Earthport Regulatory News (EPO)

29 Mar 2007 07:01

Earthport PLC29 March 2007 Interim Results For the six months ended 31 December 2006 29 March 2007 * Turnover in the first half increased to £403,000, 51% higher than the 2nd half of the previous year * Operating Loss fell 16% to £2.2m compared to 2nd half of the previous year * Loss before tax (pre-exceptional items) fell 30% to £2.4m compared to the 2nd half of the previous year * Net cash used in operating activities fell 59% to £1.1m compared to the 2nd half of the previous year * Interest costs down 38% to £0.2m * £2.3m of equity and £0.4m convertible loan stock raised during period * SWIFT acceptance announced on 26 October 2006 * New CEO David Fife appointed in November 2006 * WebSphere Platform launched on 21 November 2006 * US Channel Partner wins Mike Harrison, Chairman of Earthport plc, stated "This period saw the start ofsignificant progress in the development of the business whilst some keyfoundations were completed. Acceptance to the SWIFT network; completion of themigration of our technology platform to an industrial strength, scalable and"banking grade" security (this platform can deliver 15m transactions per monthat 40% loading); winning new accounts and Channel Partners; starting to offerand recognise Foreign Exchange (FX) revenues are all milestones in the development of Earthport's business opportunity, which we now believe to besignificantly larger than we first thought. With our Partners now integrated and bringing new customers on board we are veryexcited about the continuation of the prospects for the second half of thefiscal year. David Fife's appointment as CEO is well timed to oversee and drive this growththroughout the organisation." Press enquiries:Mike Harrison, Chairman - Earthport plc +44 20 7220 9700Mark Ashurst - Canaccord Adams Limited +44 20 7050 6500Lulu Bridges/Polly Hutchinson - Tavistock Communications +44 20 7920 3150 Earthport plcINTERIM RESULTSFOR THE SIX MONTHS ENDED 31 DECEMBER 2006 STATEMENT FROM THE BOARD OF DIRECTORS The results for six months to 31 December 2006 have started to demonstrate thebenefits from the restructuring and reorganisation program undertaken during theprevious financial year. These interim results are the first to be reported in accordance withInternational Financial Reporting Standards (IFRS). The impact of adopting IFRSis disclosed in note 10. RESULTS Turnover in the first half year increased to £403,000, 51% over the second halfof the preceding financial year (£266,000). This progress reflects recoveringand increasing transaction volumes from both existing and new customers. Despitecontinued investment in the Group's technology platform, the operating loss fellto £2.2m, 16% lower than the second half of last year (£2.7m). Interest costsfell to £202,000, 38% lower than the second half of last year (£328,000). TheGroup made a loss before tax of £2.4m, 30% lower than the second half of lastyear (£2.9m). CASH FLOW The net cash used in operating activities fell to £1.1m, 59% lower than thesecond half of last year (£2.7m). During the period, the Company securedadditional long term debt of £400,000 and raised a further £2.3m through theissue of equity, of which £1.5m was received after the period end. Also duringthe period £4.7m of warrants lapsed. Since the period end the Company has raiseda further £1.0m through the issue of equity. OPERATIONS During the period the Group continued to expand the reach and capacity of itsinternational banking network. This reach will be further enhanced by access tothe SWIFT network. SWIFT membership will also provide improved efficiencies inreporting, processing and integration of new banking relationships. The banking network is leveraged by our technology platform, the UniversalPayments Network. In December, the existing architecture was successfully movedto an IBM WebSphere application server platform, providing improvedavailability, reliability, security and scalability. The initial deployment ofthis new architecture provides enhanced functionality and improved processefficiencies. The sales and marketing functions are focused on targeting markets where thereis a proven demand for our services