Earthport Regulatory News (EPO)

24 Mar 2009 07:00



24 March 2009

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 2008.

Introduction

The results for the six months ended 31 December 2008 demonstrate continued progress despite the effects of the recent the global credit crunch following the turbulence in the banking industry. Interest in the Company's technology and products remains high and is increasing as the Company continues to market its products and services widely around the world.

Revenue for the six months ended 31 December 2008 increased to £1,193,000 compared to £1,067,000 for the six months ended 31 December 2007. Although the increase is satisfactory in the context of the current economic climate, it does not reflect the possible step changes that could have been achieved if the agreements with major banking industry clients had come on stream during the period. The Company continues to drive forward discussions, negotiations and integrations in relation to a number of such agreements.

Strategic Review

The liquidity crunch facing the world's banks is encouraging the use of Earthport's banking network, as it provides liquidity for banks. In addition, high volume low-risk fee-earning businesses, like transaction banking, are becoming an important part of banks' offerings to their customers. This is a service that Earthport delivers to banks at advantageous terms in white label format.

Earthport attended Sibos 2008 in conjunction with IBM in Vienna and subsequently there is a strong pipeline of prospects that the Company has been pursuing. Earthport will be attending Sibos 2009. The Company was active in promoting the TS Lite trade services product for banks, developed jointly with Adobe. Using Earthport to facilitate low level international trade lowers the risk for a bank offering this service to its SME customers. The Lloyds TSB Group announced in February 2009, that it is the banking group working with Earthport to develop the TS Lite services product. Earthport also secured a partnership with Experian Limited to provide its customers with access to Earthport's UPN through Experian's Payments Gateway.

In December 2008 Earthport agreed to partner with a local corporation to establish a sales office in the United Arab Emirates, Earthport Middle East Ltd. As a result of the establishment of the sales offices, Earthport has accessed and is pursuing a number of opportunities with large and medium sized clients. One Earthport client has already gone live in making remittances from the UAE to Africa.

Furthermore the Company's business is continuing to progress organically. Examples of this include the signing of a new contract with DataCash (DATA.L) and other clients reaffirming their commitment and increasing their levels of business with the Company.

Board Changes

On 15 September 2008, Lance Browne CBE was appointed as a Non Executive Director. Lance is Vice Chairman of Standard Chartered Bank (China) Limited. 

On 26 September 2008, Lady Olga Maitland was appointed as a Non Executive Director. Lady Olga is CEO of Money Transfer International Association Limited (MTI). 

In addition on 26 September 2008 Peter Chappell joined the Board as an Executive Director. He continues his role as Company Secretary.

 

Following the appointments of Lance Browne and Lady Olga Maitland, Jonathan Hill stepped down from the Board as a Non Executive Director on 26 September 2008. 

Outlook

The current economic environment has led to the Company witnessing longer timeframes in the progression of its contracts. This has been combined with increased periods of integration in house as the banks' attentions have been diverted elsewhere. The Company's growing customer base continues to show support for the Earthport offering and while it is impossible to predict the bottom of the market in terms of timing of take up of our services, the Company continues to drive forward discussions, negotiations and integrations. The Company is also in the process of expanding its direct network coverage to Russia, Latin America and Africa, having delivered new services in Europe, Asia-Pacific, the GCC and Canada. The management remain confident in the future prospects for Earthport and its products.

A conference call will be held today at 8:30am on +44 (0)1452 569 393.

- Ends -

Enquiries:

Earthport plc James Bergman, Chief Executive Officer Mike Harrison, Chairman	+44 (0)20 7220 9700
Cenkos Securities plc Nicholas Wells / Elizabeth Bowman	+44 (0)20 7397 8900
Financial Dynamics Jonathon Brill / Alex Beagley / Laura Proudlock	+44 (0)20 7831 3113

  

