CBUY.L Regulatory News (CBUY)

11 Apr 2006 07:01

@UK PLC11 April 2006 Under embargo until 7:00am 11 April 2006 @UK PLC Maiden Preliminary Results for the year ended 31 December 2005 @UK PLC (AIM:ATUK.L), a leading provider of software solutions that facilitate eCommerce/eProcurement, today announces its maiden preliminary results for the year ended 31 December 2005. Highlights to April 2006 • Results in line with expectations following successful December 2005 IPO, raising £8m gross • eCommerce revenues up by 80% • Overall turnover up 21% to £1.5m (2004: £1.2m) • Strategically significant contract wins, including the Leeds Teaching Hospitals Trust, North Yorkshire County Council and East Renfrewshire • A member of the consortium delivering the Zanzibar Managed Service contract for the Office of Government Commerce • Staff numbers now doubled to 66, in line with stated strategy Commenting on today's announcement, Lyn Duncan, Managing Director, said: "This has been an extremely exciting and successful year for @UK. @UK hasdeveloped a seamless eCommerce solution, in line with the Government'srequirement for public sector eProcurement following the 2004 Gershon report.Based on the achievements in 2005, the Board is confident of the company'sability to deliver continued revenue growth during 2006 and to achieve furthercommercial milestones throughout the year." An analyst briefing will be held at the offices of Smithfield, 10 Aldersgate Street, London, EC1A 4HJ at 9.30 am today. For further information please contact: @UK PLC +44 (0) 118 963 7000Lyn Duncan Managing DirectorJohn Aiken Finance Director Shore Capital +44 (0) 151 600 3700Mike Sawbridge Smithfield +44 (0) 20 7360 4900Sara MusgraveTania Wild Notes to Editors: eCommerce can be defined as the buying and selling of products and services overthe internet. eProcurement is the particular process by which largeorganisations carry out their purchasing using eCommerce. @UK offers a uniquesolution within the field of eCommerce/eProcurement. Using its online network,public sector bodies such as local authorities, schools and hospitals andprivate sector enterprises can buy online from small to medium enterprises(SMEs), as well as larger suppliers. At the same time those suppliers generallyset up a trading website on @UK which can be used to sell online to otherbusinesses and even consumers worldwide. @UK is currently focused strongly onselling this approach to buyers throughout the public sector since this sectoroffers specific opportunities as a result of the UK Government's statedrequirements for eProcurement. Currently, there are over 1,000 public sector bodies spending over £100 billionannually on goods and services with around one million suppliers. These publicsector bodies have now been given specific performance targets in connectionwith eProcurement, and substantial sums have been invested by the Government ineCommerce platforms in both central and local Government. These projects form a core part of the 'Gershon' efficiency drive to save thepublic purse more than £20 billion annually by 2007/08. This drive followed thepublication in July 2004 of Sir Peter Gershon's report, 'Releasing resources tothe front line: Independent Review of Public Sector Efficiency'. In addition,the Government encourages public sector bodies to engage with local companiesand stimulate their adoption of eCommerce. The Directors believe that @UK is ideally positioned to experience significantgrowth as these public sector bodies put in place the necessary online linkswith their suppliers. @UK listed on AIM in December 2005, raising £8 million before expenses at anissue price of 60p. @UK is included in the Software and Computer Services Sector(9530). For further information please visit www.ukplc.net. CHAIRMAN'S STATEMENT IntroductionI am delighted to present my first report as Chairman and @UK's first report toshareholders as an AIM Listed company. Admission to AIMThe key event of the year was our successful float on AIM through Shore Capital.This was completed on 14 December 2005, with shares being placed at 60 pence pershare to raise £8 million before expenses for the Company. These funds will beused to finance the roll out of @UK's products and services nationwide as weexploit the many opportunities that exist within the fast growing eCommerce/eProcurement market. I am pleased to welcome all new investors. Financial ResultsDuring the year the Company delivered a strong financial performance. Resultsare in line with market expectations set at the time of the IPO. Turnoverincreased by more than 21% to £1,454,000, whilst overall eCommerce sales rose by80%. Loss before tax (before exceptional item) was £885,000 compared to £385,000in the previous year, the increase reflecting the increase in our cost base inpreparation for the successful roll-out of our products and services across thepublic sector. An exceptional goodwill write-off of £798,000 was incurred as a result of theacquisition of @Software PLC, necessary as part of the fundraising and Admissionto AIM. After