Last checked at 28 Nov 2008 07:00
RNS Release
28 November 2008
KNOWLEDGE TECHNOLOGY SOLUTIONS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2008
Knowledge Technology Solutions PLC (AIM: KTS), provider of market information services and software to the finance sector, reports its audited results for the year ended 30 June 2008.
Financial and business highlights:
Turnover increased by 98% to £1.9m (2007: £1.0 m)
Group loss before tax of £1.7m (2007: £1.1m)
Acquisition of Arcontech Limited completed in September 2007
Arcontech contributed turnover of £1,037,177
MarketTerminal subscription business closed and assets sold
Focus on Arcontech business and proposed name change to Arcontech Group plc
Completed substantial fund raising in April 2008 amounting to over £1.1 million (net of expenses)
Major investment in Arcontech's CFD and spread betting AXE system
CFD and spread betting AXE system fully proven and live
Richard Last, Chairman of Knowledge Technology Solutions, said:
"It should not be underestimated the amount of management time and energy that has needed to be dedicated to dealing with the cessation of the MarketTerminal business and its ultimate sale. As a result it has not been possible to apply sufficient resources (mainly management time) to realising the many opportunities presented by the Arcontech business. This has now been rectified and already we are seeing notable increase in sales prospects and opportunities, some of which we are hopeful will result in orders in the near future.
The general level of uncertainty in the UK financial markets means the precise timing of such orders is even more difficult to predict. We view the future with renewed optimism and believe we have created a stronger platform for growth."
Enquiries, please contact:
| Andrew Miller | Knowledge Technology Solutions PLC | 020 7256 2300 |
| Richard Last | Knowledge Technology Solutions PLC | 01608 683 108 |
| Mike Coe/Marc Davies | Blue Oar Securities PLC | 0117 933 0020 |
Chairman's Statement
Commentary
The year ended 30 June 2008 was one of many challenges for Knowledge Technology Solutions. We have addressed these challenges and have emerged with a stronger business based on the Arcontech product set.
As reported in my interim statement we concluded that the MarketTerminal subscription business should be closed. We announced on 22 May 2008 the intended closure of this business on 29 August 2008 and the sale to Ionic Information Limited of certain of the MarketTerminal assets, including goodwill for an initial consideration of £50,000 and further consideration dependent on the number of clients transferred to the Ionic platform. The aggregate proceeds accounted for during the year were £137,500.
During the year the traditional KTS business, which largely comprises MarketTerminal contributed post tax losses of £1,337,363. In the period since its acquisition on 4 September 2007, Arcontech contributed post tax losses of £300,135.
Exceptional charges, which were reported in the interim statement earlier this year were also incurred, amounting to £222,062. These costs related to the termination of the Arcontech lease prior to moving to the KTS premises, and the settlement with our previous Chief Executive. These costs will not reoccur.
The Arcontech business, acquired in September 2007, contributed turnover of £1,037,177 in the financial year under review. Arcontech has been adversely affected by our focus in dealing with the MarketTerminal business, as well as delivering the Borse Berlin/Equiduct project, which with hindsight, was significantly under-specified by the previous management. These issues are now largely behind us and we are therefore able to concentrate on delivering the Arcontech CFD and spread betting AXE system and winning new business in this area, as well as extending market share in Arcontech's traditional distribution and contributions market space. To this end we have added to our sales resource in order that we are more able to identify and respond to the opportunities available in our markets.
Financing
We completed a fund-raising of £1,185,000 (net of expenses) on 3 April 2008. During the year under review the group sustained a significant net cash outflow from operations amounting to £1,681,851. This outflow has been reduced by the disposal of the MarketTerminal business. Once the benefits of focusing on the Arcontech business begin to be realised we expect to start generating cash, however, the timing of this will be dependant upon when orders are won and clients invoiced.
