Corero Network Regulatory News (CNS)

29 Mar 2007 07:01

Corero PLC29 March 2007 Corero plc("Corero" or "the Group") Preliminary Results for the year ended 31 December 2006 Corero PLC, the specialist provider of software solutions to the banking &securities and education markets, announces its preliminary results for the yearended 31 December 2006. All comparisons are for the eight months ended 31st December 2005. • Record revenues of £6.3 million (2005 £2.1 million) • Financial Markets Division increased revenues to £3.9 million (2005 £0.8 million) • Business systems sales grew to £2.4 million (2005 £1.3 million) • Record adjusted pre-tax profits of £0.4 million (2005: loss £0.8 million) • Both divisions profitable • Adjusted Earnings per share of 1.1 p (2005 loss 2.9 p) • 2005 acquisitions of Blue Curve and Eclipse Learner Systems were successfully integrated and performed above expectations • First US sales for Financial Markets Division • 24 new clients added, taking the total to 288. • Annual recurring revenue base increased by 47% to £2.8 million at 31 December 2006 • Previously reported delayed large license agreement anticipated during the first half of 2007 Jarlath McGee, Chief Executive, said: "It has been a year of significant change with the acquisitions of Blue Curveand Eclipse and we are delighted by the overall performance of the business. The Group now operates from a much broader base with significant recurringrevenues, creating a much stronger financial position. We expect the momentum built in 2006 to continue and our sales pipeline to growin size and quality. We plan to open our first overseas office in New York inthe first half of 2007 to support our existing US revenue stream and to enableus to increase our presence in the large North American market with minimumexposure. We anticipate further sales there in 2007 and beyond." 29 March 2007 Enquiries: Corero PLC Tel: 020 7392 1300Jarlath McGee, Chief Executive John East & Partners Limited Tel: 020 7628 2200John East College Hill Tel: 020 7457 2020Matthew Smallwood/Jamie Ramsay About Corero Corero designs, develops and delivers market leading software products forfinancial institutions through its Financial Markets Division, and business andeducation markets through its Business Systems Division. Radica is the European leading software system that addresses the needs of assetservicing operations for the global banking & securities sector. By fullyautomating the life-cycle of corporate actions, dividends, including taxationand new issues and placings, Radica reduces the serious operational risk ofmissing or miscalculating corporate events. This area of operations hastraditionally been very manual with all the risk and cost associated with suchprocesses. Radica is designed for a global market and can address the needs offinancial institutions from Europe, North America or Asia Pacific. Blue Curve software allows organisations to vastly improve the production anddistribution of their financial research. It collates and presents complexfinancial data efficiently and quickly for analysts to make informed opinions onmarket conditions and trends. It speeds up the process of content creation,content approval and publishing. And it also makes sure that each piece ofcontent conforms to the correct regulatory requirements, and that it gets sentto the right people, using the right method and at the right time. ICAEW accredited, Resource Financials, is at the core of the Corero suite ofbusiness applications. Also featured are solutions for eProcurement, ProjectCosting, HR & Payroll, Continuing Professional Development and LearningManagement. Together with Workflow and Web Applications, covering Reporting,Timesheets, Expenses and Requisitions, there are over 60 highly integratedmodules offering large and small enterprises modern and dynamic businesssolutions. Eclipse Learner Management system manages the students, tutors and processeswithin Further and Higher Education environments by electronically capturing theinformation required throughout the "learning lifecycle" and to satisfyGovernment reporting requirements and, most importantly, secure the funding uponwhich Colleges depend. Chairman's Statement I am pleased to report that Corero has achieved record results for the year bothin terms of revenue and profit. All Divisions and product lines were profitable,with Blue Curve, now a part of Financial Markets Division, doubling its revenuesand the Business Systems Division more than doubling its profit