Last checked at 1 Mar 2010 07:00
FOR RELEASE
7.00AM
01 march 2010
ACCESS INTELLIGENCE PLC
("Access Intelligence" or "the Group")
PRELIMINARY RESULTS FOR THE FINANCIAL YEAR ENDED 30 NOVEMBER 2009
Access Intelligence Plc (AIM: ACC), a leading supplier of compliance Software-as-a-Service solutions for the financial services, procurement and media sectors, is pleased to announce its preliminary results for the year ended 30 November 2009.
Financial Highlights
* Turnover from continuing activities up 51.6% to £6,014,913 (2008: £3,967,000)
* Profit before tax increased to £566,000 (2008: loss £4.6 million)
* Basic earnings per share of 0.38p (2008: loss 5.27p)
* Positive cash balance of £1,714,243 (2008: £763,000)
Operational Highlights
* Group repositioned as a provider of compliance Software-as-a-Service solutions
* Acquisition of Ether Ray in June 2009
* Media & Communications division formed through combination of Solcara and Ether Ray
* All divisions trading profitably
* Significant contracts won with RBS and Aviva
* Robust stance on costs
Post Period End Highlights
* £5.2 million acquisition of Cobent Ltd - see today's separate announcement
* Placing of 60 million new ordinary shares for cash at 5p per share
* Howard Sears, MD of Cobent Ltd, to join the Board of Access Intelligence
Michael Jackson, Executive Chairman, commented: "We are delighted with the Group's performance this year. The decision to position ourselves as a compliance Software-as-a-Service provider, combined with tight cost control and the formation of a new media & communications division through the merger of Ether Ray & Solcara have helped return Access Intelligence to profitability.
"Looking ahead, we are extremely excited to be announcing the acquisition of Cobent Ltd as this not only reinforces our focus on the compliance sector, but it also expands our sales footprint into the US. With cash on the balance sheet, we continue to search for similar acquisition opportunities."
For further information:
Access Intelligence plc
Michael Jackson (Chairman) 020 7831 5088
Jeremy Hamer (Finance Director) 07977 234 614
Cubitt Consulting
James Verstringhe 020 7367 5100
Astaire Securities Plc
Shane Gallwey 020 7448 4400
Notes to Editors:
Access Intelligence plc is the parent company of a group of compliance Software-as-a-Service ("SaaS") businesses providing solutions for the financial services, procurement and media sectors. The board is headed by Michael Jackson as Executive Chairman and Jeremy Hamer as Group Finance Director.
Product Portfolio
e-Procurement:
• Managed by Alan Gray, a founder of the original business, who has been involved in developing financial solutions for over 20 years.
• SaaS procurement & contract management solutions. Heavily compliance focussed following the recommendations of the Glover Report which proposed that all Public Sector organisations must engage suppliers via electronic tendering by 2012.
• Over 130 customers incl. Bank of England, Met Police, Ladbrokes, and many large Local Government Authorities.
• Recurring revenue represents 80% of total costs.
FSA Training & Competence:
• Managed by David Alderson, a founder of the business with over 35 years of experience in the financial services sector, and a recognised industry expert in business critical software.
• SaaS solutions for the financial services sector solving the industry's key challenges; controlling and monitoring compliance commitments and reducing administration overheads. Sales driven by the need to comply with the FSA's Retail Distribution Review.
• Key customers include RBS & Aviva.
Media & Communications:
• A new division created from the merger of two recent acquisitions, Solcara & Ether-Ray.
• SaaS solutions for media relations & public sector news flow management. A market leader in the UK for media relations management software.
• One integrated application enables users to capture, create, distribute, and analyse all communications, facilitating compliance with corporate messaging and upholding the reputation of the organisation.
• Over 220 clients in local government, central government, police and several major private sector clients from Solcara.
• Recurring revenue represents 140% of total costs.
CHAIRMAN'S STATEMENT
I am pleased to announce our results for the year ended 30 November 2009. The Group has made considerable strategic and financial progress this year since Elderstreet VCT, David Lowe and I invested in October 2008. The decision to position the Group as a compliance Software-as-a-Service provider, a tough stance on costs and focus on sales have brought about a significant turnaround in performance.