taking account of this exceptional item the loss before tax forthe year was £1,684,000. BoardI joined the Board in May 2005 as Non Executive Chairman and was followed byfellow Non Executive Directors, Jo Connell and Mike Tobin, before the flotation.Jo and Mike have excellent credentials both within the technology and quotedcompany arena, and will be of great benefit to the Company as it embarks on itsstated strategy of rapid growth. It is the Board's intention to comply with the Combined Code, where practicablefor a company of @UK's size. On flotation we established an audit committee andremuneration committee. PeopleOn behalf of the Board, I thank all our employees for their enormouscontribution and effort during the year. The successful IPO gives us anunprecedented platform for future growth and our new share option schemeprovides all employees with the opportunity to share in our future success. Summary2005 has been a watershed year for @UK. eCommerce revenue grew by 80% whilst oursuccessful AIM Admission secured the investment needed to take us through ournext stage of growth. Our unique approach to online trading sees us in a strongposition to become the company of choice for providing eCommerce solutions tothe public and private sectors. Based on the achievements in 2005, the Board is confident of the company'sability to deliver continued revenue growth during 2006 and to achieve furthercommercial milestones throughout the year. Bernard R. FisherChairman11 April 2006 MANAGING DIRECTOR'S REVIEW eCommerce/eProcurement -A Major Opportunity @UK has developed a unique approach to allow transactions via eCommerce betweenbuyers such as public sector bodies - local authorities, schools and hospitals,and corporate enterprises, and sellers such as small to medium enterprises(SMEs) as well as larger companies. Our solution is very well received by publicbodies as it has significant Local Economic Development benefits as well asallowing authorities to purchase (by eProcurement) in a cost-effective,paperless way. At this time the Company is focused strongly on the buyers withinthe public sector although our solution offers benefits to any arena and anytype of procurement e.g. buying services as well as goods anywhere in the world. Currently, there are over 1,000 UK public sector bodies spending over £100billion annually on goods and services from around one million suppliers - allof whom may be considered as potential customers for @UK. These public sectorbodies have been given specific targets in connection with eCommerce.Substantial sums have been invested by the Government in eProcurement platformsfor both central and local Government. Without effective and efficientconnection to the supplier base, however, Government Purchase to Pay systemswould be largely ineffective. These eProcurement projects form a core part of the 'Gershon' efficiency driveto save the public purse more than £20 billion annually by 2007/08. Thisfollowed the publication in July 2004 of Sir Peter Gershon's report, 'Releasingresources to the front line: Independent Review of Public Sector Efficiency'. Inaddition to increased efficiency, the Government strongly encourages publicsector bodies to engage with local companies. @UK is a leading provider of theselinks. The Directors believe that @UK is positioned to experience significant growth asthese public sector bodies put in place the link with their suppliers. What sets @UK apart in the market is that we have a solution which is used byboth the public sector body or large private enterprise as the buyer (our"buyside" customers), and their suppliers (our "supply-side" customers);providing seamless, user friendly eCommerce for all sizes of supplier, fromsmall local providers to multinational companies. The Successful @UK Business Model Our strategy is to target buyers in the public sector, signing them up ascustomers before turning our attention to their suppliers. Once set-up work andtraining has been completed, we then work with the buyside customer to adopttheir suppliers (which may be several thousand in number) onto the @UK eCommerceplatform. This means that buyers can use our network to purchase from theirsuppliers, but one of the attractive features of the system is that those samesuppliers are also immediately available to be accessed by any other buyer onthe network at no extra charge. @UK charges set-up and annual fees to both its buyside and supplyside customersbut ongoing transaction fees are not charged. We believe that this fixed chargeis also attractive to our clients, especially the smaller companies in that theycan budget without having to provide for any variation in costs. It is on thisbasis that we believe that as take up of the @UK solution grows, the businesswill have a large, recurring and stable revenue base.