contribution.The acquisitions of Eclipse and Blue Curve have been very successful and havegiven the Group a platform for continuous and sustainable growth. These acquisitions, combined with organic growth across the Group, have resultedin a transformation of the business and a significant restructuring of ourtrading operations. To recognise these changes and to reposition it for the nextphase of its development, the name of the Company was changed to Corero plc fromMondas plc with effect from 27 February 2007. Results For the year ended 31 December 2006, the Group reported record revenues of £6.3million (eight months ended 31 December 2005: £2.1 million). Our adjusted profitbefore tax was £0.4 million (eight months ended 31 December 2005: loss £0.8million), with the turnaround of £1.2 million due to strong revenue performancein the financial sector most notably with Blue Curve more than doubling itsrevenues compared to 2005. The Group took on 24 new customers in the year, aswell as 2 major cross sales of new products to existing users in the financialsector. The Business Systems division produced strong profits from its soliduser base, with the Eclipse product line moving from break even in 2005 to asignificant operating profit in 2006. Our annualised support base increased by47% to £2.8 million at 31 December 2006. Our earnings per share based on adjusted pre tax profit were 1.1 pence (eightmonths ended 31 December 2005: loss 2.9 pence). The improved trading and successful integration of acquisitions has allowed theGroup to benefit from positive free cash flows of £430,000. This has lead to amuch improved working capital position at the year end. This, when combined withthe August 2006 variation of the Convertible Unsecured Loan Stock ("CULS"), hasgiven the Group its strongest ever financial position. Business model and strategy. Our strategy is one of strong organic growth from our financial markets productson a global basis and to underpin this by increasing recurring revenues acrossboth divisions. We will augment this with appropriate acquisitions which offerexciting growth opportunities and deliver shareholder value. Staff On behalf of the board, I would like to take this opportunity to thank our stafffor their efforts in producing these excellent results, and I look forward toworking with them over the next few years as we realise the true potential ofthis business. Outlook The much improved financial position of the Group, its strong increase in newclients, its recurring annual revenues and the proven global capability of itsproducts put Corero in a position to deliver strong results in 2007 and beyond.In our trading update on 3 January 2007, we referred to the slippage of a largelicense extension agreement from an existing customer, which arose due to aprocurement delay. We expect this agreement will augment the first half of2007's performance. In summary, I am pleased to report Corero has achieved record results for theyear both in terms of revenue and profit, resulting in a much improved financialposition. The acquisitions of Eclipse and Blue Curve have been very successfuland we now have a platform for continuous and sustainable growth which leads usto view the Group's future with optimism. Peter Waller Chairman 29 March 2007 Chief Executive's Report Overview I am delighted with the performance of all divisions this year. It has been ayear of significant change in the business with the acquisitions of Blue Curveand Eclipse adding greatly to the Group through their customers, their productsand their people. Our international business has grown significantly. We nowservice clients in the West and East Coasts of North America, continentalEurope, Moscow, South Africa and Singapore. Our rebranding has brought together all of the Group under one new set of valuesand identity, while retaining the very strong branding of the products withineach of our divisions. Following this restructuring, we now have two operatingdivisions; Financial Markets Division and Business Systems Division. FinancialMarkets comprises the Blue Curve and Radica product lines and is focussed onResearch Management and Asset Servicing solutions. Business Systems Divisioncomprises the Eclipse and Resource product lines and is focussed on the publicsector, in particular the education market. During 2006 we won 24 new clients and now support 288 customers in total. WithBlue Curve, we achieved sales to our first US clients and with Radica CAPS, wewere selected to provide a global