Management and Staff
I would like to thank all our employees for their hard work, commitment and dedication during what undoubtedly has been a period of change and uncertainty. Their continued support will contribute to the future success of the Company.
I would also like to thank Andrew Miller, who joined the board following the acquisition of Arcontech in September 2007, and became Chief Executive in December 2007. Without his unstinting hard work and focus the reshaping of the Group would have been significantly more difficult. I look forward to continuing to work with him to drive the refocused business forward to sustain profitability.
Change of Name
Reflecting the new focus of our business a resolution will be proposed at our forthcoming Annual General Meeting to change the name of the group to Arcontech Group plc.
Outlook
It should not be underestimated the amount of management time and energy that has needed to be dedicated to dealing with the cessation of the MarketTerminal business and its ultimate sale. As a result it has not been possible to apply sufficient resources (mainly management time) to realising the many opportunities presented by the Arcontech business. This has now been rectified and already we are seeing notable increase in sales prospects and opportunities, some of which we are hopeful will result in orders in the near future.
The general level of uncertainty in the UK financial markets means the precise timing of such orders is even more difficult to predict. We view the future with renewed optimism and believe we have created a stronger platform for growth.
Richard Last
Chairman
27 November 2008
Chief Executive's Review
This is my first review following the departure of my predecessor and my appointment as CEO earlier in the year.
It has been a period of great change and challenge. Nonetheless, we are emerging with a more focussed product range and see signs of forthcoming recovery in performance.
The implementation date for the much discussed Markets in Financial Instruments Directive (MiFID) passed without the anticipated increase in demand for technology and related services. For KTS/Arcontech however, MiFID provided the opportunity to work jointly on the real-time web portal for Borse Berlin's Equiduct, the new Pan-European stock exchange, which went live on 4th April. Although the return from this contract was disappointing, it has enabled us to develop additional direct exchange connectivity components and know-how that add to our capability in core business areas.
The withdrawal of KTS from the MarketTerminal business was expensive in terms of management time but nonetheless has been achieved within the provisions made. The associated staff and infrastructure reductions means that the Group will move forward with a lower cost base, focussed on the proven Arcontech product range and with the opportunity to incorporate the MarketTerminal intellectual property.
We have continued to invest and advance AXE, our on-line trading system platform. We now have broking clients running this platform live, in both spread betting and Contracts for Difference, servicing customers in Europe and the Middle East. The last report mentioned the Hichens Harrison contract win and I am pleased to report that their AXE system is now trading successfully.
Growth in the major retail margin trading firms has been strong and we watch with interest the moves from the London Stock Exchange and other markets towards on-exchange CFD trading. This could further stimulate demand for the margin trading technology that AXE provides as more firms see the benefits of offering margin products directly to their retail clients but also via brokers as a "White labelled" service, a strong feature of AXE. We look forward to developing the AXE product further to cater for the ongoing requirements of customers.
We continue to enhance Arcontech's traditional 'CityVision' products aimed at firms seeking both vendor independence and cost-efficiency, particularly for their vital market data contributions. We are engaged with several major investment banks and are encouraged that the 'credit crunch' does not appear to be impeding progress towards new business. We have added a raft of additional features in response to increasingly sophisticated requirements from existing customers and new prospects, maintaining CityVision's position at the forefront of its market. Recurring revenue remains strong, with no clients lost during the year.
I look forward to developing the opportunities for growth that we believe exist for the refocused Group, soon to be renamed Arcontech Group plc, in the coming year.
