Corero Network Regulatory News (CNS)

12 Jul 2005 07:00

Mondas PLC12 July 2005 Mondas plc("Mondas") Preliminary Results for the year ended 30 April 2005 Mondas PLC, the specialist provider of software solutions to the banking &securities and education markets, announces its preliminary results for the yearended 30 April 2005. Key points Results • Mondas delivers first ever full year profit before taxation, amortisation and exceptional items of £79,000 (2004: loss of £806,000)• Second half profit of £619,000 driven by: - 45% growth in revenue from Banking & Securities unit - 96% increase in licensed revenues following sales to new and existing clients• Resource business unit now clearly focused on the education sector - Agreement with Pearson Education added 10 school customers with the total now standing at 140 education sector clients• Cash of £1.03 million seen as sufficient for the foreseeable future• Tight control of costs with a reduction of 6% during the year Outlook • Two new products: New Issues & Placings (NIPS) and Web Election Portal strengthens the Group's position as a supplier in the asset servicing market• Mondas strongly placed to take advantage of the endorsement and acceleration in adoption of the Group's products in banking and securities Jarlath McGee, Chief Executive, said: "The last year has seen much progress both operationally and financially. Wehave a strategy that should ensure that we capitalise on developments in themarketplace in both of the sectors in which we operate. Following our recentsuccess in banking and securities, we feel confident of further progress in thecurrent year." 12 July 2005 Enquiries: Mondas PLC Tel: 020 7392 1300Jarlath McGee, Chief Executive College Hill Tel: 020 7457 2020Matthew Smallwood/Clare Warren Chairman's Statement I am pleased to announce that Mondas has achieved a significant improvement inits financial performance. Results For the year ended 30 April 2005, Mondas made its first-ever profit beforetaxation, amortisation and exceptional items, of £79,000 (2004: loss of£806,000). This full-year result is after we suffered a first-half loss of£540,000, calculated on the same basis. In our second-half, our profit beforetaxation, amortisation and exceptional items, was therefore £619,000. Our annualearnings before restructuring, amortisation, depreciation and interest were£406,000 (2004: Loss £501,000). After amortisation of goodwill of £945,000 (2004: £945,396) and afternon-recurring exceptional items of £489,000 (2004: £nil) the loss beforetaxation was £1,384,000 (2004: £1,880,000). The exceptional items relate to thesignificant restructuring of the company which was carried out during the year. Turnover Turnover for the year was £4,592,000 (2004: £3,975,000), representing growth of15.5 per cent. The Banking and Securities Business Unit (BSBU) contributed 58%(2004: 46%) of group revenues. In this division, total revenues grew by 45%,with licence revenues increasing by 96% following sales to new and existingclients and professional services revenues grew by 43%. In the Resource Business Unit (RBU), revenues were 9% lower than 2004, mainlydue to lower services revenues, as contract deliveries were weighted towards thesecond half of the year. Already a market leader in colleges of furthereducation, this division has recorded its first material revenues from sales ofits Resource 32000 software to schools, through its relationship with Pearsonplc. Significant revenues also arose from sales of new products and modules intothe existing user base. Deferred income has increased to £1,096,000 (2004: £947,000). This is shown as aliability on the balance sheet, as the embedded revenue will be shown in futureaccounting periods. Costs Operating costs before amortisation of goodwill and restructuring charge werereduced by 6% to £4,289,000 (2004: £4,574,000), primarily as a result ofreductions in central overheads. Our major restructuring has resulted in anon-recurring exceptional charge of £490,000 (2004: £nil). Most of this arose inthe first half of the year, with a further £62,000 arising in the second half.The total includes £341,000 in relation to the management restructuring, with afurther £34,000 of exceptional AGM costs. A further £115,000 arose from businessrestructuring. These amounts include salary costs, severance payments, legaland professional fees and cancellation of certain marketing programs. Research & Development expenditure, which is charged to the profit and lossaccount, was £184,000, (2004: £57,000). Further development activity was carriedout during the year, which focussed on enhancement, support and deployment ofour products. In addition a significant amount of new product development wasfunded by customers. Interest payable of £252,000 (2004: £236,000) included amortisation ofConvertible Unsecured Loan Stock ("CULS") issue costs of £27,800 (2004 £27,800). Cash Cash balances at 30 April 2005 amounted to £1,031,000 (2004: £1,493,000), whichthe Directors believe, when combined with other working capital resources, issufficient for operations for the foreseeable future. Trade debtors at 30 April 2005 were £1,301,000 (2004: £757,000), whichrepresented the last 27 days of sales based on billings in April 2005 (2004:28). Cash collections have