Results
Group turnover from continuing activities was up by 51.6% to £6,014,913 (2008: £3,967,000). Operating profit before charges for share-based payments and acquisition accounting was £631,423 (2008: restated Loss £838,000) while profit attributable to shareholders was £601,892 (2008: restated Loss £6,059,000).The basic profit per share from continuing operations was 0.38p (2008: restated Loss 5.27p). The Group has net cash and bank balances of £1,714,243 (2008: £763,000).
The Group acquired Ether Ray Ltd on 30 June 2009 for a total cost of £2,598,715 in cash. Ether Ray had cash balances of £888,902 at completion. The acquisition was funded through the issue in June 2009 and July 2009 of £1,850,000 of Convertible Redeemable Loan Notes each with an annual yield of 6% and a conversion price of 4p. In the event that they are redeemed by the Group within 18 months of their issue date a 10% premium will be payable.
The Directors are not recommending the payment of an ordinary dividend.
Strategy
The Group is continuing to implement its strategy to focus on supplying compliance Software-as-a-Service solutions for the financial services, procurement and media sectors. The proportion of revenues originated from compliance solutions has risen to 59% (2008: 35%) in 2009. Though the advantages to both customers and ourselves of providing software as a hosted service are becoming increasingly accepted in the market place, the Group does still support a proportion of its customer base with licensed sales and support agreements.
The market for compliance-based software solutions is driven by mounting legislation as the business environment becomes more regulated. The Group stands to benefit from this trend as organisations increasingly recognise their responsibilities and take the necessary action to comply. This is particularly true of the public sector's efforts to achieve greater transparency in its day-to-day business.
The Board intends to grow Access Intelligence both organically and by acquisition, with an emphasis on developing recurring revenues and building compliance related solutions. The existing product portfolio offers a strong bedrock on which to build a dynamic and competitive Software-as-a-Service proposition, providing the Group with sustainable profits and long-term growth in shareholder value.
Operations
As part of its overall strategy, the Group has focused on delivering services through three core divisions: e-procurement, FSA Training & Compliance and Media & Communications, supported by the IT Support Services division.
e-Procurement
Due North has continued to benefit from the investment made in its sales pipeline management and marketing at the beginning of the year. Recurring revenues have reached £80,000 per month (2008: £55,000 per month) and it continues to make steady progress in the local authority and emergency service sectors in particular. As well as sales and marketing, the Group has invested strongly in the core product suite with five people working throughout the year to keep the product technically competitive. The company is profitable with a strong pipeline for 2010 and is now in a position where it can invest further in its sales and order generation.
FSA Training & Compliance
MS2M has now won the long expected contracts with both the Royal Bank of Scotland and Aviva. As a result of these significant wins, the company has invested in the technical team working on the 'Track Record' product with a view to developing it further in 2010.
Media & Communications
Solcara completed a significant turnaround in 2009, returning to profit largely through a tight control on costs. Since the acquisition of Ether Ray Ltd it has become clear that the Solcara 'Spotlight' product should sit alongside the Ether Ray product as they both provide media solutions, albeit to slightly different markets. On 1 December the two businesses were merged into Access Intelligence Media & Communications Ltd (AIMediaComms).
The purchase of Ether Ray Ltd on 30 June 2009 brought the Group a pure software as a service business hosting 200 local authority media and communication activities. Its recurring revenues exceed £100,000 per month. Now combined with Solcara 'Spotlight', the division offers solutions for media departments in local authorities, the NHS, central government and the private sector. This was an important acquisition for the Group and we are very confident about its prospects.
IT Support Services
Willow Starcom had a record year following the decision to lower costs and move away from storage sales. The focus on outsourced IT maintenance and support services has resulted in a growth in recurring revenues to over £110,000 per month. Looking ahead, we are confident that our emphasis on service excellence will enable Willow Starcom to retain customers in a very competitive market.
In 2009 as a Group we spent £278,000 (2008: £249,000) on research and development and now have £360,000 (2008: £178,000) of contracted monthly recurring revenue.
