Earthport Regulatory News (EPO)

RNS Number : 3800J

Earthport PLC

30 March 2010

 

30 March 2010

 

Earthport plc (the "Company" or the "Group")

 

Interim Results

 

Earthport plc, the global payments utility, announces its interim results for the six months ended 31 December 2009.

 

Revenue for the six months ended 31 December 2009 increased 30.2% to £971,000 compared with £745,000 for the prior year. The majority of this increase was due to increasing transactional volumes and the remainder was due to an increase in new client integrations. Transactions for the period rose by 28.2%.

 

Gross profit increased by 32.0% to £709,000 compared with £537,000 in 2008 and gross margin rose slightly to 73% compared with 72% for the prior year.

 

Operating loss rose to £3,341,000 from £2,183,000 for the prior year. This rise was entirely due to the inclusion of the non-cash share-based payment charge in the interim results. This item was not present in the prior year interim results, as the Company's historic practice was not to book this charge in the interim results and to book the entire charge in the full year results. Excluding the share-based payment charge, operating loss decreased by 6.0% to £2,052,000 from £2,183,000 in 2008.

 

Financing costs for the period under consideration were £269,000. This included a non-cash item of £208,000 related to warrant issuance, with the remainder due to costs associated with the debt financing secured in October 2009. For the prior period, the Company had financing income of £20,000.

 

Overall, net loss rose to £3,610,000 from £2,163,000 for the prior year. Excluding the share-based payment charge and the non-cash financing charge, net loss fell 2.3% to £2,113,000 from £2,163,000 for the prior year.

 

The revenue figure for the six month period ended 31 December 2008 has been restated to £745,000 from £1,193,000. This restatement reflects the adjustment that was made in the full year to 30 June 2009 financial statements presented in the preliminary results announced on 20 October 2009.

 

Review of the Period

 

The first half was one of strategic underperformance in the business combined with the non-delivery on announced deals. However, the Group did make progress on various business initiatives including the IBM GERS Solution, the expansion of the Middle East footprint, and significant enhancements to the technology platform. The overall results achieved, however, were below the levels of expectation within the Group and the capacity that the platform is capable of delivering.

 

Post Balance Sheet Events

 

On 26 January 2010 the Company raised £875,000 through a placing of 7,000,000 new Ordinary Shares at 12.5p per share.

 

On 18 February the Company raised £4.13m by the issue of equity and Convertible Loan Notes. The Loan Notes converted to 33,000,000 ordinary shares in the Company following passing of the all resolutions at the General Meeting held on 24 March 2010. Following the conversion the Company's share capital is 133,976,340 Ordinary shares.

 

Board Changes

 

On 20 October 2009 Mike Harrison moved from Executive Chairman to Non Executive Chairman and Lance Browne CBE became Non Executive Vice Chairman.

 

On 2 December 2009 Zafarullah (Zafar) Karim was appointed as an Executive Director.

 

James Bergman resigned from the Board on 20 January 2010 and is no longer involved with the Company in any capacity.

 

Hank Uberoi joined the Board on 18 February 2010 as an Executive Director.

 

Outlook

 

Following the successful fundraisings, changes to the management and to the Board, Earthport is completely focused on building the business. The opportunity for a global cross-border money transfer infrastructure player is significant and the combination of the technology platform, the banking network and the recently raised funding, positions Earthport well to take advantage of this opportunity.

 

We have made some progress since the end of 2009 and will take whatever steps are necessary to unlock Earthport's significant potential. Whilst there are many challenges and opportunities ahead, the management team is looking to the future with a sense of excitement and confidence.