income processing system to one of the world'slargest investment banks. We now support clients across four continents and aremoving towards becoming a truly global provider of complex products to expandingmarkets. Our commitment to our customers has been rewarded with very strong revenues fromour user base and our focus on sales has seen our customer base increase by 24to 288. Financial Markets Division This division has seen the greatest change with the acquisition of Blue Curve.Divisional revenues have increased from £0.8 million in 2005 to £3.9 million,including almost £2.0 million from Blue Curve, more than double its 2005revenues. Annual recurring revenues have increased from £0.5 million at thestart of the year, to £1.2 million at the balance sheet date. The divisionincreased its number of customers from 6 to 22, with 8 new Blue Curve and 2 newRadica CAPS clients joining the user base which was also enlarged with theacquisition of Blue Curve. All financial markets clients have contracted for additional licences orservices which clearly points to a very satisfied customer base. Several largeBlue Curve licence renewals, including ING and Evolution, are testament to theacceptability of our products. Our investment in Version 4 of Radica CAPS hasallowed us to deliver a fully integrated system to Panmure Gordon in less than12 weeks and has ensured the selection of Corero as the global platform forincome processing in one large investment bank. We have increased our headcount in this division. This is due to the strong BlueCurve business and an increasing pipeline of opportunities across both products.Our internal estimates and those of the Celent report, (Celent is anindependent consultancy focussed on the banking sector) show that the potentialmarkets for our key products are forecast to be worth approximately $1 billionbetween now and 2010, and I believe that we have the products and the people tocapitalise on these growing markets. The business drivers remain the same. Thesedrivers are reduction of operational risk, growing compliance demands and thereduction of cost, all of which produce a demand for automation within ourtarget customers. Basel II and MiFID remain strong drivers for better systemsand our products will help our customers achieve the level of automationrequired. We are seeing increasing interest in the Blue Curve product from North Americaand our plan for a New York office will ensure that we capitalise on this whileit will also service our current revenue stream from existing US clients. Itwill also facilitate the global roll out of the global income project at one ofour large investment banking client and at the same time increase theacceptability of the Radica CAPS product to our other global prospects. Business Systems Division The acquisition of Eclipse has helped increase the revenues of this divisionfrom £1.3 million in 2005 to £2.4 million this year. Divisional contribution hasincreased from £0.1 million to £0.6 million. At the year end, annual recurringrevenues from support contracts were £1.5 million. The division has 266 clients,up from 250, and the education sector now accounts for over 60% of the user basewith 154 education sector clients. City Academies represent an emerging complementary market within the educationsector, and of the 16 new education clients, 6 were City Academies. We continueto see strong brand loyalty from our customers in this division which isreflected in the level of repeat business and low attrition rate. This hascontributed greatly to the fact that 75% of Group revenues have come from ourclients who were with us at the start of the year. We continue to invest in product development and are in the first stages of thedevelopment of a new Learner Management System (LMS) which will provide anupgrade path for current users of our existing Resource LMS and Eclipse LMSproducts. Future We expect the momentum built in 2006 to continue and our sales pipeline to growin size and quality. We plan to open our first overseas office in New York inthe first half of 2007 to support our existing North American revenue stream.This will enable us to increase our presence in the large North American marketwhere we anticipate further sales in 2007 and beyond. We expect this operationto be break-even by the end of the year, minimising any exposure. We willcontinue to develop our products to maintain their market leadership positionand plan to hire additional sales and delivery staff to take advantage of ourgrowing