Acquisition
The Group has today announced in a separate statement the acquisition of the entire share capital of Cobent Ltd, a training and compliance software delivery business, for £5.2 million. Of the £5 million due at completion, £3 million will be paid in cash, £2 million in vendor shares and a £200,000 cash payment will be deferred for 12 months. The £3 million is being funded through the placing of 60 million new ordinary shares at 5p. The vendors will also receive 33.3 million new ordinary shares, pricing them at 6p per share, giving an average issue price per share of 5.4p.
Cobent Ltd, founded in 2003 by Howard Sears, has developed a 'gold standard' training and compliance delivery platform operating in a number of markets including FDA, FSA and HSE regulated industries. It has a Blue Chip client base in the UK and US.
Directors and Staff
I would like to thank all our staff for their hard work and help in a year of transformation during which they have kept faith with the new management approach. Together we have delivered an excellent result and I am looking forward to 2010 with high expectations.
Outlook
Access Intelligence Plc is in a stronger position at the start of 2010 than a year ago and I am pleased to report a strong start to trading for 2010 with continuing growth in the recurring revenue base. The Board, however, acknowledges that economic conditions remain tough and that it is difficult to predict how spending, particularly in the public sector, will be affected post the election. Despite this, we remain confident that our strategy to focus on compliance and our ability to offer a 'rented' rather than 'purchased' solution through Software-as-a-Service should keep us competitive.
On behalf of Access Intelligence's Board and Management, I would like to thank you for your ongoing support.
Michael Jackson
Chairman
1 March 2010
Consolidated Income Statement for the Year Ended 30th November 2009
|
|
|
| Restated |
|
| Notes | 2009 | 2008 |
|
|
| £'000 | £'000 |
|
|
|
|
|
| Revenue - continuing operations |
| 6,015 | 3,967 |
|
|
|
|
|
| Cost of sales |
| (2,665) | (2,146) |
|
|
| ______ | ______ |
|
|
|
|
|
| Gross profit |
| 3,350 | 1,821 |
|
|
|
|
|
| Administrative expenses |
| (2,719) | (2,476) |
| Share based payment | 7 | - | (183) |
|
|
| ______ | ______ |
|
|
| 631 | (838) |
| Impairment of goodwill |
| - | (2,950) |
| Impairment of capitalised development costs |
| - | (532) |
| Non - recurring expenses |
| - | (256) |
|
|
| ______ | ______ |
|
|
|
|
|
| Operating profit / (loss) |
| 631 | (4,576) |
|
|
|
|
|
| Financial income |
| 2 | 17 |
| Financial expense |
| (67) | (7) |
|
|
| ______ | ______ |
|
|
|
|
|
| Profit / (loss) before taxation |
| 566 | (4,566) |
|
|
|
|
|
| Taxation credit | 4 | 35 | 258 |
|
|
| ______ | ______ |
| Profit / (loss) for the year from continuing operations |
| 601 | (4,308) |
| Loss for the year from discontinued operations net of income tax expense |
| - | (1,751) |
|
|
| ______ | ______ |
|
|
|
|
|
| Profit / (loss) for the year attributable to the equity holders of the parent company |
| 601 | (6,059) |
|
|
| ______ | ______ |
|
|
|
|
|
| Earnings per share |
|
|
|
| Basic profit per share | 5 | 0.38p | (5.27)p |
| Diluted profit per share | 5 | 0.29p | (5.27)p |
|
|
|
|
|
Consolidated Balance Sheet as at 30th November 2009
|
|
|
|
|
| Restated |
|
|
|
| 2009 |
| 2008 |
|
| Notes |
| £'000 |
| £'000 |
| Non-current assets |
|
|
|
|
|
| Property, plant & equipment |
|
| 181 |
| 192 |
| Intangible assets | 6 |
| 4,996 |
| 2,722 |
| Deferred tax assets |
|
| 493 |
| 415 |
|
|
|
| ----------------- |
| ----------------- |
| Total non-current assets |
|
| 5,670 |
| 3,329 |
|
|
|
| ---------------- |
| ----------------- |
| Current assets |
|
|
|
|
|
| Inventories |
|
| 265 |
| 268 |
| Trade and other receivables |
|
| 1,481 |
| 1,490 |
| Cash and cash equivalents |
|
| 1,714 |
| 763 |
|
|
|
| ----------------- |
| ----------------- |
| Total current assets |
|
| 3,460 |
| 2,521 |
|
|
|
| ----------------- |
| ----------------- |
|
|
|
|
|
|
|
| Total assets |
|
| 9,130 |
| 5,850 |
|
|
|
| ----------------- |
| ----------------- |