 

 

For further information, please contact:

 

Earthport 020 7220 9700

Hank Uberoi/Zafar Karim

 

Financial Dynamics 020 7831 3113

Jonathon Brill / Alex Beagley

 

Panmure Gordon (Nominated Adviser) 020 7459 3600

Dominic Morley / Stuart Gledhill

 

CONSOLIDATED INCOME STATEMENT

for the period ended 31 December 2009

 

		Unaudited 6 months ended 31 Dec 2009	Unaudited 6 months ended 31 Dec 2008	Audited 12 months ended 30 Jun 2009
Continuing operations:	Notes	£'000	£'000	£'000
			As Restated
Revenue		971	745	1,568
Cost of sales		(262)	(208)	(402)
		------	-------	-------
Gross profit		709	537	1,166
Administrative expenses		(2,761)	(2,720)	(5,534)
Share-based payment		(1,289)	-	(2,162)
Impairment of available-for-sale investment		-	-	(160)
		-------	-------	-------
Operating loss		(3,341)	(2,183)	(6,690)
Finance (costs) / income	4	(269)	20	(325)
		-------	-------	-------
Loss before taxation		(3,610)	(2,163)	(7,015)
Taxation		-	-	(280)
		-------	-------	-------
Loss attributable to owners of the parent		(3,610)	(2,163)	(7,295)
		---------------	---------------	--------------
Loss per share - basic and diluted	5	(4.20p)	(2.83p)	(8.92p)
		---------------	--------------	--------------

CONSOLIDATED BALANCE SHEET

at 31 December 2009

 

		Unaudited 31 Dec 2009	Unaudited 31 Dec 2008	Audited  30 Jun 2009
	Notes	£'000	£'000	£'000
			As Restated
Non-current assets
Property, plant and equipment		64	95	90
Investments	6	-	160	-
Deferred tax asset		-	280	-
		-------	-------	--------
		64	535	90
		-------	-------	--------
Current assets
Trade and other receivables	7	1,380	1,411	1,117
Cash at bank and in hand		154	2,014	885
		-------	-------	-------
		1,534	3,425	2,002
		-------	-------	-------
Total assets		1,598	3,960	2,092
Current liabilities
Trade and other payables	8	(1,469)	(2,136)	(1,250)
Borrowings	9	(1,685)	(381)	(407)
		-------	-------	-------
		(3,154)	(2,517)	(1,657)
		-------	-------	-------
Non-current liabilities
		-------	-------	-------
Borrowings	9	(73)	(502)	(297)
		-------	-------	-------
Total liabilities		(3,227)	(3,019)	(1,954)
		-------	-------	-------
NEt (liABILITIES)/ ASSETS		(1,629)	941	138
		--------------	--------------	--------------
Equity
Capital and reserves
Ordinary shares	10	31,955	31,210	31,810
Share premium	11	46,975	45,279	46,774
Own shares held	12	(101)	-	(101)
Merger reserve	13	9,200	9,200	9,200
Share-based payment reserve	14	4,716	1,354	3,440
Warrant reserve	15	234	816	233
Retained earnings	16	(94,608)	(86,918)	(91,218)
		---------	---------	---------
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT		(1,629)	941	138
		---------------	---------------	---------------

CONSOLIDATED STATEMENT OF CASH FLOWS

for the period ended 31 December 2009

		Unaudited 6 months ended 31 Dec 2009	Unaudited 6 months ended 31Dec 2008	Audited 12 months ended 30Jun 2009
	Notes	£'000	£'000	£'000
NET CASH USED IN OPERATING ACTIVITIES	17	(2,120)	(2,203)	(5,116)
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(11)	(9)	(40)
		------	------	------
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(11)	(9)	(40)
FINANCING ACTIVITIES
Issue of ordinary share capital (net of costs paid)		346	789	2,783
Repayment of term loans		(196)	(218)	(397)
Issue of new loan note		1,250	-	-
		------	------	------
NET CASH FLOWS FROM FINANCING ACTIVITIES		1,400	571	2,386
		------	------	------
NET DECREASE IN CASH AND CASH EQUIVALENTS		(731)	(1,641)	(2,770)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		885	3,655	3,655
		------	------	------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		154	2,014	885
		----------	----------	----------

 

 

notes to the INTERIM results

for the period ended 31 December 2009

 

1. GENERAL INFORMATION

 

Earthport plc is a public limited company incorporated and domiciled in the England and Wales under the Companies Act 2006. The address of its principal place of business and registered office is 21 New Street, London EC2M 4TP.