opportunities. Jarlath McGee Chief Executive 29 March 2007 Chief Financial Officer's Report Financial Performance For the year ended 31 December 2006, the Group reported adjusted profits beforetax, adjusted for goodwill amortisation, restructuring costs, notional non-cashinterest and share option expense, of £408,000 compared to a loss of £772,000for the eight months ended 31 December 2005. Group revenues increased significantly to £6,294,000 (eight months ended 31December 2005: £2,091,000), driven by the recent acquisitions and by organicgrowth across the Group. Approximately 75% of our revenues came from existingusers, demonstrating the acceptance of our products and the high level ofcustomer satisfaction we enjoy. Strong growth was experienced in the Financial Markets Division, where revenuesgrew to £3,873,000 (eight months ended 31 December 2005: £774,000). Revenues of£1,968,000 arose from the acquisition in January 2006 of Blue Curve; an increaseof 223% on its revenues for the year ended 31 December 2005 of £883,000. BlueCurve generated significant licence revenues, both from sales to new customersand increasing commitments by existing customers. Radica revenues were£1,905,000 (eight months ended 31 December 2005: £774,000) with growth comingfrom 2 new licences and increased delivery of services into existing customers.Business Systems Division revenues grew to £2,420,000 (eight months ended 31December 2005: £1,317,000), with approximately £500,000 of this arising fromEclipse, which was acquired in October 2005. Contracted annual licence and support revenues have increased to approximately£2,800,000 (eight months ended 31 December 2005: £1,900,000) due to theacquisition of Blue Curve, an increased customer base, and significant sales ofadditional licences and services into the existing user base. Revenue growth has been in conjunction with a controlled increase in our costbase. Employee numbers have increased to 75 at the balance sheet date (31December 2005: 53) arising from the acquisition of Blue Curve and frominvestments made in sales, delivery and infrastructure staff to support theincreased level of business. Recurring revenues of approximately £2.8 millionnow provide significant coverage of fixed costs. Exceptional costs of £170,000 relate largely to surplus premises arising on theacquisition of Blue Curve, and include a provision against certain futureproperty lease costs. The company is actively marketing these premises topotential tenants. Goodwill amortisation arising on our recent acquisitions has been calculated ona straight-line basis based on a 10 year amortisation period from the point ofacquisition, giving rise to a total charge of £295,000. The comparative chargeof £495,000 was mainly the final element of goodwill arising from the October2000 acquisition of DSR Resource (now the Business Systems Division), which wasamortised over a 5 year period. We believe the change to a 10 year amortisationperiod more accurately reflects the life of the recently acquired products,taking into account their user base, revenue performance, increasing recurringrevenues, profitability and cash generation. However, for 2007 we will bereporting under International Financial Reporting Standards (IFRS), whichrequire that goodwill is not amortised, but instead is tested annually forimpairment. Net interest payable on the 8% Convertible Unsecured Loan Stock ("CULS") lessamounts held in the bank was £274,000 (eight months ended 31 December 2005:£151,000). Additionally the company was obliged under FRS25 ("FinancialInstruments: Disclosure and Presentation") to report an additional, non-cash, 'interest' charge of £388,000 (eight months ended 31 December 2005: £89,000).This includes £325,000 non-recurring, notional adjustments arising from thevariation of the CULS, in addition to £63,000 of non-cash, notional interestcharges also required by this standard (eight months ended 31 December 2005:£89,000). The cash cost of the CULS variation was approximately £82,000 andconsisted of commissions and professional fees. The Group has adopted FRS20 ("Accounting for Share Based Payments") as we offershare options to staff and executives. This has been applied retrospectively tothe prior period as well as the current year. The valuation has been estimatedby using the Black-Scholes model, and has made certain reasonable assumptions todetermine the valuation. As a result there is a charge of £13,000 (2005:£3,000) relating to share based payments. There is no cash impact to the Groupas