| Current liabilities |
|
|
|
|
|
| Other interest bearing loans and borrowings |
|
| - |
| 2 |
| Trade and other payables |
|
| 662 |
| 872 |
| Accruals and deferred income |
|
| 2,349 |
| 1,564 |
| Current income tax liabilities |
|
| 98 |
| - |
|
|
|
| ----------------- |
| ----------------- |
| Total current liabilities |
|
| 3,109 |
| 2,438 |
|
|
|
| ----------------- |
| ----------------- |
| Non - current liabilities |
|
|
|
|
|
| Deferred tax liability |
|
| 55 |
| - |
| Interest bearing loans and borrowings | 8 |
| 1,655 |
| 52 |
|
|
|
| ----------------- |
| ----------------- |
| Total non - current liabilities |
|
| 1,710 |
| 52 |
|
|
|
| ----------------- |
| ----------------- |
|
|
|
|
|
|
|
| Total liabilities |
|
| 4,819 |
| 2,490 |
|
|
|
| ----------------- |
| ----------------- |
|
|
|
|
|
|
|
| Net Assets |
|
| 4,311 |
| 3,360 |
|
|
|
| ______ |
| ______ |
|
|
|
|
|
|
|
| Equity |
|
|
|
|
|
| Share capital | 1 |
| 797 |
| 779 |
| Share premium account | 1 |
| 8,955 |
| 8,873 |
| Capital redemption reserve | 1 |
| 191 |
| 191 |
| Share option valuation reserve | 1 |
| 247 |
| 183 |
| Equity reserve | 1 |
| 186 |
| - |
| Retained earnings | 1 |
| (6,065) |
| (6,666) |
|
|
|
| ----------------- |
| ----------------- |
| Total equity attributable to equity shareholders |
|
| 4,311 |
| 3,360 |
|
|
|
| ______ |
| ______ |
Consolidated Cash Flow Statement for the Year Ended 30th November 2009
|
|
| 2009 | Restated 2008 |
|
|
| £'000 | £'000 |
| Cash flows from continuing operating activities |
|
|
|
| Profit/(Loss) for the year attributable to equity shareholders of the parent |
| 601 | (6,059) |
| Adjusted for: |
|
|
|
| Disposal of subsidiary |
| - | 1,751 |
| Depreciation |
| 80 | 81 |
| Impairment of intangible assets |
| - | 3,482 |
| Share option valuation charge |
| - | 183 |
| Financial income |
| (2) | (17) |
| Financial expense |
| 67 | 7 |
| Taxation |
| (35) | (258) |
| Loss on disposal of property, plant and equipment |
| 1 | - |
|
|
| _____ | _____ |
| Operating profit/(loss) before changes in working capital and provisions |
| 712 | (830) |
|
|
|
|
|
| (Increase)/decrease in trade and other receivables |
| (607) | 145 |
| Decrease in inventories |
| 3 | 83 |
| Increase in trade and other payables |
| 611 | 168 |
| Increase in provisions |
| - | 27 |
|
|
| _____ | _____ |
| Net cash inflow/(outflow) from the continuing operations |
| 719 | (407) |
|
|
|
|
|
| Taxation received |
| 98 | 51 |
|
|
| _____ | _____ |
| Net cash inflow/(outflow) from continuing activities |
| 817 | (356) |
|
|
| _____ | _____ |
|
|
|
|
|
| Cash flows from investing in continuing activities |
|
|
|
| Interest received |
| 2 | 17 |
| Expenditure on business acquisitions |
| (2,598) | (830) |
| Cash acquired with subsidiary |
| 889 | 15 |
| Acquisition of property, plant and equipment |
| (63) | (67) |
|
|
| _____ | _____ |
| Net cash outflow from investing in continuing activities |
| (1,770) | (865) |
|
|
| _____ | _____ |
|
|
|
|
|
| Cash flows from financing continuing activities |
|
|
|
| Interest received |
| (1) | (7) |
| Issue of equity share capital |
| 100 | 1,265 |
| Issue of loan notes |
| 1,850 | - |
| Cost of share issues |
| - | (68) |
| Repayment of borrowings |
| (45) | (45) |
|
|
| _____ | _____ |
| Net cash inflow from financing continuing activities |
| 1,904 | 1,145 |
|
|
| _____ | _____ |
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| 951 | (76) |
| Cash from discontinued operations |
| - | (33) |
| Opening cash and cash equivalents |
| 763 | 872 |
|
|
| _____ | _____ |
|
|
|
|
|
| Closing cash and cash equivalents |
| 1,714 | 763 |
|
|
| _____ | _____ |
1. Notes to the Shareholders' funds
Share capital and share premium account
When shares are issued, the nominal value of the shares is credited to the share capital reserve. Any premium paid above the nominal value is taken to the share premium account. Access Intelligence plc shares have a nominal value of 0.5p per share. Directly attributable transaction costs associated with the issue of equity investments are accounted for as a reduction from equity, net of any relating income tax benefit.