been strong since the year-end. The Company has in issue £3,000,000 8% convertible unsecured loan stock, with aredemption date of 31 October 2007 and which is convertible on the basis of 2ordinary shares for every £1 of loan stock. This was originally due forredemption on 31 October 2005, but the redemption date was extended in February2005. The coupon rate will increase to 8.75% from 1 November 2005. Costs ofapproximately £40,000 were incurred during the renegotiations and these will beamortised under FRS4 over the 2-year extension period. Amortisation of Goodwill Goodwill amortisation remained constant at £945,000 and arose solely from theacquisition of DSR Holdings Limited in October 2000. The remaining balance of£473,000 (2004: £1,418,000) will be fully amortised by 31 October 2005, afterwhich this profitable and cash generative division will be carried at zero valuein the consolidated balance sheet, with the consequence that no further goodwillamortisation will be charged to our profit and loss account. Acquisitions and Alliances We have previously set out that our strategy is to expand our banking andsecurities division by making suitable acquisitions in the asset servicingmarket. As well as increasing the range of products, we believe the rightacquisition should provide greater geographic reach for our flagship corporateactions product, CAPS. We have been in active negotiations with a number ofbusinesses which meet our criteria, but we are not yet in a position to put anyspecific proposals to shareholders. The market available to our banking and securities division is experiencing anincrease in mergers and acquisitions. Small companies are both joining forcesto meet the challenges of supplying global financial institutions and are beingacquired by larger organizations. We recognize the need for Mondas to buildcritical mass in order to capitalise on the global potential of our CAPS productand will consider all appropriate means to achieve this. Opportunities for growth by acquisition also exist in the education sector. Weaim to leverage our leading position in this market and will examine eachopportunity as it arises. Personnel Following my appointment as chairman of Mondas plc, in August last year, I havewitnessed the genuine support and dedication of all our staff. The significantturnaround in our financial results could not have taken place without theiroutstanding performance. I would like to thank everyone in the company for theircontribution to our success. Colin PetersChairman 12 July 2005 Chief Executive's Review I am very pleased to report a much improved set of results for the year ended 30April 2005. The actions arising from the review which I carried out last yearhave now been completed and I can report progress in both of our operatingdivisions, which have led to a record turnover and a maiden operating profit forthe full year, as reported by the Chairman. Banking and Securities Although new client business remains a challenge for every company in thissector, we secured Williams de Broe plc in the final quarter, thus adding to ourlist of prestigious customers for Radica CAPS. Williams de Broe also ordered twoof our new products, New Issues and Placings (Radica NIPS) and our recentlydeveloped Election Management Portal (Radica EMP). We are also delighted to saythat Brewin Dolphin Securities Limited has also ordered these new products inaddition to upgrading its CAPS system and we expect the successfulimplementations at both organisations to drive new licence sales in the newyear. In particular, the Radica NIPS product should provide an additionalpipeline of business to our traditional CAPS market. Radica EMP is a web based straight through processing solution that automatesthe processes around corporate action election management. Radica NIPS automates the process of new issues and placings, from the initialplc cash target, for the Corporate Broker & Nominated Advisor, through to FundManagers or Brokers for underlying client allocations. The strongest licence sales came from our existing customers, underlining theircommitment to Mondas and our range of products. Both Credit Suisse First BostonLimited and Credit Suisse Asset Management Limited extended both their existingterm and the international dimension of their contracts. Credit Suisse Asset Management also licensed our Web Election product. At HSBC, due to a strategic review of its equities business, projectimplementation has been delayed. We are confident of gaining formal acceptance,but significant further revenues may not arise during the current year. Business Development While we continue to pursue a direct sales model, we are adding channel sales toincrease the distribution capability of our products. We were delighted to forma strategic partnership with Rhyme Systems Limited, which will be our partnerfor the well-established FISCAL and QUASAR market in the UK. Rhyme Systems hasalso licensed our FES product, which was deployed at Brewin Dolphin Securities.Under this development licence, Mondas will receive royalty payments for anylicence sales of this product. We are currently pursuing other similar channels and expect them to contributesubstantially to our licence revenues from 2006, although this will involve someinitial set-up