and developing channel partners with anestablished track record servicing the payments market. This strategy isbeginning to drive increased transaction volumes and to generate additionalvolume based fees from foreign exchange opportunities, the heart of everyinternational transaction. David Fife's appointment as CEO increases the management capacity to deliver thehuge potential revenues and profits from the transaction flows and associatedforeign exchange. OUTLOOK With new customers, sales channels and process functionality due to go liveduring the second half, the Board is confident that the growth in transactionvolumes evident in the first half will continue to drive an improvement in theresults for the remainder of the year. Earthport plc CONSOLIDATED INCOME STATEMENTfor the period ended 31 December 2006 Unaudited Unaudited Unaudited 6 months 6 months 12 months ended ended ended 31 Dec 2006 31 Dec 2005 30 June 2006 As restated As restated Notes £'000 £'000 £'000 TURNOVER 403 395 661 Operating expenses (2,647) (2,301) (5,264) ------- ------- --------OPERATING LOSS (2,244) (1,906) (4,603) Finance costs 3 (202) (328) (569)Exceptional income 4 - 2,570 2,570 ------- ------- --------(LOSS) / PROFIT BEFORE TAXATION (2,446) 336 (2,602)Taxation - - - ------- ------- --------NET (LOSS) / PROFIT FOR THE PERIOD (2,446) 336 (2,602) ======= ======= ========(Loss) / Earnings per 5 (7.5p) 3.1p (12.4p)share - basic - diluted 5 (7.5p) 2.8p (12.4p) ======= ======= ======== Earthport plc CONSOLIDATED BALANCE SHEETat 31 December 2006 Unaudited Unaudited Unaudited 31 Dec 2006 31 Dec 2005 30 June 2006 As restated As restated Notes £'000 £'000 £'000 NON CURRENT ASSETS Property, plant and equipment 132 153 184 Investments 160 160 160 ------- ------- -------- 292 313 344 ------- ------- --------CURRENT ASSETS Trade and other receivables 6 2,523 1,513 1,240 Cash at bank and in hand 8 1,485 65 ------- ------- -------- 2,531 2,998 1,305 ------- ------- -------TOTAL ASSETS 2,823 3,311 1,649 ------- ------- -------CURRENT LIABILITIES Trade and other payables 7 (5,017) (4,858) (4,249)Loans 8 (1,377) (1,282) (1,233) ------- ------- -------- (6,394) (6,140) (5,482) NET CURRENT LIABILITIES (3,863) (3,142) (4,177) NON CURRENT LIABILITIES Loans 8 (1,201) (1,084) (973) ------- ------- --------TOTAL LIABILITIES (7,595) (7,224) (6,455) ------- ------- --------NET LIABILITIES (4,772) (3,913) (4,806) ======= ======= ======== EQUITY Called up share capital 9 27,322 25,572 26,269 Share premium account 10 36,518 33,169 35,161 Other reserves 10 11,144 11,603 11,052 Retained earnings 10 (79,756) (74,257) (77,288) ------- ------- --------TOTAL EQUITY (4,772) (3,913) (4,806) ======= ======= ======== Earthport plc CONSOLIDATED STATEMENT OF CASH FLOWSfor the period ended 31 December 2006 Unaudited Unaudited Unaudited 6 months 6 months 12 months ended ended ended 31 Dec 31 Dec 30 June 2006 2005 2006 As As restated restated Notes £'000 £'000 £'000 NET CASH USED IN OPERATING ACTIVITIES 11 (1,120) (3,256) (5,981) INVESTING ACTIVITIES Purchase of trade investment - (160) (160)Purchase of property, plant and equipment (8) (14) (110)Proceeds of disposal of property, plant and equipment - - 15 ------ ------ ------ NET CASH FLOWS USED IN INVESTINGACTIVITIES (8) (174) (255) FINANCING ACTIVITIES Issue of ordinary share capital (net ofcosts paid) 699 4,216 5,859 Drawdown of term loans 410 1,250 1,250 Repayment of term loans (38) (866) (1,123)Repayment of finance lease obligations - (293) (293)Issue of convertible loan notes - 600 600 ------ ------ ------NET CASH FLOWS FROM FINANCING ACTIVITIES 1,071 4,907 6,293 ------ ------ ------NET (DECREASE) / INCREASE IN CASH (57) 1,477 57 CASH AT THE BEGINNING OF THE PERIOD 65 8 8 ------ ------ ------CASH AT THE END OF THE PERIOD 8 1,485 65 ====== ====== ====== Earthport plc NOTES TO THE INTERIM RESULTSfor the period ended 31 December 2006 1. FUNDAMENTAL ACCOUNTING CONCEPT This statement has been prepared on the assumption that the Group is a goingconcern. When assessing the foreseeable future, the directors have looked at a period oftwelve months from the date of approval of this interim report. The forecastcash-flow requirements of the business is contingent