 

 

2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The interim financial information has been prepared on the assumption that the Group is a going concern.

 

When assessing the foreseeable future the directors have looked at a period of twelve months from the date of approval of the financial statements. The forecast cash-flow requirement of the business is contingent upon the ability of the Group to generate future sales. The directors believe that the Group has demonstrated progress in achieving its objective of positioning the Group as an infrastructure supplier to the global payments industry, and therefore consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Company is to continue in operational existence for the foreseeable future.

 

 

3. ACCOUNTING POLICIES

 

Basis of preparation

The interim financial information is prepared using accounting policies which are consistent with International Financial Reporting Standards ("IFRS'') as adopted by the European Union.

 

The financial statements have been prepared under the historical cost convention and the principal accounting policies are set out in the 30 June 2009 financial statements.

 

 

4. FINANCE COSTS / (INCOME)

 

	6 months	6 months	12 months
	ended	ended	ended
	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
Interest payable on unsecured loans	61	(20)	152
Other finance costs	208	-	173
	269	(20)	325
	---------------	---------------	---------------

 

 

 

5. LOSS PER SHARE

 

	6 months	6 months	12 months
	ended	ended	ended
	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
		As Restated
Loss attributable to owners of the parent	(3,610)	(2,163)	(7,295)
	Number	Number	Number
Weighted average number of ordinary shares in issue (thousands)	85,921	76,495	81,770
Basic and fully diluted loss per share (pence)	(4.20p)	(2.83p)	(8.92p)

Loss per share is calculated by dividing the loss attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period.

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of IAS33.

 

 

6. INVESTMENTS

 

	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
Available-for-sale investment	-	160	-

 

 

 

7. TRADE AND OTHER RECEIVABLES

 

	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
		As Restated
Trade receivables	207	861	159
Other receivables	1,051	434	864
Prepayments	122	116	94
	1,380	1,411	1,117

 

 

8. TRADE AND OTHER PAYABLES

 

	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
		As Restated
Trade payables	944	736	704
Other payables	71	155	168
Other taxation and social security	255	357	179
Accruals and deferred income	199	888	199
	1,469	2,136	1,250

 

Trade payables and accruals principally comprise amounts outstanding in respect of operating costs. The directors consider that the carrying amounts for trade and other payables approximate their fair value.

 

 

9. BORROWINGS

 

Current liabilities
	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
Unsecured loans	1,685	381	407

 

Non-current liabilities
	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
Unsecured loans	73	502	297

 

 

10. SHARE CAPITAL

 

	31Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
Authorised
169,412,642 ordinary shares of 10p each	16,941	16,941	16,941
Deferred shares of 7.5p each: 307,449,810	23,059	23,059	23,059
Total	40,000	40,000	40,000
Issued	6 months ended 31 Dec 2009 £'000	6 months ended 31 Dec 2008 £'000	12 months ended 30 Jun 2009 £'000
At start of period (87,511,340 ordinary shares of 10p each)	8,751	7,909	7,909
Shares issued in the period	145	242	842
At end of period (88,966,340 ordinary shares of 10p each)	8,896	8,151	8,751
Deferred shares of 7.5p each: 307,449,792	23,059	23,059	23,059
Total	31,955	31,210	31,810

Deferred shares carry no rights to receive any dividend nor other distribution. The holders of the deferred shares have no rights to receive notice, nor attend, speak or vote at any general meeting of the Company. On a return of capital on liquidation or otherwise, the holders of the deferred shares are entitled to receive the nominal amount paid up on the deferred shares after the repayment of £10,000,000 per ordinary share.

 

Following are the warrants which have been granted under the terms of the Company's fund-raising activities with exercise prices and dates shown in the table below.