CONSOLIDATED INCOME STATEMENT

for the period ended 31 December 2008

		Unaudited 6 months ended 31 Dec 2008	Unaudited 6 months ended 31 Dec 2007	Audited 12 months ended 30 June 2008
Continuing operations:	Notes	£’000	£’000	£’000
			As restated	As restated
Revenue		1,193	1,067	1,915
Cost of sales		(208)	(203)	(390)
		–––––––	–––––––	–––––––
Gross profit		985	864	1,525
Administrative expenses		(2,720)	(1,928)	(4,861)
		–––––––	–––––––	–––––––
Operating loss		(1,735)	(1,064)	(3,336)
Finance income/(costs)	3	20	(117)	(325)
		–––––––	–––––––	–––––––
Loss before taxation		(1,715)	(1,181)	(3,661)
Taxation		-	-	280
		–––––––	–––––––	–––––––
Loss attributable to equity shareholders of the company		(1,715)	(1,181)	(3,381)
		–––––––––––––––	––––––––––––––	––––––––––––––
Loss per share – basic and diluted	4	(2.24p)	(2.3p)	(5.14p)
		–––––––––––––––	––––––––––––––	––––––––––––––

 

  CONSOLIDATED BALANCE SHEET

at 31 December 2008

		Unaudited 31 Dec 2008	Unaudited 31 Dec 2007	Audited  30 June 2008
	Notes	£’000	£’000	£’000
Non-current assets
Property, plant and equipment		95	165	139
Investments	5	160	160	160
Deferred tax asset		280	-	280
		–––––––	–––––––	––––––––
		535	325	579
		–––––––	–––––––	––––––––
Current assets
Trade and other receivables	6	1,859	1,232	2,436
Cash and cash equivalents		2,014	1,780	3,655
		–––––––	–––––––	–––––––
		3,873	3,012	6,091
		–––––––	–––––––	–––––––
Total assets		4,408	3,337	6,670
Liabilities
Current liabilities
Trade and other payables	7	(2,136)	(2,868)	(3,254)
Borrowings	8	(381)	(1,086)	(340)
		–––––––	–––––––	–––––––
		(2,517)	(3,954)	(3,594)
		–––––––	–––––––	–––––––
Non-current liabilities
		–––––––	–––––––	–––––––
Borrowings	8	(502)	(914)	(761)
		–––––––	–––––––	–––––––
Total liabilities		(3,019)	(4,868)	(4,355)
		–––––––	–––––––	–––––––
NET ASSETS/(LIABILITIES)		1,389	(1,531)	2,315
		––––––––––––––	––––––––––––––	––––––––––––––
Equity
Capital and reserves
Ordinary shares	9	31,210	29,908	30,968
Share premium	10	45,279	41,477	44,732
Merger reserve	11	9,200	9,200	9,200
Share-based payment reserve	12	1,354	1,083	1,354
Warrant reserve	13	816	-	816
Retained earnings	14	(86,470)	(83,199)	(84,755)
		–––––––––	–––––––––	–––––––––
EQUITY ATTRIBUTABLE TO THE EQUITY		1,389	(1,531)	2,315
SHAREHOLDERS OF THE COMPANY		–––––––––––––––	–––––––––––––––	–––––––––––––––

 

  

CONSOLIDATED CASH FLOW STATEMENT

for the period ended 31 December 2008

 

		Unaudited 6 months ended 31 Dec 2008	Unaudited 6 months ended 31 Dec 2007	Audited 12 months ended 30 June 2008
	Notes	£’000	£’000	£’000
NET CASH USED IN OPERATING ACTIVITIES	15	(2,203)	(2,429)	(4,851)
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(9)	(115)	(144)
		––––––	––––––	––––––
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(9)	(115)	(144)
FINANCING ACTIVITIES
Issue of ordinary share capital (net of costs paid)		789	3,990	8,466
Repayment of term loans		(218)	(121)	(271)
		––––––	––––––	––––––
NET CASH FLOWS FROM FINANCING ACTIVITIES		571	3,869	8,195
		––––––	––––––	––––––
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,641)	1,325	3,200
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,655	455	455
		––––––	––––––	––––––
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		2,014	1,780	3,655
		––––––––––	––––––––––	––––––––––

  

notes to the HALF YEAR results

for the period ended 31 December 2008

1. fundamental accounting concept

When assessing the foreseeable future the directors have looked at a period of twelve months from the date of approval of this report. The forecast cash-flow requirement of the business is contingent upon the ability of the Group to generate future sales. The uncertainty as to the timing of the future growth in sales and the potential impact on future funding arrangements require the directors to consider the Group's ability to continue as a going concern. The directors believe that the Group has demonstrated progress in positioning the Group as an infrastructure supplier to the global payments industry. The directors therefore consider that it is appropriate to prepare the Group's financial statements on a going concern basis.

2. ACCOUNTING POLICIES

Basis of preparation

The half-year financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. 

The financial statements have been prepared under the historical cost convention and the principal accounting policies as set out below.