Andrew Miller
Chief Executive
27 November 2008
Consolidated Income Statement
For the year ended 30 June 2008
| Note | 2008 | 2007 | |||
| £ | £ | ||||
| Revenue | 2 | 1,939,604 | 981,745 | ||
| Distribution costs | (907,155 | ) | (1,043,738 | ) | |
| Administrative costs | (2,557,363 | ) | (1,129,359 | ) | |
| Administrative costs - exceptional | 3 | (222,062 | ) | - | |
| Operating loss | 4 | (1,746,976 | ) | (1,191,352 | ) |
| Finance income | 41,724 | 50,834 | |||
| Loss before taxation | (1,705,252 | ) | (1,140,518 | ) | |
| Taxation | 67,754 | - | |||
| Loss for the year | (1,637,498 | ) | (1,140,518 | ) | |
| Basic loss per share | 5 | (0.31 | )p | (0.45 | )p |
| Diluted loss per share | 5 | (0.31 | )p | (0.45 | )p |
Balance Sheets
As at 30 June 2008
| Group | Group | ||||
| 2008 | 2007 | ||||
| £ | £ | ||||
| Non-current assets | |||||
| Goodwill | 1,634,547 | - | |||
| Property, plant and equipment | 154,390 | 122,226 | |||
| Investments in subsidiaries | - | - | |||
| Total non-current assets | 1,788,937 | 122,226 | |||
| Current assets | |||||
| Trade and other receivables | 563,159 | 216,641 | |||
| Cash and cash equivalents | 1,082,604 | 1,473,451 | |||
| Total current assets | 1,645,763 | 1,690,092 | |||
| Current liabilities | |||||
| Trade and other payables | (1,052,521 | ) | (442,542 | ) | |
| Total current liabilities | (1,052,521 | ) | (442,542 | ) | |
| Net current assets | 593,242 | 1,247,550 | |||
| Net assets | 2,382,179 | 1,369,776 | |||
| Equity | |||||
| Called up share capital | 736,443 | 332,532 | |||
| Share premium account | 8,516,940 | 6,316,870 | |||
| Share option reserve | 45,920 | - | |||
| Retained earnings | (6,917,124 | ) | (5,279,626 | ) | |
| 2,382,179 | 1,369,776 |
Consolidated Cash Flow Statement
For the year ended 30 June 2008
| 2008 | 2007 | ||||
| £ | £ | ||||
| Net cash used in operating activities | (1,681,851 | ) | (1,254,885 | ) | |
| Investing activities | |||||
| Interest received | 41,724 | 50,834 | |||
| Acquisition of subsidiary, net of cash acquired | (784,523) | - | |||
| Purchases of plant and equipment | (75,178) | (8,971 | ) | ||
| Disposal of plant and equipment | - | 1,042 | |||
| Net cash (used in)/generated from investing activities | (817,977) | 42,905 | |||
| Financing activities | |||||
| Proceeds on issue of shares | 2,239,000 | 1,842,571 | |||
| Expenses paid in connection with share issues | (130,019 | ) | (119,018 | ) | |
| Net cash generated from financing activities | 2,108,981 | 1,723,553 | |||
| Net (decrease)/increase in cash and cash equivalents | (390,847 | ) | 511,573 | ||
| Cash and cash equivalents at beginning of year | 1,473,451 | 961,878 | |||
| Cash and cash equivalents at end of year | 1,082,604 | 1,473,451 |
Notes to the Financial Statements
For the year ended 30 June 2008
1. Basis of preparation
The financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") for the first time. The financial statements have been prepared in accordance with IFRS as adopted by the European Union applied in accordance with the provisions of the Companies Act 1985.
On the basis of current projections, confidence of future profitability and the availability of shareholder support if required, the Directors have adopted the going concern basis in the preparation of the financial statements.
The financial statements have been prepared under the historical cost convention.