upon the ability of theGroup to generate future sales. The uncertainty as to the timing of the futuregrowth in sales, together with the potential impact on future funding arrangements require the directors to consider the Group's ability to continue as agoing concern. Notwithstanding this uncertainty, the directors believe that theGroup has demonstrated progress in achieving its objective of positioning theGroup as an infrastructure supplier to the global payments industry, andtherefore consider that it is appropriate to prepare the Group's financialstatements on a going concern basis, which assumes that the Company is tocontinue in operational existence for the foreseeable future. The financial statement does not include any adjustment that would result shouldthe Group not generate sufficient revenues, free cash flow or raise additionalfinance through further injections of debt or equity. It is not practical toquantify the adjustments that might be required, but should any adjustments berequired they may be significant. 2. ACCOUNTING POLICIES Basis of preparation This interim financial statement is prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") for the first time, including IFRS 1First time adoption of IFRS. Previously the Group's financial statements wereprepared in accordance with United Kingdom Generally Accepted AccountingPractice ("UK GAAP"). The principal accounting policies previously adopted areexplained in the Group's last UK GAAP Annual Report for the year ended 30 June2006. The principal accounting policies applied under IFRS in preparation of thisinterim report are explained below, highlighting, where appropriate, the changesfrom previously applied UK GAAP policies and quantifying the impact of thesechanges. The accounting policies set out below have been consistently applied to all theperiods presented, except that the Group has adopted the following transitionalexemption. IFRS 2: the Group has elected to apply the share-based payment exemption andaccordingly it has applied IFRS 2 Share-based payment, from 1 July 2005 to thoseshare options that were granted after 7 November 2002, but which had not vestedby 1 July 2006. Share-based paymentThe Group has adopted IFRS 2 Share-based payment: An expense is recognised forall equity settled option and performance share schemes issued by the Groupbased on the fair value at the date of grant. The fair value is measured by theuse of the Black Scholes model. The expense is recognised over the vestingperiod of the relevant scheme, based on the Group's estimate of the shares thatwill eventually vest. The Black Scholes model is modified, where applicable totake non-market performance conditions into account. The impact of adopting IFRS2 is disclosed in note 10. Compound financial instrumentsUnder IAS 32 Financial instruments: disclosure and presentation, convertibleloan notes are treated as debt where the conversion terms of the note state thatconversion is at the choice of the noteholder. Certain notes convertautomatically into equity upon maturity. In such cases the discounted value ofthe interest income is treated as debt, with the balance of the principal takento equity and accounted for in other reserves. Upon conversion, the appropriatetransfer is made from reserves to ordinary share capital. 3. FINANCE COSTS 6 months 6 months 12 months ended ended ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Interest payable (200) (325) (566)Loan arrangement fees andother finance costs (2) (3) (3) ------- ------- ------- (202) (328) (569) ======= ======= ======= 4. EXCEPTIONAL INCOME 6 months 6 months 12 months ended ended ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Debt restructuring - 2,570 2,570 ======= ======= ======= On 9 December 2005, the Company announced the completion of the restructuring ofits secured loans and unsecured finance leases, whereby £3.9m of debt wassettled for £1.3m, financed with a new £1.25m secured loan facility, repayableover five years. 