will continue to do so using Anix as both a further channel to market and a customer. Unlike the software from the larger vendors, Itheon's software is ideal for our mid market focus both in terms of cost and scalability. Rather than integrate this business under the Anix brand the Group has decided to continue to trade as Itheon in order to protect the third party revenues that already exist. Indeed, given the traditionally high margins enjoyed by software businesses, it is our aim to try and extend the offering across Europe Middle East and Africa with a positive impact on revenues and profitability. A particularly exciting element of the Itheon software is the ability to provide storage allocation tracking. In simple terms this means the customer can measure and bill the use of storage at a very granular level via an automated process. This has already been successfully deployed in the UK with NHS electronic patient records. Having proved the model the Group is now going to host this aspect of the software and turn the provision of this into Software as a Service ("Saas"). This will enable customers to simply log in and pull down this service on a subscription basis and means we can launch it globally. Gartner reports that by 2011 25% of all software sold will be via SaaS and will have a global value of $19.3bn. Fujin Technology In September 2007, the Group disposed of Fujin Technology Trading Limited. Having undertaken a strategic review of this business, the Board decided that Fujin's mobile web content filtering platform was no longer core to the Group's activities. The business was sold to Fujin's management for a cash consideration of £1.0 million realising a profit on sale of £437,000. Under the terms of this agreement Xploite retained the rights to Fujin's patented innovative content filtering and categorisation software, thereby protecting any future value that might arise from its investment to date. Board During the year we made a number of significant Board changes. The Group welcomed back Tony Weaver who rejoined the Board in February 2007 as Chief Operating Officer. Tony was previously the COO of Matrix Communications and had left only to facilitate the successful earn out and integration of that business with its acquirer Calyx Group plc. Robert Arrowsmith joined as Finance Director and brought with him many years experience of mergers and acquisitions within IT services. I joined the Board in April as non executive Chairman and I was joined in July by Richard Ramsay who is our independent senior non-executive director. I consider that the skills of the Board are very well suited to the strategic goals of the Group. Employees As a specialist service company it is imperative that we retain high quality employees. As the business grows through acquisition it is often an unsettling time and I would like to extend my sincere thanks and gratitude to all members of our staff for their commitment and loyalty. The high level of service that our customers expect has always been maintained and it is thanks to the dedication of our colleagues that this has been possible. Group Strategy The Group continues its strategy of identifying, acquiring and consolidating businesses that have a clear strategic fit focused on managed services and storage solutions, two of the fastest growing segments of the IT services market. We remain focussed on value improvement by integrating and consolidating operations, reducing costs and developing recurring revenue streams through the efficient deployment of people, processes and technologies, and the subsequent realisation of these businesses creating value for shareholders. Current trading and outlook Our trading is encouraging and we are confident that our strategy will prove rewarding for our shareholders. Currently less than 10% of mid market customers outsource any or all of their IT - this is our opportunity. This market is growing strongly at some 40% annually amongst FTSE 250 customers and it is our aim to be the UK's number one supplier to this market. We announced on 11 December 2007, that discussions were taking place which may or may not lead to an offer for all or part of the company. These discussions are ongoing and there is no certainty that they will result in a formal offer. We will make a further announcement as appropriate. John Standen Chairman Business and Financial review Business Review Xploite is a company that