2. Revenue
An analysis of the Group's revenue is as follows:
| 2008 £ | 2007 £ | ||||
| Financial information service, advertising and sponsorship | 902,427 | 981,745 | |||
| Software development and consultancy | 1,037,177 | - | |||
| 1,939,604 | 981,745 |
3. Administrative costs - exceptional:
| 2008 £ | 2007 £ | ||||
| Directors' remuneration - payment in lieu of notice | 135,315 | - | |||
| (in respect of Marc Pinter-Krainer, the former Chief Executive) | |||||
| Restructuring costs - office relocation expenses | 86,747 | - | |||
| 222,062 | - |
4. Operating loss for the year is stated after charging/(crediting):
| 2008 £ | 2007 £ | ||||
| Depreciation of plant and equipment | 47,580 | 44,722 | |||
| Loss/(profit) on disposal of fixed assets | 171 | (492) | |||
| Staff costs | 1,890,619 | 718,474 | |||
| Operating lease rentals - land and buildings | 55,300 | 55,300 | |||
| Research and development | 736,693 | 816,682 |
5. Earnings per share
| 2008 | 2007 | ||||||||
| £ | £ | ||||||||
| Earnings | |||||||||
| Earnings for the purpose of basic and diluted earnings per share being net loss attributable to equity shareholders | (1,637,498 | ) | (1,140,518 | ) | |||||
| No. | No. | ||||||||
| Number of shares | |||||||||
| Weighted average number of ordinary shares for the purpose of basic earnings per share | 520,890,310 | 254,113,141 | |||||||
| Number of dilutive shares under option | - | - | |||||||
| Weighted average number of ordinary shares for the purposes of dilutive earnings per share | 520,890,310 | 254,113,141 | |||||||
The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.
6. Acquisition of subsidiary
On 4 September 2007, the Group acquired 100 per cent of the issued share capital of Arcontech Limited. The initial consideration was satisfied with cash of £1,239,933 and the issue of 45 million shares of 0.1 pence. In addition, contingent consideration capped at £300,000 is payable in cash or shares if Arcontech Limited achieves turnover over £1.2 million and up to £2.2 million in the 18 month period immediately following the completion of the acquisition. The principal activity of Arcontech Limited is that of real-time software specialists. This transaction has been accounted for by the purchase method of accounting.
If the acquisition of Arcontech Limited had been completed on the first day of the financial year, Group revenues for the period would have been £1,897,578 and Group loss attributable to equity holders of the Parent would have been £1,663,416.
Arcontech Limited contributed £1,037,177 to the Group's revenue and £300,135 to the Group's loss after tax for the period from the date of acquisition to the balance sheet date.
7. Dividends
There were no dividends paid or proposed during the period (2007: Nil).
8. Post balance sheet events
On 29 August 2008 Knowledge Technology Services Limited terminated its MarketTerminal subscription service. The attributable operating loss for the year ended 30 June 2008, before unallocated overheads, is estimated to be £814,381.
9. Transition to IFRS
Knowledge Technology Solutions PLC reported under UK GAAP in its previously published financial statements for the year ended 30 June 2007. The transition to IFRS has not resulted in any impact on the equity, loss or cash flow statement at 30 June 2006 and 30 June 2007.
Cashflow statement
The Group's consolidated cash flow statements are presented in accordance with IAS 7. The statements present substantially the same information as that required under UK GAAP, with the following principle exceptions:
1. Under UK GAAP, cashflows' are presented under nine standard headings, whereas IFRS requires the classification of cash flows resulting from operating, investing and financing activities.
2. The cash flows reported under IAS 7 relate to movements in cash and cash equivalents, which include cash and short-term liquid investments. Under UK GAAP, cash comprises cash in hand and deposits repayable on demand.
10. Copies of this statement
Copies of this statement are available from the Company Secretary at the Company's registered office at 8th Floor, Finsbury Tower, 103-105 Bunhill Row, London, EC1Y 8LZ or from the Company's website at www.ktsplc.com.
11 . Annual General Meeting
The Annual General Meeting of Knowledge Technology Solutions PLC will be held at 8th Floor, Finsbury Tower, 103-105 Bunhill Row, London, EC1Y 8LZ on 24 December 2008 at 9 a.m.
It is expected that the Annual Report and Accounts for the year ended 30 June 2008 will be sent by post to all shareholders on 28 November 2008.