@UK works closely with partners who have important links to our clients. Theseinclude Sage, which has a pre-eminent position in providing financial softwarefor the SME market place, and Capita Education Services, which has a dominantposition in the supply of management information systems to schools in Englandand Wales. @UK charges set-up and annual fees to both its buyside and supplyside customers.Transaction fees are not charged. As take up of the @UK solution grows, webelieve the business will have a large recurring revenue base. Operational Overview eProcurement - I am pleased with the progress made in 2005. During the year weworked hard to ensure that @UK is seen as the leading supplier of eProcurementservices to the public sector, and our aim is to become in turn the company offirst choice for providing eCommerce solutions to its supplier base.We have made and continue to make significant progress across all sectors andare now working with 72 Public Sector Organisations: Local Authorities - we started the year with two client authorities, and are nowpleased to report that a total of 48 authorities have adopted the @UKeProcurement solution as their chosen approach. Our geographic spread nowextends from Dorset and Devon in the South West, to Maidstone in the South Eastand as far north as North Yorkshire and Durham in the North East. Since the yearend, East Renfrewshire in Scotland has adopted our solution. We still have manyfurther opportunities in the pipeline. Central Government - During the year the Office of Government Commercecontracted with a consortium led by PA Consulting for the provision of theZanzibar Managed Service, the Government's new public sector eProcurement andmarketplace system. @UK is a key member of the consortium, with the lead role insupplier adoption, enabling suppliers to engage with the public bodies throughan eCommerce platform. I am very pleased to tell you that we expect this to leadto further major opportunities for @UK. Zanzibar announced its first majorcontract with the Department for Work and Pensions (DWP) in February, andcurrently has 22 Public Sector clients, both Central Government and NHS. National Health Service - During the year we have worked successfully with Sageon a project at University Hospital Birmingham. This project marked our entryinto the National Health market. This has been consolidated since the year endby winning a contract to work with the Leeds Hospital Group, the largest NHSTrust in the UK. Education - We continue to promote our initiative in this area and were pleasedwhen nine Greater Manchester Boroughs selected us. We are the preferred providerof an electronically based schools purchasing information service. Currently wehave in excess of 2,000 schools registered on our system. This gives us 10% ofthe UK schools market and provides us with the critical mass to adopt educationsuppliers onto our system. Private Sector - While not a target sector for us at present, 2005 saw our firstprivate sector buyside customer, Johnson Service Group. Suppliers - To attract buyside customers it is important to be able todemonstrate that @UK has a range of large suppliers on our platform. During theyear, we are pleased to report that Dell, Rentacrate, Cannon Hygiene and OfficeDepot (Viking Direct), all signed up on the @UK eCommerce platform. During thefirst quarter this has remained our principal focus and we are now moving to aphase of mass supplier adoption. Company Formations - Our company formation services business grew by 9% in theyear. Pricing for basic on-line formation services continues to be underpressure. We intend to develop this business and are currently working toenhance our product offerings. We intend to provide a more complete businessstart up and support service. This will increase the potential for the upsell ofeCommerce solutions whilst providing additional services to many of our microsuppliers to the Public sector. Marketing - Throughout 2005 marketing efforts were largely directed at buildingawareness of @UK within the public sector. By attending industry exhibitions andtargeting relevant press, we endeavour to ensure that @UK has a high profile andis viewed as the leading supplier of eCommerce services to the public sector. Tothis end we believe that our close working relationships with Sage and Capitaand membership of the Zanzibar consortium has contributed greatly to this aim. People - since our IPO, we have invested in recruitment and training and ourstaff numbers have more than doubled to 66. In addition we have created anImplementation and Training Centre, to drive significant supplier adoption inline with our strategy. Financial Results Turnover for the year was £1,454,000, an increase of 21% over the previous year(2004: £1,203,000). Web and ecommerce sales rose by 80% to £372,000. Grossmargin fell from 61% to 47% reflecting lower margins on Company Formation sales,and the cost of pay-per-click advertising of Company Formation products. Operating expenses before exceptional item increased from £1,101,000 to£1,593,000. The rise reflects the increase in the cost base in preparation forthe roll-out of our products and services across the UK public sector. As part of the preparation for our pre-IPO and IPO fundraisings it was necessaryto acquire @Software PLC and its subsidiary