a result of this new accounting standard. Tax credits of £38,000 were received in the year which relate to previous taxcredits reclaimed. Total tax losses carried forward are approximately£5,200,000, subject to final HMC&E agreement regarding the streaming of certainlosses from acquired businesses. Earnings per share based on adjusted pre-tax profits were 1.1 pence (eightmonths ended 31 December 2005: loss 2.9 pence). The average number of shares inissue in 2006 was 36,251,573 (2005: 26,881,206). After adjusting for exceptional costs, FRS25 interest and the amortisation ofgoodwill the loss after tax was £418,996 (eight months ended 31 December 2005:£1,449,199 restated for FRS 20). Financial Position On 30 August 2006 our balance sheet was strengthened by changes to the CULS,with the redemption date being extended from 31 October 2007 to 31 October 2011,the coupon reduced from 8.75 per cent to 8 per cent and the conversion priceadjusted to 25p. In addition a placing of £1,000,000 nominal of new CULS wascompleted at par, together with a small placing of 405,250 new ordinary sharesat 16p per share, raising £65,000, to provide funds for incremental investmentopportunities and working capital. Positive free cash flow of £430,000 was generated from operations, compared to aconsumption of £726,000 in the prior eight month period. The net turnaround of£1,156,000 when combined with the CULS renegotiation and the issue of £1m newCULS has significantly strengthened the Group's financial position. Tradedebtors were £2,294,000 (2005: £643,000), which represented 52 days salesoutstanding (2005: 67 days). Goodwill arising during the year was £2,519,000, which was entirely due to theacquisition of Blue Curve on 16 January 2006. £925,000 of this arose from theinitial consideration, with the remaining £1,530,527 arising from the deferredconsideration, which was determined by revenue growth in excess of a definedthreshold. This will be payable by way of a share issue, with the number ofshares being determined by reference to the higher of 17 pence or a 10 per centdiscount to the closing mid-market price on the date of the preliminaryannouncement of these results. Consequently a maximum of 9,003,100 shares willbe issued under the earn-out. Net liabilities of £3,000 were assumed onacquisition, and the costs of acquisition were £61,000. Deferred income, which represents future revenues for the Group, increased to£1,466,000 (2005: £1,245,000). This increase arose from the acquisition of BlueCurve Ltd and from increased sales during the year. The Group's net deficit position has decreased significantly by £2,438,000 to£312,000 at 31 December 2006, as a result of improved trading, and the increasedcapital base. Ian Selby Chief Financial Officer 29 March 2007 Consolidated Profit and Loss Account for the year ended 31 December 2006 Year ended 31 Year ended Year ended 8 month period December 2006 31 December 31 December ended 31 2006 2006 December 2005 Continuing Note Acquisitions Operations Total Restated £ £ £ £ Turnover 1,968,038 4,325,833 6,293,871 2,091,456Cost of sales (16,479) (200,820) (217,299) (90,949)Gross profit 1,951,559 4,125,013 6,076,572 2,000,507Total administrative expenses (1,516,815) (4,355,001) (5,871,816) (3,209,578) Operating profit / (loss) 434,744 (229,988) 204,756 (1,209,071) Analysis of net interestpayable and similar chargesNet interest payable (274,167) (150,700)Notional and extinguished (387,825) (89,428)CULS interest and costsNet interest payable and 3 (661,992) (240,128)similar charges Profit/(loss) before FRS 25 408,372 (772,255)interest, restructuring,FRS20, and goodwillamortisation and taxationNotional and extinguished (387,825) (89,428)CULS interest ("FRS 25")Restructuring 2 (170,322) (90,070)Share based payments ("FRS20 (12,647) (2,620)")Amortisation of goodwill (294,814) (494,826) Loss on ordinary activities (457,236) (1,449,199)before taxation Tax on loss on ordinary 4 38,240 -activities Loss for the period 7 (418,996) (1,449,199) Basic and diluted loss per 5 (1.2p) (5.4p)share Statement of Total Recognised Gains and Losses for the year ended 31 December2006 (Restated) 8 month period ended 31 Year ended December 2005 31 December 2006 £ £ Loss for the financial period (418,996) (1,449,199)Total recognised gains and losses relating to the year (418,996) (1,449,199) Prior year adjustment (note 1) (2,620) - Total recognised gains and losses since the last financial statements (421,616) (1,449,199) Consolidated Balance Sheet as at 31 December 2006 