 

 

 

11. SHARE PREMIUM

	6 months ended 31 Dec 2009 £'000	6 months ended 31 Dec 2008 £'000	12 months ended 30 June 2009 £'000
At start of period	46,774	44,732	44,732
Premium on shares issued	201	547	2,042
At end of period	46,975	45,279	46,774

 

 

12. OWN SHARES HELD

	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
At start and end of period	101	-	101

 

 

13. MERGER RESERVE

	31 Dec 2009	31 Dec 2008	30 Jun 2009
	£'000	£'000	£'000
At start and end of period	9,200	9,200	9,200

 

The merger reserve represents the premium attributable to shares issued in consideration of the costs of acquisition of subsidiaries in prior years.

 

 

14. SHARE BASED PAYMENT RESERVE

	6 months ended 31 Dec 2009	6 months ended 31 Dec 2008	12 months ended 30 June 2009
	£'000	£'000	£'000
At start of period	3,440	1,354	1,354
Equity settled share-based payments- employees	1,289	-	2,162
Options exercised during the period	(13)	-	(76)
At end of period	4,716	1,354	3,440

 

The share-based payment reserve represents the cumulative charge to date in respect of unexercised share options at the balance sheet date.

 

 

 

15. WARRANT RESERVE

 

 

	6 months ended 31 Dec 2009	6 months ended 31 Dec 2008	12 months ended 30 Jun 2009
	£'000	£'000	£'000
At start of period	233	816	816
Equity settled share-based payments-warrants	208	-	173
Warrants exercised during the period	(207)	-	(756)
At end of period	234	816	233

 

The warrant reserve represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet.

 

 

16. RETAINED EARNINGS

 

	6 months ended 31 Dec 2009 £'000	6 months ended 31 Dec 2008 £'000	12 months ended 30 Jun 2009 £'000
		As Restated
At start of period	(91,218)	(84,755)	(84,755)
Loss for the period attributable to owners of the parent	(3,610)	(2,163)	(7,295)
Options exercised during the period	13	-	76
Warrants exercised during the period	207	-	756
At end of period	(94,608)	(86,918)	(91,218)

 

 

 

17. RECONCILIATION OF LOSS BEFORE TAX TO NET CASH OUTFLOW FROM

OPERATING ACTIVITIES

Group

 

	6 months ended 31 Dec 2009 £'000	6 months ended 31 Dec 2008 £'000 As Restated	12 months ended 30 Jun 2009 £'000
Loss before tax	(3,610)	(2,163)	(7,015)
Depreciation of property, plant and equipment	37	52	89
Share-based payment expense	1,497	-	2,162
Finance costs	269	-	325
Impairment of available- for- sale Investments	-	-	160
Operating cash out flow before movements in working capital	(1,807)	(2,111)	(4,279)
(Increase)/decrease in receivables	(263)	1,026	1,319
Increase/(decrease) in payables	219	(1,033)	(2,004)
Cash used by operations	(1,851)	(2,118)	(4,964)
Interest paid	(269)	(85)	(152)
Net cash used in operating activities	(2,120)	(2,203)	(5,116)

 

18. EVENTS SINCE THE BALANCE SHEET DATE

 

On 26 January 2010 the Company raised £875,000 through a placing of 7,000,000 new Ordinary Shares at 12.5p per share. Three directors, Mike Harrison (1,200,000 shares), Zafar Karim (400,000 shares) and Peter Chappell (280,000 shares) participated in the placing.

 

On 18 February 2010 the Company raised £4.13m by the issue of equity and Convertible Loan Notes. The Loan Notes converted to 33,000,000 ordinary shares in the Company following passing of the all resolutions at the General Meeting held on 24 March 2010.

 

 

19. PUBLICATION OF NON-STATUTORY FINANCIAL STATEMENTS

 

The results for the six months ended 31 December 2009 and 2008 are unaudited and unreviewed by the auditors. The results for the year ended 30 June 2009 do not constitute statutory financial statements as defined in section 434 of the Companies Act 2006, but have been derived from the full audited financial statements for the year ended 30 June 2009. The report of the auditors on the financial statements for the year ended 30 June 2009 was qualified.

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