Share option valuation reserve
This reserve arises as a result of amounts being recognised in the income statement relating to share based payment transactions granted under the group's share option scheme. The reserve will fall as share options vest and are exercised over the life of the options.
Capital redemption reserve
This reserve arises as a result of keeping with the doctrine of capital maintenance when the company purchases and redeems its own preference shares. Amounts transferred into/out from this reserve from a purchase/redemption is equal to the amount by which share capital has been reduced/increased, when the purchase/redemption has been financed wholly out of distributable profits, and is the amount by which the nominal value exceeds the proceeds of any new issue of share capital, when the purchase/redemption has been financed partly our of distributable profits.
Equity reserve
The equity reserve arises as a result of the equity component that has been recognised on the convertible loan notes that have been issued by the group. The reserve is determined by deducting the amount of the liability component from the fair value of the convertible loan notes as a whole, net of income tax effects and the relative proportion of the directly attributable transaction costs associated with the issue of the compound instruments.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Group since inception of the business. Where subsidiary undertakings are acquired, only profits arising from the date of acquisition are included.
2. Statement of Compliance.
The Group results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use by the European Union and as applied in accordance with the provisions of the Companies Act 2006
3. Basis of consolidation and Goodwill
The group results comprise the financial statements of Access Intelligence plc and its subsidiaries as at 30th November 2009. They are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000).
4. Taxation
|
|
|
|
| |
| Analysis of tax credit in the year | 2009 | 2008 | ||
|
| £'000 | £'000 | ||
| Current corporation taxes credit: |
|
| ||
| UK Corporation tax credit for the year | (76) | (55) | ||
| Prior year adjustment | - | (6) | ||
|
| ----------- | ----------- | ||
|
| (76) | (61) | ||
| Deferred corporation taxes: |
|
| ||
| Origination and reversal of timing differences | 41 | (197) | ||
|
| ----------- | ----------- | ||
| Tax credit on profit on ordinary activities | (35) | (258) | ||
|
| ____ | ____ | ||
5. Earnings per Share
The calculation of earnings per share is based upon the profit after taxation of £601,892 (2008: restated Loss £6,059,000) divided by the weighted average number of ordinary shares in issue during the year which was 158,337,737 (2008: 114,968,122). The weighted average number of ordinary shares used in the calculation of diluted earnings per share is 208,231,224 (2008: 114,968,122). This has been adjusted for the effect of potentially dilutive share options granted under the company's share option schemes and convertible loan notes issued.