costs and ongoing third party commission payments. Resource Whilst we saw strong licence sales of add-on products to our existing clientbase, this division is now clearly focussed on the education sector, whichoffers the best growth prospects. Our exclusive agreement with Pearson plc to provide accounting systems based onour current Resource offering to schools has generated its first materialrevenues. We now have approximately 140 education sector users and we expect toadd to this in addition to further sales into our existing user base Whilst we see the agreement with Pearson Education continuing with stand-alonesystems for some time, the vision of providing Resource as an integral part ofthe e1 solutions remains a goal for both organisations. Outlook I am very pleased with the company's performance over the past year. Inparticular I am encouraged by our partnership strategy in both business units,which I believe will add considerably to our pipeline of business. Thiscapability, coupled with our success in bringing two new products to market inthe Banking and Securities business will, I believe, strengthen our position asa supplier of asset servicing solutions. In my last review I said that we are seeing the return of interest from smallerinstitutions. This market demands a simpler set of capabilities than existswithin the current CAPS system. To address this we are developing a ShortProduct Solution (SPS). SPS is a true 'off the shelf' solution, which will beinstalled from a CD and will require no further integration. We are looking tothis product to increase our reach and therefore our potential user base. I am also very encouraged by the prospects for the banking & securitiesdivision. The strong business drivers, including the Basel II Capital Adequacyaccord, whereby international banks will be required to set aside capitalagainst operational risk, remain in place and Mondas is strongly placed to takeadvantage of these, although this is not scheduled to become regulatory until2007. As mentioned by the Chairman, the climate of mergers within the vendor communitybrings the challenge of size and reach. It is therefore important that Mondasgains that critical mass in order to maintain its growth momentum. In our Resource division I expect that the main area of growth will continue tobe derived from our focus on the education sector. I intend to accelerate the delivery of new products in both businesses and toincrease the use of offshore development in order to reduce the cost of thesedevelopments. Now that we have turned the corner in the fortunes of the company, there shouldbe no looking back. The challenge facing both divisions is a difficult one.However, with the commitment from our customers and the continued hard work ofour staff, I expect this trend to continue. Jarlath McGeeChief Executive 12 July 2005 Consolidated Profit and Loss Account for the year ended 30 April 2005 Note 2005 2004 £ £Turnover 4,592,675 3,974,732 Cost of sales (155,655) (156,384)Gross Profit 4,437,020 3,818,348 Administrative expenses excluding restructuring charge (5,079,060) (5,362,889)Restructuring Charge 3 (489,618) -Administrative Expenses (5,568,678) (5,362,889) Analysis of Group operating losses Operating profit / (loss) before goodwill amortisation, 406,178 (501,206)restructuring and depreciationAmortisation of goodwill (945,396) (945,396)Depreciation of tangible fixed assets (102,822) (97,939)Restructuring Charge (489,618) - Operating loss 1 (1,131,658) (1,544,541) Net interest 2 (252,423) (235,013) Amortisation of Convertible Loan Stock Issue Costs charged to Netinterest (27,800) (27,800)Profit/(Loss) before Amortisation of goodwill and loan stock issuecosts, Restructuring charge and Taxation 78,733 (806,358) Loss on ordinary activities before Taxation (1,384,081) (1,779,554) Tax on loss on ordinary activities 4 265 147,748Loss for the financial year (1,383,816) (1,631,806)Basic and Diluted loss per share 5 (5.3p) (6.6p) Profit and loss account At 1 May 2004 (9,512,772) (7,880,966)Loss for the financial year (1,383,816) (1,631,806)At 30 April 2005 (10,896,588) (9,512,772) All of the above operations are continuing. The Group had no recognised gains and losses other than the loss for the abovefinancial years. Consolidated Balance Sheet as at 30 April 2005 2005 2005 2004 2004 £ £ £ £Fixed assets Intangible assets 472,691 1,418,087Tangible assets 152,225 229,294 624,916 1,647,381Current assets Debtors 1,433,221 934,331Cash at bank and in hand 1,030,865 1,492,744 2,464,086 2,427,075Creditors: Amounts falling due within one year (690,786) (585,071) Net current assets 1,773,300 1,842,004 Total assets less current liabilities 2,398,216 3,489,385 Creditors: amounts due falling after more than 1yearConvertible 8% Unsecured Loan Stock 2005 6 (2,951,585) (2,964,285) Accruals and deferred income 7 (1,448,348) (1,143,001) Net (liabilities) (2,001,717) (617,901) Capital and ReservesCalled up share capital 2,614,164 2,614,164Share Premium account 6,280,707 6,280,707Profit and loss account (10,896,588) (9,512,772)Equity shareholders' deficit 8 (2,001,717) (617,901) Consolidated Cash Flow Statement for the year ended 30 April 2005 2005 2004 £ £Net cash outflow from operating activities (171,268) (727,600) Returns on investments and