identifies, acquires, consolidates and develops businesses in the IT services sector. In order to give a meaningful review of the company's achievement against its objectives two separate elements will be considered.The first is the "identify and acquire" objective and the second is the "consolidate and develop" objective. Throughout this review these objectives will be considered separately as our ability to identify and acquire businesses that fit our strategic objective is separate to our ability to consolidate and develop the businesses once they have been acquired. Objectives and strategies of the business The company first adopted its buy and build strategy in 2003 when Matrix Communications,(as the business was then called) acquired the AIM shell Offshore Telecom plc. Between 2003 and 2006 the company acquired nine businesses in the network integration sector of the IT industry. These were consolidated into two operating divisions. In February 2006 and June 2006 the company disposed of these two operating divisions realising a profit of £19.2m. In December 2006 the company returned £10.3m to shareholders. In February 2007 the group embarked on a second buy and build programme by announcing its plans to acquire and consolidate in the managed services sector of the IT industry. Since then the Group has acquired four businesses pursuant to this strategy. The acquisitions were: * Posetiv Limited * Anix Holdings Limited * Itheon Limited * Red Squared plc In this period the group also disposed of the last remaining business from its previous cycle; Fujin Technology Trading Limited. The strategy of the business is to continue to grow both organically and by acquisition and to convert this growth into higher profit and cash flow through margin expansion mainly as a result of cost optimisation programmes and revenue mix management. The Company's brands and market position The company is consolidating its acquisitions under two brands, Anix and Itheon. The Anix brand represents the hardware distribution and managed services business and Itheon the network assurance software business. Anix is a leading implementer of advanced storage solutions and one of IBM's leading partners in the UK. Itheon was established in 1987 and is a UK software vendor focused on designing and implementing IT business service and application management solutions that monitor, meter and automatically recover critical IT business services. The industry, market and competitive environment There are two distinct areas of "The industry, market and competitive environment" that have a bearing on the company's performance. The first is the environment that influences the company's ability to source and fund acquisitions and the second is the market and competitive environment in which the acquired companies operate. The company's ability to source and fund acquisitions that will be complementary to the existing group companies is a function of the "pipeline" of acquisition opportunities that the company has. This is built up and constantly revised by a programme of research, meetings and general networking by the Board and its advisors. The company has funded the four acquisitions it has made during the year from its own cash resources and from bank debt. The company considers that the relationship it has with its bankers to be very important and so considerable time is spent communicating with the bankers and ensuring the loan covenants are met. The second area is the market and competitive environment in which the acquired companies operate. Demand for managed services in both the public and private sector is increasing as organisations look to third parties with the necessary specialist skills and scale to implement and host key applications on a cost effective basis. In the medium term, the Board expects that the anticipated migration to managed service solutions may lead to a decline in headline revenue, but with a resultant improvement in overall margin. Furthermore, the Board expects the revenue visibility of the business to improve as the operating group moves towards long term customer contracts and away from low margin, one-off hardware sales. The Board expects the demand for the group's services to increase as more companies recognise the benefits of having their data networks actively managed by a third party. RESOURCES The Group has the following key resources which assist in its pursuit of its