An adjusted earnings per share and a diluted adjusted earnings per share, which exclude goodwill amortisation and other non-operating financial charges, have also been calculated to allow shareholders to gain a clearer understanding of the trading performance of the group. This has been computed as follows:
|
| Profit after tax £'000 | 2009 Weighted average no. of shares | Profit per share (pence) | Restated Loss after tax £'000 | 2008 Weighted average no. of shares | Restated Earnings per share (pence) |
|
|
|
|
|
|
|
|
| Earnings attributable to ordinary shareholders from continuing activities | 601 | 158,337,737 | 0.38p | (6,059) | 114,968,122 | (5.27)p |
| Dilutive effect of options & conversion | - | 49,893,487 | - | - | - | - |
| Diluted earnings per share for the year | 601 | 208,231,224 | 0.29p | (6,059) | 114,968,122 | (5.27)p |
|
|
|
|
| ______ | _______ | ___ |
|
|
|
|
|
|
|
|
As a result of the loss, as restated, made in the year ended 30 November 2008 the fully diluted restated earnings per share would be anti-diluted and thus is unchanged from the basic EPS.
6. Intangible assets
|
| Brand Value | Goodwill | Development costs | Total |
|
| £'000 | £'000 | £'000 | £'000 |
| Cost |
|
|
|
|
| At 1 December 2007 - as previously stated | - | 6,491 | 681 | 7,172 |
| Additions - restated overleaf | - | 888 | - | 888 |
| Disposed with subsidiary | - | (1,707) | (42) | (1,749) |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| At 30 November 2008 | - | 5,672 | 639 | 6,311 |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
|
|
|
|
|
|
| At 1 December 2008 | - | 5,672 | 639 | 6,311 |
| Additions on acquisition of subsidiary | 1,200 | 1,074 | - | 2,274 |
| Fully impaired and no longer in use | - | - | (639) | (639) |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| At 30 November 2009 | 1,200 | 6,746 | - | 7,946 |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| Amortisation and impairment |
|
|
|
|
| At 1 December 2007 | - | - | 126 | 126 |
| Disposed with subsidiary | - | - | (19) | (19) |
| Impairment charge | - | 2,950 | 532 | 3,482 |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| At 30 November 2008 | - | 2,950 | 639 | 3,589 |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 December 2008 | - | 2,950 | 639 | 3,589 |
| Amortisation | - | - | - | - |
| Fully impaired and no longer in use | - | - | (639) | (639) |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| At 30 November 2009 | - | 2,950 | - | 2,950 |
|
| ----------------- | ---------------- | ----------------- | ----------------- |
| Net Book Value |
|
|
|
|
| At 30 November 2009 | 1,200 | 3,796 | - | 4,996 |
|
| ______ | ______ | ______ | ______ |
|
|
|
|
|
|
| At 30 November 2008 | - | 2,722 | - | 2,722 |
|
| ______ | ______ | ______ | ______ |
|
|
|
|
|
|
| At 30 November 2007 | - | 6,491 | 555 | 7,046 |
|
| ______ | ______ | ______ | ______ |
Finance lease agreements
Included within the net book value of development costs of £nil is £nil (2008: £nil) relating to assets held under finance lease agreements. The impairment charged to the financial statements in the year in respect of such assets amounted to £nil (2008: £16,000).
Brand Value
On acquisition of Ether Ray Ltd the Directors judged the brand value of the software purchased on the basis of a multiple of the 'clean' annualised operating profit of the business at the end of June 2009. As at the 30 November 2009 the Directors see no justification for amortising that agreed valuation of £1.2m. The fundamental reasoning behind this is that the continuous investment being made in the software is expensed through the profit and loss as incurred.
Adjustment to carrying value of goodwill
On 5 November 2008 the Group acquired 100% of the share capital of Solcara Limited. At the time of the acquisition the fair value of the net assets acquired was estimated at £324,000 net liabilities.
Subsequent to the finalisation of the Group accounts for 30 November 2008 it was determined that Solcara had additional assets at completion as follows:
| Net liabilities acquired | Book value and fair value as initially recorded | Adjustment to Carrying value | Book value and fair value as restated |
|
| £'000 | £'000 | £'000 |
|
|
|
|
|
| Property, plant and equipment | 8 | - | 8 |
| Deferred tax asset | - | 217 | 217 |
| Trade and other receivables | 446 | 35 | 481 |
| Cost and cost equivalents | 15 | - | 15 |
| Trade and other payables | (745) | 14 | (731) |
| Bank borrowings | (48) | - | (48) |
|
| ───── | ───── | ───── |
|
| (324) | 266 | (58) |
| Goodwill | 1,154 | (266) | 888 |
|
| ───── | ───── | ───── |
| Cost of acquisition | 830 | - | 830 |
|
| ══════ | ══════ | ══════ |
|
|
|
|
|
The carrying value of goodwill brought forward has thus been reduced by £266,000. There are no associated adjustments to amortisation or impairment charges.