Software Limited, which had a largeholding in @UK shares. This also consolidated the ownership of @UK'sintellectual property. The acquisition gave rise to goodwill of £798,000. It hasbeen provided against in full in these accounts as an exceptional item. After taking account of this exceptional item the loss before tax for the yearwas £1,684,000 compared to £385,000 in the previous year. The company had a number of share issues in the year to raise funds for thedevelopment of the business, most notably the IPO which raised £8 million beforeexpenses and a pre-IPO fundraising which raised £2.2 million before expenses. Weended the year with net funds of £8,553,000. Transition to International Accounting Standards As an AIM listed company @UK will adopt IAS for our financial statements for theyear ending 31 December 2007. Our IAS evaluation is ongoing. Outlook This has been an extremely exciting and successful year for @UK. Thanks to thesuccessful placing and AIM flotation by Shore Capital in December last year, weare now in a strong position with the financial resources in place to deliverwhat we believe is the premier eProcurement solution to both the public andprivate sectors. @UK has developed a solution which is entirely compatible toboth buyers and suppliers and with the Government requirement for the publicsector to adopt an eProcurement solution following the Gershon report, we lookforward to rapid and sustained growth over the coming years. Since obtaining that funding we have continued to consolidate our position withour buyside clients which now number 72 across Local Authorities, NHS andZanzibar. Simultaneously we have been putting in place the additional resourcesneeded to allow us to start the major push on supplier adoption for all of ourbuyside customers. The Board expects this investment to be reflected in a steadygrowth in turnover through the rest of the year. We will continue our efforts to recruit buyside customers. Further progress hasbeen made already, most notably, with our first authority in Scotland, EastRenfrewshire, and another reference site in the NHS, the Leeds TeachingHospitals Trust, the largest NHS Trust in the UK. I am looking forward to the challenges of the next year and the opportunity thatexists to substantially grow our business. Lyn Duncan Managing Director11 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2005 Notes 2005 2004 £ £TURNOVER 3 1,454,073 1,202,924 Cost of sales (764,186) (473,958) -------- ---------Gross profit 689,887 728,966 Administrative expenses (1,593,323) (1,100,822) -------- ---------OPERATING LOSS BEFORE EXCEPTIONAL ITEM (903,436) (371,856) Exceptional goodwill write-off 2 (798,408) - -------- ---------OPERATING LOSS (1,701,844) (371,856) Interest receivable 27,510 - Interest payable (9,549) (12,889) -------- ---------LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,683,883) (384,745) Taxation 4 - - -------- ---------LOSS ON ORDINARY ACTIVITIES AFTER TAXATION,RETAINED (1,683,883) (384,745) ======== ========= LOSS PER SHARE 5 Basic and diluted 8.5p 2.2p The turnover and operating loss for the year arises from the company'scontinuing operations. No separate Statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the Profit and Loss Account. GROUP BALANCE SHEET31 December 2005 Notes 2005 2004 £ £FIXED ASSETSTangible Assets 114,067 10,564Investments - - ---------- --------- 114,067 10,564 ---------- --------- CURRENT ASSETSDebtors 226,839 123,684Cash at bank and in hand 8,644,345 4,360 ---------- --------- 8,871,184 128,044 CREDITORS: Amounts falling due within oneyear (1,079,796) (774,198) ---------- --------- NET CURRENT ASSETS/(LIABILITIES) 7,791,388 (646,154) ---------- ---------TOTAL ASSETS LESS CURRENT LIABILITIES 7,905,455 (635,590) CREDITORS: Amounts falling due within oneyear (79,167) (91,667) ---------- ---------TOTAL NET ASSETS/(LIABILITITES) 7,826,288 (727,257) ========== ========= CAPITAL AND RESERVESCalled up share capital 7 375,654 180,677Share premium account 8 10,113,881 1,646,144Other reserve 8 582,174 -Profit and loss account 8 (3,245,421) (2,554,078) ---------- ---------EQUITY SHAREHOLDERS' FUNDS 9 7,826,288 (727,257) ========== ========= CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2005 Notes 2005 2004 £ £NET CASH OUTFLOW FROM OPERATING ACTIVITIES 10a (1,307,510) (28,994) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (5,747) (6,889) TAXATION (25,012) - CAPITAL EXPENDITURE (120,755) (14,153) ACQUISITIONS (125,918) - ----------- ---------CASH OUTFLOW BEFORE MANAGEMENT OF LIQUIDRESOURCES AND FINANCING (1,584,942) (50,036) MANAGEMENT OF LIQUID RESOURCES (7,567,974) - FINANCING 10,224,927 62,500 ----------- ---------INCREASE IN CASH 10b 1,072,011 12,464 =========== ========= Notes to the Preliminary Statement 1 Accounting policies and basis of preparation The financial information set out in this preliminary announcement does notconstitute the Group's statutory accounts for the years ended 31 December 2005or 2004, but is derived from those accounts. The statutory accounts for the yearended 31 