key objectives: "Identify and acquire" * Extensive knowledge of the IT markets; * Strong relationships with debt providers. * Employees who have extensive knowledge of the key markets and therefore can assist in the development of the business; "Consolidate and develop." * Well-established and respected brands; * Strong distribution channels and established working relationships with business partners; * Quality products and services with strong market positions; * Employees who have extensive knowledge of the key markets and therefore can assist in the development of the business. * Strong corporate reputation for quality products and services. * Highly qualified and stable employee base. Relationships, principal risks and uncertainties "Identify and acquire" The company's critical relationships are with the business owning community and the providers of capital be it our bankers or our shareholders. Acquisitions play a key role in the strategy and the successful integration and operation of the acquired businesses represents a commercial risk to the Group. The risk is mitigated by a very structured approach to the integration process using a detailed project plan, dedicated teams and careful monitoring of performance post acquisition "Consolidate and develop" The company's critical external relationships are with its major customers and its major suppliers. The Group's customer base is diverse with no single customer accounting for more than 7% of the gross margin, and the top 10 customers accounting for 39% of the gross margin. The Group maintains its relationships with its customers through the efforts of its sales force, including key account managers. The principal market risks are that the current slowdown in the demand for new hardware may continue and competition may reduce the Company's market share and margins. In order to mitigate these market risks the Group constantly monitors the market through its own sales force, by attendance at industry groups and monitoring of competitors. This information enables us to make informed decisions about where the sales force should be targeted and informs our discussions with suppliers. The principal operational risks are that key management may leave or management turnover may significantly increase; unfavourable economic or business conditions may adversely disrupt operations; or a major failure may occur at one of the network operation centres. In order to mitigate these operational risks the Group aims to create a rewarding working environment that will attract staff by offering competitive salaries and benefits, structured career paths, tailored training and by encouraging free thinking and innovation. Also, the Group prepares recovery plans for most foreseeable situations so that our business operations would continue should these situations occur. Commercial relationships The principal risks around our commercial relationships are that some of our products utilise software licensed to us by independent, third-party software developers. We also depend on third parties to enhance their current products, to develop new products on a timely and cost-effective basis and to respond to rapid technological change. Any absence or failure of key third-party products could have a material effect on our business. To mitigate this risk, we keep under review all key commercial relationships and developments in technology in our marketplace. We also work with a range of partners to mitigate the risk inherent in working with a single partner. Financial review Basis of preparation. The table below shows which companies have been included in the group consolidation and the approximate period for which they were members. Anix Holdings Limited Seven months to 31 October 2007 Posetiv Limited Nine months to 31 October 2007 Itheon Limited Nineteen days to 31 October 2007 Red Squared plc Fourteen days to 31 October 2007 Fujin Technology Trading Limited Ten months to disposal on 31 August 2007 Reconciliation of statutory numbers to adjusted numbers Set out below is a reconciliation of the Groups statutory profit/(loss), which the Directors believe is a more helpful indicator of the company's underlying performance 2007 2006 £000 £'000 Operating loss per financial statements (877) (7,496) Exceptional items 171 - Depreciation 524 23 Amortisation of goodwill 1,357 1,796 Impairment of goodwill - 1,340 Adjusted operating profit/(loss) 1,175 (4,337) References to adjusted operating profit refers to profit before depreciation, amortisation and impairment of goodwill and exceptional items. This figure is shown as it is more representative of the underlying performance of the business. Profit The group has realised an adjusted operating profit for the year of £1.2m, a more than £5.5m improvement on the previous year which was a loss of £4.3m The operating loss for the year is £877k which is an improvement of over £6.6m on the previous year loss of £7.5m. The loss before tax (that is after having taken into account the profit on sale of subsidiaries) is £341k against a profit last year of £11.5m. The 2006 figures included £19.2m profit on sale of subsidiaries compared to £0.3m in 2007. Restructuring In the year to 31October 2007 the group has incurred net operating exceptional costs of £171k. This figure is made up of restructuring expenses of £374k and an exceptional credit realised on the settlement of a liability of £203k. Net interest The Group had interest receivable of £327k in the year. This related to interest on the proceeds of the disposal of the integration business and to the write back of £127k of accrued interest not required due to the settlement of a liability. The Group had £102k of interest payable in the year arising on bank loans and overdrafts and hire purchase commitments. Taxation The tax charge of £224,000 for the year resulted in an effective tax rate of 66% (2006 charge 13%). The profit on sale of Fujin Technology Trading Limited will be exempt from tax under the Substantial Shareholder Exemption rules. Cash flow and net funds The cash generated from operating activities improved from an outflow of £4.5m in 2006 to an inflow of £5.8m in 2007. Cash inflows included £5.9m deferred consideration on prior year disposals, £3.1m on acquisition of subsidiaries and a new loan of £2.5m. Cash outflows included £21.7m on purchase of subsidiaries, £1.9m on deferred consideration from prior years, £0.9m repayment of loans and £10.3m on repayment of capital to shareholders. These above cash flows together with a number of less significant cash flows resulted in funds reducing from £22.3m at 31 October 2006 to £852k at 31 October 2007. Balance sheet At the end of 2007 the Group had shareholders funds of £14.6m. This is a reduction on 2006 of £10.4m; the key reason for this was a repayment to shareholders of £10.3m. At 31 October 2007 the Group had net current liabilities of £6.0m. The Board does not consider this to be a problem for a number of reasons: * The Group secured a new £3m long term loan facility from HSBC Bank plc in November 2007 and has a further undrawn overdraft facility of £2.5m. * The Board is confident that sufficient funding is available to meet its liabilities as they fall due. Key performance indicators The Board has identified a number of Key Performance Indicators that are most relevant to the Group and are used to measure performance. These KPIs are: Financial: * Growth in gross margin * Adjusted operating profit * Adjusted earnings per share * Internal Rate of Return on businesses sold Commercial * Total value of contracts signed * Service level agreements governing our response to customer enquiries Group prospects and future developments The Group believes that it is well positioned to continue to deliver on its strategic objectives. Consolidated profit and loss account for the year ended 31 October 2007 2007 2006 Restated note 1 Notes £'000 £'000 Turnover Acquisitions 29,098 - Discontinued operations 2,126 29,481 Turnover 4 31,224 29,481 Cost of sales (23,967) (21,914) Gross profit 7,257 7,567 Administrative expenses (excluding exceptional items, (6,606) (11,927) amortisation and impairment of goodwill) Amortisation and impairment of goodwill (1,357) (3,136) Exceptional items (171) - Total Administrative expenses (8,134) (15,063) Operating loss Continuing operations (1,355) (2,753) Acquisitions (14) - Discontinued operations 492 (4,743) Operating loss 4 (877) (7,496) Profit on sale of subsidiaries 3 311 19,220 (Loss)/Profit on ordinary activities before interest and taxation (566) 11,724 Interest receivable and similar income 327 325 Interest payable and similar charges (102) (568) (LOSS)/Profit on ordinary activities before taxation (341) 11,481 Tax on (loss)/profit on ordinary activities 5 (224) (1,517) (LOSS)/Profit retained for the financial year 6 (565) 9,964 Basic (Loss)/earnings