5. EARNINGS PER SHARE The calculation of the basic, diluted and headline (loss) / earnings per shareis based on the following data 6 months 6 months 12 months ended ended endedWeighted average number of 31 Dec 2006 31 Dec 2005 30 June 2006shares Number Number Number Weighted average number of shares in issue for basic and headline (loss) /earnings pershare 32,776,353 10,732,949 20,994,679Dilutive effect of shareoptions/warrants - 6,888,055 -Weighted average number of shares in issue for diluted (loss) / earnings per share 32,776,353 17,621,004 20,994,679 =========== =========== =========== 6 months 6 months 6 months 12months ended ended ended endedEarnings 31 Dec 2006 31 Dec 2005 31 Dec 2005 30 June 2006 Basic and Basic and diluted diluted Basic Diluted As restated As restated As restated £'000 £'000 £'000 £'000 (Loss) / profitattributable to shareholders (2,446) 336 336 (2,602)Plus: interest onconvertible loan stock - - 154 - Less: exceptionalincome - (2,570) (2,570) ------- ------- ------- -------Headline (loss) /earnings (2,446) (2,234) 490 (5,172) ======= ======= ======= ======= 6 months 6 months 12 months ended ended ended 31 Dec 31 Dec 30 June 2006 2005 2006 As restated As restated As restat Number Number Number Basic (loss) / earnings per share (7.5p) 3.1p (12.4p)Diluted (loss) / earnings per share (7.5p) 2.8p (12.4p)Headline loss per share (7.5p) (20.8p) (24.7p) 6. TRADE AND OTHER RECEIVABLES At At At 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Trade receivables 227 265 194 Other receivables 2,192 1,180 854 Prepayments and accrued income 104 68 192 ------- ------- ------- 2,523 1,513 1,240 ======= ======= ======= Included in other receivables is an amount in respect of unpaid share capital of£2,125,000 of which £1,500,000 has been received after the period end (2005:£875,000). 7. Trade and other payables At At At 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Trade creditors 807 1,564 877 Other creditors 1,247 31 963 Other taxation and social security 2,187 1,950 1,790 Accruals and deferred income 776 1,313 619 ------- ------- ------- 5,017 4,858 4,249 ======= ======= ======= 8. LOANS At At At 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Amounts falling due within one yearSecured loans 340 166 196 Unsecured loans 270 445 270 Convertible loan notes 767 671 767 ------- ------- ------- 1,377 1,282 1,233 ======= ======= ======= The convertible loan notes in issue are subject to the following terms: Principal Conversion Maturity Value Value terms Date 31 December 31 December No.shares per 2006 2005 £1 loan note £'000 £'000No. 1 2004 600 2.857 30 June 2007 600 600No. 1 2005 1,250 2.395 30 June 2007 Nil 71No. 1 2006 167 2.857 30 June 2007 167 - ------- ------ ------ 2,017 767 671 ======= ====== ====== The 2004 and 2006 series notes have a coupon of 10% payable in arrears in cashor shares at the option of the Company. The 2004 and 2006 series notes areconvertible into shares at the option of the note holder and therefore have beentreated as debt under IAS 32 Financial instruments: disclosure and presentation.The maturity date for the 2005 series notes has been extended to 30 June 2007,though no coupon is payable after their original maturity date of 30 June 2006.The 2005 notes convert into shares at the maturity date, at the option of theCompany. The discounted value of the interest out flows has been included increditors: amounts falling due within one year, with the balance of the principal taken to equity in other reserves (see note 10). At At At 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000Amounts falling due after more than one year Secured loans 1,201 1,084 973 ======= ======= ======= A £1.66m loan facility has been provided by General Capital Venture FinanceLimited and Michael Gerson Finance plc. The facility is repayable over 5 yearsat an IRR of 15% and is secured by means of an all monies mortgage debenture. 