Impairment testing for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the group's operating companies which represent the lowest level within the group at which the goodwill is monitored for internal management accounts purposes.
The aggregate carrying amounts of goodwill allocated to each business segment are:-
|
| 2009 | Restated 2008 |
|
| £'000 | £'000 |
|
|
|
|
| Software as a service | 2,996 | 1,922 |
| IT Support Services | 800 | 800 |
| Other | - | - |
|
| ________ | ________ |
|
| 3,796 | 2,722 |
|
| ______ | ______ |
The value in use was determined by discounting the future cash flows generated from the continuing operation of the business segment and was based on the following assumptions:
·; Cash flows were projected based on actual operating results and a one year Group trading forecast as approved by management.
·; Cash flows were extrapolated for a further 4 years based on a revenue growth rate of 2% per annum in each year from 2 to 5, and an increasing cost base of 3% per annum.
·; The weighted average cost of capital used in the DCF calculation is 5%
The Directors concluded following this review that they can justify for each subsidiary the carrying value of the respective goodwill.
7. Equity-settled share based payments - prior year
On 23 October 2008, 23,300,000 warrants were granted to M Jackson, D Lowe and Elderstreet VCT plc, linked to their investment in the company at that time, at an exercise price of 2.75p per share. The share price at the time meant that no valuation charge was made in the 2008 accounts.
A condition of this warrant is that they are immediately exercisable. As a result the Black Scholes method is not applicable and the 'binomial' calculation has been used to assess their fair value.
The share option valuation charge resulting was £182,672 which has been dealt with as a prior year adjustment. The assumptions used in arriving at this valuation were:
Option pricing model used:- Binomial
Share price on the date of both grant and vesting - 2.25p
Expected volatility: - 50%
Expected life of the options:- 7 years
Expected dividend yield:- Nil
Risk free interest rate:- 3%
Leaver risk: - 0%
At 30 November 2009 the share price had risen above the option price giving rise to a deferred tax asset £89,705, an equity component of £64,131 and a credit to this year's taxation charge of £25,574.
8. Interest bearing loans and borrowings
|
| 2009 | 2008 |
|
| £'000 | £'000 |
|
|
|
|
| Convertible loan notes | 1,655 | - |
|
| ______ | ______ |
On 30 June 2009 £1,750,000 Convertible Loan Notes were issued. The Notes mature on 30 June 2014 and carry a coupon of 6% per annum, payable semi-annually until such time as they are repaid or converted in accordance with their terms. The holders of the Notes may convert all or part of the Notes held by them into new Ordinary Shares in the Company on delivery to the Company of a conversion notice, at 4 pence per share. The company reserved the right to redeem the Notes, in whole or part, at any time within 18 months of the date of issue, at a premium of 10%.
On 9 July 2009 the company issued a further £100,000 Convertible Loan notes with the same terms as those issued on 30 June 2009 except that their maturity date is 9 July 2014.
The net proceeds received from the issues of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the company, as follows:-
|
| 2009 |
|
| £'000 |
|
|
|
| Proceeds of issue of convertible loan notes | 1,850 |
| Equity component | (186) |
| Deferred taxation | (72) |
|
| ________ |
|
| 1,592 |
| Interest charged | 63 |
|
| ________ |
| Liability component at 30 November 2009 | 1,655 |
|
| ______ |
The equity component of £185,882 has been credited to equity reserve. The interest charged for the year is calculated by applying an effective rate of interest of 9.8% to the liability component for the 5 month period since the loan notes were issued. The liability component is measured at amortised cost. The difference between the carrying amount of the liability component at the date of issue and the amount reported in the balance sheet at 30 November 2009 represents the effective interest rate less interest paid to that date.
9. AGM date
It is intended that the AGM will take place at the company's registered office, 32 Bedford Row, London, WC1R 4HE, at 10.00 am on Wednesday, 14th April 2010.