December 2004 have been delivered to the Registrar of Companies, andthose for the year ended 31 December 2005 will be delivered to the Registrar ofCompanies following the Annual General Meeting. The auditors have reported onthose accounts; their reports were unqualified and do not contain statementsunder Companies Act 1985 sections 237(2) or (3). The Financial Information is presented on the basis of the accounting policiescontained in the Financial Statements for the year ended 31 December 2004.Accounting policies adopted in the year in respect of the basis ofconsolidation, goodwill on acquisition and share based payments are set outbelow. Copies of the Group's audited statutory accounts for the year ended 31 December2005 will be dispatched to shareholders and the AIM team shortly. Copies willalso be available to the public at the Company's office at Jupiter House,Calleva Park, Aldermaston, Berks RG7 8NN. Basis of consolidationThe consolidated profit and loss account and balance sheet include the financialstatements of the Company and its subsidiary undertakings made up to 31 December2005. The results of subsidiaries sold or acquired are included in the profitand loss account up to, or from the date control passes. Intra group sales andprofits are eliminated fully on consolidation. GoodwillGoodwill arising on acquisitions, representing the excess of the considerationgiven over the fair value of the identifiable assets and liabilities acquired,is capitalised and written off on a straight line basis over its useful economiclife of a maximum of 20 years, on an acquisition by acquisition basis. Provisionis made for any impairment in the value of goodwill.Share optionsThe issue of shares under employee share schemes is charged to the profit andloss account over the vesting period. The charge is determined by reference tothe fair value of the options issued at the time of grant, and the effect of anynon-market vesting conditions such as option lapses. An option may lapse if, forexample, an employee ceases to be employed by @UK before the end of the vestingperiod. Estimates of future such employee departures are taken into account whenaccruing the cost. 2 Exceptional itemThe exceptional item represents the provision for impairment, in full, of thegoodwill which arose on the acquisition of @Software PLC in the year (see note6). 3 Segmental analysis 2005 2004 £ £Company formation services 1,081,607 995,924Web and ecommerce services 372,466 207,000 ---------- --------- 1,454,073 1,202,924 ---------- --------- In the opinion of the Directors, it is not possible to analyse profit onordinary activities before tax or net assets by class of business due to theintegrated nature of the Company's operations. Such analysis is therefore notpresented. All turnover arose in the United Kingdom. 4 Taxation 2005 2004 £ £Taxation charge for the year - - ---------- --------- Factors affecting tax for the year: Loss on ordinary activities before taxation (1,683,883) (371,856) ---------- --------- Loss on ordinary activities before taxation multipliedby standard rate of UK corporation tax of 30.00%(2004: 30.00%) (505,165) (111,557) ---------- ---------Effects of:Expenses not deductible for tax purposes 340,995 2,093Capital allowances less than/(in excess) ofdepreciation (10,845) (2,861)Carry forward of tax losses 175,015 112,325 ---------- --------- 505,165 111,557 ---------- --------- Current tax charge - - ---------- --------- The group has estimated tax losses of £3,664,000 (2004: £3,081,000) availablefor carry forward against future trading profit. No deferred tax asset has beenrecognised in respect of the losses given the uncertainty regarding availablefuture taxable profits. 5 Loss per share The basic and diluted loss before tax after adjusting for the exceptional itemis 4.4p (2004: 2.2p). The calculations for loss per share are based on the weighted average number ofshares in issue during the year, 19,920,248 (2004: 17,842,849) and the followingloss: 2005 2004 £ £Unadjusted earningsLoss on ordinary activities after tax (1,683,883) (384,745)Add back exceptional write-off of goodwill 798,408 - ---------- ---------Adjusted earnings (885,475) (384,745) ---------- ---------The share options and warrants are non-dilutive as they would not increase theloss per share in the year. 6 Acquisition On 25 October 2005 the Company acquired 100% of the issued share capital of@Software PLC for a consideration comprising 3,137,687 ordinary shares of 1peach in the company. The fair value of the consideration was £1,411,959. Inaccordance with sections 131 and 133 of the Companies Act 1985, the Company hastaken no account of any premium on the shares issued and has recorded the costof the investment at the nominal value of the shares issued. The resultingdifference on consolidation has been credited to other reserves. The following table sets out the book values of the identifiable assets andliabilities acquired and their fair value to the Group: Book value Revaluation Fair value £ £ £ Investment (3,137,687 shares in @UKPLC) 615,408 796,551 