31 December 31 December 2006 2005 Restated Note £ £Fixed assetsIntangible assets 2,733,585 509,102Tangible assets 92,423 109,577 2,826,008 618,679Current assetsDebtors 2,463,418 840,911Cash at bank and in hand 906,890 397,405 3,370,308 1,238,316Creditors: amounts falling due within one year (1,095,257) (539,208)Net current assets 2,275,051 699,108 Total assets less current liabilities 5,101,059 1,317,787 Deferred income (1,466,160) (1,245,069) Creditors: amounts due falling after more than one yearConvertible 8% unsecured loan stock (3,947,258) (2,823,067)Net liabilities (312,359) (2,750,349) Capital and ReservesShares to be issued 1,530,527 -Called up share capital 3,684,875 2,822,775Share premium account 6,369,379 6,428,347Merger reserve 364,394 -Convertible unsecured loan stock equity reserve 146,286 -Share options reserve 15,267 2,620Profit and loss reserve (12,423,087) (12,004,091)Equity shareholders' deficit 7 (312,359) (2,750,349) Consolidated Cash Flow Statement for the year ended 31 December 2006 8 month period ended 31 Year ended December 2005 31 December 2006 Note £ £ Net cash outflow from operating activities A (448,049) (381,850) Returns on investments and servicing of finance (246,116) (150,700)Taxation received 38,240 - Capital expenditure (56,660) (10,610)Acquisitions 63,855 (159,550)Cash outflow before use of liquid resources and financing (648,730) (702,710) Management of liquid resources (589,073) 94,249 FinancingIssue of ordinary capital including premium net of costs 1,158,215 69,250 Decrease in cash (79,588) (539,211) Notes to the consolidated cash flow statement A. Reconciliation of operating profit/(loss) to net cash outflow fromoperating activities. 8 month Year ended period ended 31 December 31 December 2006 2005 £ £Operating profit/(loss) 204,756 (1,209,071)Depreciation 78,324 57,289Amortisation 294,814 494,826(Increase)/decrease in debtors (1,441,054) 653,280Increase/(decrease) in creditors 402,644 (380,794)Other non-cash charges 12,647 2,620 Net cash outflow from operating activities (448,049) (381,850) B. Purchase of subsidiary undertaking On 16 January 2006, the Company acquired 100% of the issued share capital ofBlue Curve Limited whose assets and liabilities were Book value Fair value Fair value adjustment £ £ £ Tangible fixed assets 4,512 - 4,512Debtors 181,453 - 181,453Cash at bank and in hand 124,866 - 124,866Creditors (216,432) - (216,432)Deferred income (97,160) - (97,160) Net separable liabilities (2,761) - (2,761) Goodwill 2,519,298 - 2,519,298 Satisfied by: Consideration 2,516,537 Consideration comprises: Equity consideration 925,000Shares to be issued 1,530,527Costs of acquisition 61,010 Total consideration 2,516,537 Amounts incurred in restructuring, reorganising and integrating Blue CurveLimited since acquisition and included in the Company's financial results underrestructuring costs amounted to approximately £155,000. The consideration comprised: a) Initial consideration of £925,000, satisfied by the issue of 5,606,060 newordinary shares at a price of 16.5p per share; and b) Deferred consideration of up to £2,075,000, based on Blue Curve's revenuesfor the year ending 31 December 2006, after deducting any shortfall adjustment,at the rate of twice the excess above minimum revenue of £1,150,000. Theshortfall adjustment was defined as 1.5 times the amount by which Blue Curve'srevenues for the year ending 31 December 2005 fell below £925,000. Blue Curve'srevenues for the year ended 31 December 2005 were £882,567. The deferredconsideration is to be satisfied by the issue of up to a further 9,003,100 newCorero ordinary shares, issued at the higher of 17p per share and a discount of10 per cent. to the mid market price of a Corero plc ordinary share on the dateof the announcement of preliminary results for the year ending 31 December 2006.The entire deferred consideration is by way of issue of 10 pence ordinaryshares. C. Free Cash Flow 8 month Year ended period ended 31 December 2006 31 December 2005 £ £Operating Profit / (loss) 204,756 (1,209,071) AddAmortisation 294,814 494,826Depreciation 78,324 57,289Restructure 170,322 90,070Share based payments 12,647 2,620 556,108 644,805LessCapital expenditure (56,994) (10,610)Interest payable (274,167) (150,700) (331,161) (161,310) Free Cash Flow from ongoing operations 429,702 (725,576) 1. Accounting policies Basis of Preparation Going Concern These financial statements have been prepared under the historical costconvention, and in accordance with applicable accounting