servicing of finance (224,623) (207,213)Taxation 265 147,748Capital expenditure and financial investment (25,753) (133,388) Cash outflow before use of liquid resources and financing (421,379) (920,453) Management of liquid resources 766,688 (848,852) Financing Issue of ordinary capital including premium and renegotiation of (40,500) 1,435,254loan stock net of costs Increase/(decrease in cash) 304,809 (334,051) Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 £ £Operating loss (1,131,658) (1,544,541)Depreciation 102,822 97,939Amortisation of Goodwill 945,396 945,396(Increase)/Decrease in debtors (498,890) (185,059)Increase/(Decrease) in creditors 411,062 (41,335)Net cash outflow from operating activities (171,268) (727,600) Notes to the preliminary results 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 will ensure that Mondas has adequateworking capital to service its existing business for the foreseeable future. 1. Operating Loss Operating loss is stated after charging: 2005 2004 £ £Operating lease rentals in respect of buildings 112,522 119,293Operating lease rentals in respect of plant and machinery 15,169 40,647Directors' remuneration including benefits in kind 337,999 328,665Contributions to Director's pension fund 17,125 16,875Compensation for loss of office for former directors 172,986 -Research and Development Expenditure 183,563 57,244Restructuring Charge 489,618 -Amortisation of goodwill 945,396 945,396Depreciation 102,822 97,939Auditors' fees: Audit 25,558 21,000 Other fees 6,446 6,530 2. Net interest 2005 2004 £ £Bank interest receivable 14,381 34,314 Bank interest payable (714) (1,527)Amortisation of Convertible unsecured loan stock costs (27,800) (27,800)Interest payable on other loans (238,290) (240,000) (266,804) (269,327) (252,423) (235,013) 3. Restructuring Charge 2005 £ Board Restructuring (including provisions for salaries, legal and other professional 340,546fees) Annual General Meeting 33,802 Other restructuring including severances, professional fees, and cancellation of 115,270certainmarketing programs 489,618 4. Tax on loss on ordinary activities The tax assessed on the loss on ordinary activities for the period differs fromthe UK corporate of tax of 30%. The amounts represent tax refunds receivedduring the period. 2005 2004 £ £UK Corporation TaxAdjustments in respect of Prior Years (265) (147,748)Tax on loss on ordinary activities (265) (147,748) 5. Loss per share Basic and Diluted loss per share is based on a weighted average number of sharesoutstanding of 26,141,634 (2004: 24,572,155) and loss after taxation of£1,383,816 (2004: £1,631,806). The CULS and share options were non-dilutive forboth years and thus the diluted loss per share is the same as the basic amount. 6. Creditors: Amounts falling due in more than one year 2005 2004 £ £ Convertible unsecured loan stock 2,951,585 2,964,285 The loan stock, which has a par value of £3,000,000 and bears interest at anannual rate of 8 per cent, payable in equal proportions on 30 June and 31December in each year, is redeemable, if not converted, on 31 October 2007 andis convertible into fully paid Ordinary Shares on the basis of 2 Ordinary Sharesfor every £1 nominal of convertible loan stock. The CULS holder has the optionto convert the CULS into shares or redeem. If the mean average of the closingbid price of an Ordinary Share as shown on the London Stock Exchange for aperiod of at least 30 consecutive days is 200p or more, the Company is entitledto require a holder of CULS to convert all or part of his holding of CULS intofully paid Ordinary Shares on the basis set out above. The cost of raising theCULS was £139,000, which is amortised over the period to redemption. The CULSwere previously redeemable on 31 October but the redemption date has beenextended to 31 October 2007. The coupon rate increases to 8.75% from 1 November2005. The costs of renegotiating the CULS were £40,500 which will be amortisedover the extension period. 7. Accruals and deferred income 2005 2004 £ £ Accruals 352,262 196,229Deferred income 1,096,086 946,772 1,448,348 1,143,001 8. Reconciliation of movements in shareholders' funds 2005 2004 £ £Loss for the financial year (1,383,816) (1,631,806)Issue of ordinary shares at par - 504,188Premium on new share issued (net of expenses) 931,066 -Net addition/(reduction) to shareholders' funds (1,383,816) (196,552)Opening shareholders' funds (617,901) (421,349)Closing shareholders' funds (2,001,717) (617,901) 9. Sundry Information This preliminary statement, which has been agreed with the auditors, wasapproved by the Board on 12 July 2005. It is not the Company's statutoryaccounts. Copies of the 2005 Annual Report and Accounts will be posted toshareholders shortly and may be obtained from John East & Partners Limited,Crystal Gate, 28-30 Worship Street, London EC2A 2AH. The statutory accounts for the year ended 30 April 2004 received an audit reportwhich was unqualified and did not contain a statement under s237 (2) or (3) ofthe Companies Act 1985. The statutory accounts for the year to 30 April 2004have been delivered to the Registrar of Companies but the 30 April 2005 accountshave not yet been approved, audited or filed. This information is provided by RNS The company news service from the London Stock Exchange