1,411,959Other debtor 25,000 - 25,000Overdraft (125,918) - (125,918)Taxation (90,795) - (90,795)Accruals and deferred income (17,594) - (17,594)Amounts owed to related party (298,236) - (298,236)Amounts owed to @UK (290,865) - (290,865) ---------- --------- ----------Net assets (183,000) 796,551 613,551 ---------- --------- Goodwill 798,408 ---------- 1,411,959 ----------Satisfied by:Shares issued 1,411,959 ---------- The acquisition of @Software PLC was carried out as part of the arrangements forthe pre-IPO and IPO fundraisings and also to ensure that ownership of @UK'sintellectual property was consolidated (@Software PLC and Software Limitedhaving carried out a substantial part of the research and development for @UK).A provision for impairment has been made for the full value of the goodwill. 7 Share Capital 2005 2004 £ £Authorised:250,000,000 (2004: 20,000,000) ordinary shares of 1p each 2,500,000 200,000 --------- --------- Allotted, issued and fully paid:37,565,394 (2004: 18,067,726) ordinary shares of 1p each 375,654 180,677 --------- --------- On 1 November 2005 677,778 "A" ordinary shares of 1p each were issued at 90peach. Convertible loan notes were issued with a value of £500,000 on 25 October2005 with a further £1,090,000 being issued on 1 November 2005. On 25 October 2005 3,137,687 ordinary shares were issued as consideration forthe acquisition of @Software PLC and its wholly owned subsidiary SoftwareLimited (see note 6). Software Limited's principal asset was 3,137,687 ordinaryshares in @UK. On 14 December 2005 12,500,000 ordinary shares were issued at 60p in the placingand admission to AIM. Additionally 833,333 shares held by Software Limited wereplaced at 60p per share. Immediately prior to the Admission to AIM theconvertible loan notes converted into 3,533,333 ordinary shares and the 'A'ordinary shares converted into 1,355,556 ordinary shares. On 20 December 2005 2,304,354 shares, being the balance of the shares held bySoftware Limited, were purchases at 48p per share and immediately cancelled.This purchase was made to ensure that the Group no longer had any holding in theCompany's shares. In addition during the year another 1,275,446 shares were issued at pricesbetween 50p and 90p. Other than the issue to acquire @Software PLC, the shares were issued to raisefunds to develop the Company's business. At 31 December 2005 under the @UK Share Option Scheme options had been grantedover 750,000 Ordinary shares at an exercise price of 45p per share. The optionsare exercisable between December 2008 and December 2015. At the time of grantthe market value was 60p per share. Other than these options there were nooptions granted, exercised or cancelled in the year. The Company has granted to Shore Capital a warrant to subscribe for 375,654Ordinary Shares at 60p per share. The warrant is exercisable, in whole or inpart, at any time for a period up to 14 December 2008. 8 Reserves Share premium Other reserve Profit and loss account £ £ £ At 1 January 2005 1,646,144 - (2,554,078)Shares issued in theyear 10,419,308 1,380,582 -Expenses of equityshare issues in theyear (862,990) - -Purchase of ownshares (1,088,581) - -Retained loss forthe year - - (1,683,883)Goodwill written-offin year - (798,408) 798,408Gain on placing andon purchase of ownshares (note a) - - 194,132 ---------- --------- ---------At 31 December 2005 10,113,881 582,174 (3,245,421) ---------- --------- --------- Note (a) A value of 45p was attributed to the shares in @UK on the acquisitionof Software Limited (see note 6). The gain which arose on the placing of sharesat 60p and the repurchase and cancellation at 48p has been taken to reserves. 9 Reconciliation of movements in shareholders funds 2005 2004 £ £Loss for the year (1,683,883) (384,745)Shares issued in the year 11,154,920 75,000Purchase of own shares (1,111,624) -Gain on placing and purchase of own shares 194,132 - --------- ---------Net addition/(depletion) to shareholders' funds 8,553,545 (309,745) Opening shareholders' funds (727,257) (417,512) --------- ---------Closing shareholders' funds 7,826,288 (727,257) --------- --------- 10 Notes to the cash flow statement a. Reconciliation of operating loss to net cash outflow from operatingactivities 2005 2004 £ £Operating loss (1,701,844) (371,856)Depreciation 17,252 7,038Write-off of goodwill 798,408 -Loss on disposal of fixed asset - 2,123Increase in debtors (376,312) (77,903)(Decrease)/Increase in creditors (45,014) 411,604 --------- ---------Net cash outflow from operating activities (1,307,510) (28,994) --------- --------- b. Reconciliation of net funds/debt 2005 2004 £ £Increase in cash for the year 1,072,011 12,464 Cash outflow from management of liquid resources 7,567,974 -Cash outflow from decrease in net debt 12,500 12,500 ---------- ---------Change in net debt arising from cash flows 8,652,485 24,964 Net Debt at 1 January (99,807) (124,771) ---------- ---------Net Funds at 31 December 8,552,678 (99,807) ---------- --------- This information is provided by RNS The company news service from the London Stock Exchange