standards, using thefollowing accounting policies. The accounts have been prepared on a goingconcern basis as the Directors believe that current sales prospects combinedwith existing working capital resources should ensure that Corero has adequateworking capital to service its existing business for the foreseeable future. Although the Group has historically incurred significant trading losses and cashoutflows, the year ended resulted in operating profits after interest, and incash generated from operations. Improved trading conditions and successfulintegration of acquisitions has helped strengthen the Group's working capitalposition. During the year the CULS were renegotiated, with their redemption datemoved to 31 October 2011. Change in accounting policy The Group has changed its accounting treatment for employee share options. UnderFinancial Reporting Standard (FRS) 20, Share Based Payment, the Group isrequired to recognise an expense for share-based payments in the profit and lossaccount. Details of the accounting policy adopted are given below. The impact ofthis change in accounting treatment has been to reduce the Group's operatingprofit for the year by £12,648 (2005: £2,620) 2. Restructuring charge 8 month Year ended period ended 31 December 31 December 2006 2005 £ £Other restructuring including professional fees 13,186 65,481Integration costs of Eclipse Learner Systems 14,646 24,589Accrual against surplus premises arising on Blue Curve acquisition 131,733 -Other Blue Curve integration costs 10,757 - 170,322 90,070 3. Net interest payable and similar charges 8 month period ended 31 December Year ended 2005 31 December 2006 £ £Bank interest receivable 10,452 8,486Interest payable on other loans (282,846) (157,480)Bank interest payable (1,773) (1,706)Net Interest Payable (274,167) (150,700) Notional charges from variation of CULS under FRS25 arising (262,395) -from a change in fair value assumptionsAmortisation of notional CULS interest charges andrenegotiation costs under FRS25 (62,196) (89,428)Renegotiation of CULS (63,234) -Notional Interest Expense under FRS 25 (387,825) (89,428) Net interest payable and similar charges (661,992) (240,128) 4. Tax on loss on ordinary activities The amounts represent tax refunds in respect of research and development taxcredits received during the year. 5. Loss per share Basic loss per share for the year is based on a weighted average number ofshares outstanding of 36,251,573 (Eight months ended 31 December 2005:26,881,206) and loss after taxation £418,996 (Eight months ended 31 December2005 restated: £1,449,199). The CULS and share options were non-dilutive forboth periods and thus the diluted loss per share is the same as the basicamount. 6. Dividend The directors do not recommend paying a dividend for the year ended 31 December2006 (eight months ended 31 December 2005: £nil) 7. Reconciliation of movements in shareholders' deficit 8 month Year ended period ended 31 December 2006 31 December 2005 £ £Loss for the financial period (418,996) (1,446,579)FRS 20 Restatement - (2,620)Loss for the financial period -after restatement (418,996) (1,449,199) Issue of 8,621,000 ordinary shares at par(2005: Issue of 2,086,110 ordinary shares at par) 862,100 208,611 Premium on new shares issued (net of expenses) (58,968) 147,640Merger reserve arising on acquisition of Blue Curve Limited 364,394 - Equity arising on CULS re-negotiation 146,286 -Share Options Reserve 12,647 2,620Shares to be issued 1,530,527 -Net addition/(reduction) to shareholders' funds 2,437,990 (1,090,328)Opening shareholders' deficit (2,750,350) (1,660,021) Closing shareholders' deficit (312,359) (2,750,349) 8. Sundry Information This preliminary statement, which has been agreed with the auditors, wasapproved by the Board on 28 March 2007. It is not the Company's statutoryaccounts for the year ended 31 December 2006 but has been extracted from them.Copies of the report and accounts for the year to 31 December 2006 will beposted to shareholders shortly and may be obtained from the company's registeredoffices. The statutory accounts for the year ended 31 December 2006 received an auditreport which was unqualified and did not contain a statement under s237 (2) or(3) of the Companies Act 1985. The statutory accounts for the eight monthperiod ended 31 December 2005 have been delivered to the Registrar of Companiesbut the audited 31 December 2006 accounts have not yet been filed. This information is provided by RNS The company news service from the London Stock Exchange