9. SHARE CAPITAL At At At 31 Dec 2006 31 Dec 2005 30 June 2006Issued Number Number NumberNumber of ordinary shares inissue 42,631,105 25,129,174 32,099,988 Nominal value of each ordinaryshare 10p 10p 10p Number of 7.5p deferred sharesin issue 307,449,810 307,449,810 307,449,810 £'000 £'000 £'000 Ordinary share capital 4,263 2,513 3,210 Deferred share capital 23,059 23,059 23,059 ------- ------- ------- 27,322 25,572 26,269 ======= ======= ======= In the period ended 31 December 2006, 10,531,117 ordinary shares of 10p eachshares have been allotted, of which 9,933,031 were allotted for cashconsideration of £2,260,000, of which £1,500,000 was received after the periodend. A further 598,026 were allotted in upon conversion of £250,000 ofconvertible loan stock. As at 31 December 2006, the maximum number of shares which could be issued uponthe conversion of convertible loan notes, investor warrants and employee shareoptions is as follows: Maturity date Strike price Number of shares Convertible Loan Notes 30 June 2007 35p - 41.8p 5,180,048 Investor Warrants 30 June 2007 35p 714,286 Investor Warrants 31 October 2007 31.5p 2,187,715 Investor Warrants 31.December 2008 31.5p - 35p 3,033,384 Investor Warrants 31 December 2009 23p 1,800,000 Employee Options To January 2013 35p - 42p 4,867,000 -------------- 17,782,433 ============== 10. RESERVES Share premium Other Profit and account reserves loss account £'000 £'000 £'000 At 1 July 2006 (under UK GAAP) 35,161 10,564 (76,800)IFRS 2 Share-based payment - 488 (488) ------- ------- ------- At 1 July 2006 (under IFRS) 35,161 11,052 (77,288)Loss for the period - - (2,446)Premium on shares issued 1,357 - - IFRS 2 Share-based payment - 320 - Conversion of loan notes - (228) (22) ------- ------- ------- 36,518 11,144 (79,756) ======= ======= ======= The impact of the adoption of IFRS is as follows: Unaudited Unaudited Unaudited 6 months 6 months 12 months ended ended ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Increase in loss / reduction in profit for the period IFRS 2 Share-based payment 320 132 488 ======= ======= ======= Decrease / (increase) in equity at the end of the period - - - ======= ======= ======= 11. RECONCILATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Unaudited Unaudited Unaudited 6 months 6 months 12 months ended ended ended 31 Dec 2006 31 Dec 2005 30 June 2006 As restated As restated £'000 £'000 £'000 Operating loss (2,244) (1,906) (4,603)Depreciation of tangible fixed assets 60 46 90 Loss on disposal of tangible fixed assets - - 6 Share-based payment 320 132 488 ------- ------- -------Operating cash flows before movements in working capital (1,864) (1,728) (4,019)Decrease / (increase) in debtors 217 (172) (149)Increase / (decrease) in creditors 613 (1,346) (1,613) ------- ------- -------Cash used by operations (1,034) (3,246) (5,781)Interest paid (86) (10) (200) ------- ------- -------Net cash used in operating activities (1,120) (3,256) (5,981) ======= ======= ======= 12. ANALYSIS AND RECONCILIATION OF NET DEBT Unaudited Unaudited Unaudited 6 months 6 months 12 months ended ended endedReconciliation of cash flow 31 Dec 2006 31 Dec 2005 30 June 2006to net debt £'000 £'000 £'000 (Decrease) / increase incash (57) 1,477 57Drawdown of term loans (410) (1,250) (1,250)Repayment of term loans 38 866 1,123 Repayment of finance leaseobligations - 293 293 Issue of convertible loannotes - (600) (600) ------- ------- -------(Increase) / decrease in net debt resulting from cash flows (429) 786 (377)Compound financialinstruments - 675 744 Debt restructuring - 2,570 2,570 Other non-cash movements - 180 15 ------- ------- --------(Increase) / decrease in netdebt in period (429) 4,211 2,952 Net debt at the beginning of the period (2,141) (5,093) (5,093) ------- ------- -------Net debt at the end of theperiod (2,570) (882) (2,141) ======= ======= ======= At 30 Cash Flow At 31Analysis of net debt June December 2006 2006 £'000 £'000 £'000Cash 65 (57) 8 Secured and unsecured loans (1,439) (372) (1,811)Convertible loan notes (767) - (767) ------- ------- ------- (2,141) (429) (2,569) ======= ======= ======= 13. PUBLICATION OF NON-STATUTORY ACCOUNTS The results for the six months ended 31 December 2006 and 2005 are unaudited andunreviewed by the auditors. The results for the year ended 30 June 2006 do notconstitute statutory financial statements as defined in section 240 of theCompanies Act 1985, but have been derived (prior to restatement) from the fullaudited financial statements for the year ended 30 June 2006. The report of theauditors on the financial statements for the year ended 30 June 2006 wasqualified. This information is provided by RNS The company news service from the London Stock Exchange