per share (pence) (1.4) 26.2 Diluted (LOSS)/earnings per share (pence) (1.4) 25.9 There is no difference between the(loss)/profit on ordinary activities before taxation and the (loss)/profit for the year stated above and their historical cost equivalent. Consolidated statement of total recognised gains and losses 2007 2006 Restated note 1 £'000 £'000 For the year ended 31 October 2007 (Loss)/profit for the year (565) 9,964 Prior year adjustment - FRS20 (note 1) (97) Total recognised losses for the year (662) Consolidated balance sheet As at 31 October 2007 2007 2006 Restated note 1 Notes £'000 £'000 £'000 £'000 Fixed assets Intangible assets 28,490 - Tangible assets 1,966 62 30,456 62 Current assets Stocks 20 861 Debtors 17,746 7,775 Investments - 2,000 Cash at bank and in hand 4,225 20,280 21,991 30,916 Creditors: Amounts falling due within (27,975) (5,941) one year Net Current(LIABILITIES)/ assets (5,984) 24,975 TOTAL ASSETS LESS CURRENT LIABILITIES 24,472 25,037 Creditors: Amounts falling due after more than one year (9,828) (18) Net assets 14,644 25,019 Capital and reserves Called up share capital 3,952 3,820 Share premium account 1,647 11,926 Merger reserve 3,511 3,268 Share based payments reserve 191 97 Profit and loss account 5,343 5,908 Shareholders' funds - Equity 6 14,644 25,019 Consolidated cash flow statement for the year ended 31 October 2007 2007 2006 Notes £'000 £'000 £'000 £'000 Cash inflow/(outflow) from operating activities (a) 5,796 (4,514) Returns on investments and servicing of finance Interest received 327 325 Interest paid (63) (567) Interest element of hire purchase and finance (39) (1) lease Net cash inflow/(outflow) for returns on 225 (243) investments and servicing of finance Taxation (615) (868) Capital expenditure and financial investment Payments to acquire tangible fixed assets (347) (63) Receipt from sale of tangible fixed assets 70 - Net cash outflow for capital expenditure and (277) (63) financial investment Acquisitions and disposals Purchase of subsidiary undertakings (21,719) - Deferred consideration paid on prior year (1,871) (4,646) acquisitions Deferred consideration received on prior year 5,875 - disposals Net cash acquired with subsidiaries 3,129 - Net cash disposed of on disposal of subsidiaries (348) (1,570) Cash received from sale of subsidiaries 600 41,612 Net cash (outflow)/inflow from acquisitions and (14,334) 35,396 disposals Cash (outflow)/inflow before use of liquid (9,205) 29,708 resources and financing Sale of investments 2,000 - Net cash inflow from management of liquid 2,000 resources Financing Issue of ordinary share capital 63 139 Capital repayment - reduction in share premium (10,312) - New loans advanced 2,500 - Loans repaid (855) (9,705) Loan notes paid - (2,181) Capital element of hire purchase and finance (246) (8,850) (13) (11,760) lease (6,850) (11,760) (Decrease)/increase in cash in year (16,055) 17,948 Consolidated group cash flow statement continued for the year ended 31 October 2007 The net cash disposed of with subsidiaries and cash received from sale of subsidiaries are the only cash flows materially affected by the disposed subsidiaries. (a) Reconciliation of operating loss to net cash inflow/(outflow) from operating activities restated 2007 2006 £'000 £'000 Operating loss (877) (7,496) Depreciation of tangible fixed assets 524 23 Amortisation of goodwill 1,357 1,796 Impairment of goodwill - 1,340 Loss on disposal of fixed assets 5 13 Share based payments charge 94 46 Decrease/(increase) in stock 522 (1,255) (Increase)/decrease in debtors (5,433) 994 Increase in creditors 9,604 25 Net cash inflow/(outflow) from operating activities 5,796 (4,514) (b) Reconciliation of net cash flow to movement in net funds/(debt) 2007 2006 £'000 £'000 (Decrease)/increase in cash in the year (16,055) 17,948 Net cash (inflow)/outflow in respect of bank loan (1,645) 9,705 Cash (outflow)/ inflow from (decrease)/increase in (2,000) 2,000 investments Loan notes settled - 2,181 Cash outflow in respect of hire purchase and finance lease 246 13 Changes resulting from cash flows (19,454) 31,847 Non cash changes: Loans and finance leases acquired with subsidiaries (1,400) - New finance leases (547) (32) Change in net debt (21,401) 31,815 Net funds/(debt) at 1 November 2006 22,253 (9,562) Net funds at 31 October 2007 852 22,253 (c) Analysis of changes in net funds/(debt) Acquisitions At 1 Nov Cash flows (ex Cash) Non cash changes At 31 Oct 2007 2006 £'000 £'000 £'000 £'000 £'000 Cash at bank and in 20,280 (16,055) - - 4,225 hand Debt due within one - (1,645) - (830) (2,475) year Debt due after one year - (830) 830 - Current asset 2,000 (2,000) - - - investments Hire purchase and (9) 211 (429) (168) (395) finance lease agreements due within 1 year Hire purchase and (18) 35 (141) (379) (503) finance lease agreements due after one year Net funds/(debt) 22,253 (19,454) (1,400) (547) 852 Note 1 Accounting policies The financial statements have been prepared on the going concern basis under the historical cost convention, in accordance with the Companies Act 1985 and applicable accounting standards in the United Kingdom. The financial statements for the year ended 31 October 2007 have been prepared using accounting policies consistent with those applied in the previous year except for the following: In accordance with accounting standards the Group has adopted FRS20 "Share-based payments" in this year's financial statements. The adoption of this standard represents a change in accounting policy and comparative figures have been restated accordingly. Applying the Black-Scholes valuation model gives a fair value charge for these options which, in accordance with FRS 20 has been added to administrative expenses in each period. The administrative expenses for 2006 have been restated to include a charge of £97,400 in respect of share based remuneration. Since the corresponding adjustment to the FRS 20 charge is to profit and loss reserves there is no restatement of the opening reserves position. Note 2 Acquisitions Goodwill Group £'000 Cost At 1 November 2006 1,884 Acquisition of subsidiaries 29,847 Disposals (1,884) At 31 October 2007 29,847 Amortisation Balance at 1 November 2006 1,884 Disposals (1,884) Charge for the year 1,357 Balance at 31 October 2007 1,357 Net book amount as at 31 October 2007 28,490 Net book amount as at 31 October 2006 - Goodwill arising is being amortised over 10 years on a straight line basis, which is the period over which the Directors estimate that the value of the underlying business acquired is expected to exceed the value of the underlying net assets acquired. During the year, the Group through its subsidiary undertaking VBHG Limited acquired a number of companies as follows: * Posetiv Limited * Anix Holdings Limited * Itheon Limited. * Red Squared plc These transactions have been accounted for by the acquisition method of accounting. Company Date Consideration Fair value Goodwill £'000 Of net (assets)/liabilities £'000 acquired £'000 Posetiv Limited 9 Feb 2007 4,210 2,772 6,982 Anix Holdings Limited 31 March 207 10,968 2,915 13,883 Itheon Limited 12 October 2007 6,832 (334) 6,498 Red Squared plc 17 October 2007 3,235 (751) 2,484 25,245 4,602 29,847 Anix Holdings Limited comprised a group of companies which included Anix Group Limited, Anix Computers Limited and Anix Business Systems Limited. Note 3 Profit on sale of subsidiaries - discontinued operations 2007 2006 £'000 £'000 Profit on sale of Fujin Technology Trading Ltd 437 - Profit on sale of Equip Technology Ltd - 230 (Loss)/profit on sale of Integration business (126) 18,990 311 19,220 Taxation (note 5) - 1,500 The loss on sale of the Integration business arose after a deed of amendment was entered into with Calyx Group plc. This entitled the Group to receive the deferred consideration early, but at a discount. The amount of £126,000 represents loss on sale being the discount plus additional legal costs. Note 4 Segmental analysis Year to October 2007 Profit and loss account by operation Discontinued Acquisitions Continuing operations operations Mobile internet Software Managed Central 2007 solutions Services & costs Total Total Hardware £'000 £'000 £'000 £'000 £'000 £'000 Turnover 2,129 171 28,927 - 29,098 31,227 Inter segment sales (3) - - - - (3) Sales to third parties 2,126 171 28,927 - 29,098 31,224 Cost of sales (1,319) (7) (22,641) - (22,648) (23,967) Gross profit 807 164 6,286 - 6,450 7,257 Administrative expenses (315) (97) (4,839) (1,355) (6,291) (6,606) before amortisation of goodwill and exceptional items Amortisation of goodwill - (33) (1,324) - (1,357) (1,357) Exceptional items - - (171) - (171) (171) Total administrative (315) (130) (6,334) (1,355) (7,819) (8,134) expenses Operating profit/(loss) 492 67 1,447 (1,355) 159 651 before amortisation and exceptional items Amortisation of goodwill - (33) (1,324) - (1,357) (1,357) Exceptional items - - (171) - (171) (171) Operating profit/ (loss) 492 34 (48) (1,355) (1,369) (877) Profit on sale of 311 - - - - 311 subsidiaries Net interest - 5 98 122 225 225 Profit/(loss) before tax 803 39 50 (1,233) (1,144) (341) Segment net assets/ - (605) (7,910) 23,215 14,700 14,700 (liabilities) Taxation - (80) (102) (726) (908) (908) Net (debt)/funds - 1,035 6,901 (7,084) 852 852 Net assets by operation - 350 (1,111) 15,405 14,644 14,644 Segmental analysis Year to October 2006 Profit and loss account by operation Restated Discontinued operations Total Restated Discontinued Total Continuing Mobile Distribution Operations operations Internet solutions Integration Equip £'000 £'000 £'000 £'000 £'000 £'000 Turnover - 608 22,495 6,912 30,015 30,015 Inter segment sales - - (92) (442) (534) (534) Sales to third parties - 608 22,403 6,470 29481 29,481 Cost of sales - (398) (15,684 (5,832) (21,914) (21,914) Gross profit - 210 6,719 638 7,567 7,567 Administrative expenses before (2,753) (1,229) (7,007) (938) (9,174) (11,927) amortisation and impairment of goodwill Amortisation of goodwill - (189) (1,368) (239) (1,796) (1,796) Impairment of goodwill - (1,340) - - (1,340) (2,753) (2,758) (8,375) (1,177) (12,310) (15,063) Operating (loss) before (2,753) (1,019) (288) (300) (1,607) (4,360) amortisation and impairment Amortisation of goodwill - (189) (1,368) (239) (1,796) (1,796) Impairment of goodwill - (1,340) - - (1,340) (1,340) Operating (loss) (2,753) (2,548) (1,656) (539) (4,743) (7,496) Profit on sale of subsidiaries - - 18,990 230 19,220 19,220 Net interest (243) - - - (243) Profit/(loss) before tax (2,996) (2,548) 17,334 (309) 14,477 11,481 Net assets by operation Segmental net assets 5,127 727 - - 727 5,854 Taxation (1,088) - - - - (1,088) Net funds 20,205 48 - - 48 20,253 Shareholders' net assets 24,244 775 - - 775 25,019 Note 5 Taxation a) Analysis of charge in the year 2007 2006 £'000 £'000 Current tax charge: UK Corporation Tax based on results for the year at 30% (2006: 30%) 142 1,517 Prior year adjustment 67 - Current tax charge 209 1,517 Deferred tax: Current year movement 15 - Total tax on (loss)/profit on ordinary activities for the year 224 1,517 b) Factors affecting the tax charge for the year The tax assessed on the (loss)/profit on ordinary activities for the year is different to the standard rate of Corporation Tax for the UK of 30%. The factors affecting this are set out below: 2007 2006 £'000 £'000 (Loss)/profit on ordinary activities before taxation (341) 11,481 Profit on ordinary activities before taxation multiplied by standard rate of UK Corporation Tax of 30% (2006: 30%) (102) 3,444 Effects of: Amortisation and impairment of goodwill 407 941 Profit on disposal of subsidiaries (93) (5,766) Tax liability on disposal of subsidiaries - 1,500 Items disallowable for tax 5 102 Timing differences between depreciation and capital allowances 30 2 Prior year adjustment 67 - Impact of current year tax losses carried forward - 1,294 Brought forward losses utilised (105) - Current tax charge 209 1,517 Note 6 Reconciliation of movements in shareholders' funds 2007 2006 Restated note 1 Group £'000 £'000 Shareholders' funds at 1 November (restated) 25,019 14,870 (Loss)/profit retained for the year (565) 9,964 Movement on share based payment reserve- FRS 20 94 46 Shares issued in the year 132 27 Share premium on shares issued 33 112 Capital reduction in share premium (10,312) - Issue of new shares on acquisition of subsidiary 243 - Shareholders' funds at 31 October 2007 14,644 25,019 Note 7 2007 2006 Geographical analysis of turnover by £'000 £'000 destination UK 30,945 28,702 Other EU countries 279 771 USA - 8 31,224 29,481 Note 8 Basis of preparation of preliminary announcement Xploite Plc's financial statements for the Preliminary Results for the year ended 31 October 2007 are unaudited. The financial information set out in the announcement does not constitute the Group's statutory financial statements for the years ended 31 October 2007 and 31 October 2006. The financial information for the year ended 31 October 2006 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those financial statements; their report was unqualiified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 2005 This information is provided by RNS The company news service from the London Stock Exchange END FR IIFSRFLISIIT
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