Basis of consolidation

The Group half-year financial statements consolidate the financial statement of Earthport plc and all of its subsidiaries for the period ended 31 December 2008. The results of subsidiaries acquired or sold are included in the Group financial statements from the date control passes, until control ceases. Profits and balances arising on trading between Group companies are excluded from the financial statements. All companies in the Group prepare their statements to the same date.

Revenue recognition

Revenue on the sale of software licences and from the service agreements is recognised upon delivery to the customer providing that there is evidence of a contract, the fee is fixed or determinable, no significant customer obligations remain and collection of the resulting receivable is probable. In circumstances where a significant vendor obligation exists (such as the installation and acceptance of the software), revenue recognition is delayed until the obligation has been satisfied. Revenue from client transaction volume is billed monthly in arrears. Revenue from software implementation, consultancy and training is recognised as the services are performed.

Foreign currency translation

The functional and presentational currency of the parent Company and its subsidiaries is the UK Pound Sterling. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date and the difference is taken to the income statement.

Share-based payments

The Company offers executive and employee share schemes. For all grants of share options, the fair value as at the date of the grant is calculated using an option pricing model and the corresponding expense is recognised over the vesting period. The expense is recognised as a staff cost and the associated credit is made against equity and included in the share-based payment reserve.

Current and deferred income tax

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet, and any adjustment to tax payable in respect of previous years.

Deferred tax expected to be payable or recoverable on differences at the balance sheet date between the tax bases and liabilities and their carrying amounts for financial reporting purposes is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible differences can be utilised.

Deferred tax is calculated at the rates of taxation, which are expected to apply when the deferred tax asset or liability is realised or settled, based on the rates of taxation enacted or substantially enacted at the balance sheet date.

Impairment of non-financial assets

The carrying amounts of the Group's property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the asset's recoverable amount is estimated and compared to its carrying value. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the carrying value exceeds the recoverable amount, a provision for the impairment loss is established with a charge being made to the income statement.

Intangible assets

a) Development expenditure

Development expenditure is only recognised as an intangible asset if each of the following conditions have been met:

Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight line basis over the estimated useful life of the asset.

Where no intangible asset can be recognised, development expenditure is treated as expenditure in the period in which it is incurred.

b) Goodwill

Goodwill on consolidation, being the excess of the purchase price over the fair value of the net assets of subsidiary undertakings at the date of acquisition, is capitalised in accordance with IFRS3 Business combination. Goodwill is tested annually for impairment, or more frequently when there is an indication that goodwill may be impaired. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in a subsequent period.

Property, plant, and equipment and depreciation

Property, plant, and equipment are stated at cost less depreciation and provision for impairment. Depreciation is provided at rates calculated to write down assets to their estimated residual values over their expected useful lives, as follows:

Leasehold improvements: long lease Fixtures, fittings, and equipment Computer equipment

straight line per annum over lease term  20% - 33% straight line per annum  33% straight line per annum

The carrying values of property, plant, and equipment are reviewed for impairment annually and when events or changes in circumstances indicate that carrying value may be impaired. Any impairment is taken direct to the income statement.

Available for sale investments

Available for sale investments are non-derivative financial assets that are designated in this category or not classified in any other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. The investments are held at fair value, with gains and losses taken to equity. The gains and losses taken to equity are recycled through the income statement on realisation. If there is objective evidence that the asset is impaired, the cumulative recognised loss is removed from equity and recognised in the income statement.

Leasing

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals payable under operating leases are charged against income on a straight-line basis over the lease term.

Financial risk management and financial instruments

Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

The Group's principal financial instruments comprise secured and unsecured short-term creditors, finance leases, cash, short-term deposits and convertible loan notes. The main purpose of these financial instruments is to finance the Group's operations, including any acquisitions where relevant. The Group has various other financial instruments, such as trade receivables and trade payables arising that arise directly from its operations.

It is the Groups' policy that no trading in financial instruments shall be undertaken. The Group borrows at both fixed and floating rates of interest. The Group's policy in relation to the finance is to ensure that sufficient liquid funds are maintained for operations.

Trade receivables are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method, if material. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is evidence that the asset is impaired.

Cash and cash equivalents: comprise cash in hand, demand deposits and other short-term highly liquid investments that are readily converted into a known amount of cash and are subject to insignificant changes in value.

Trade payables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method, if material.

Compound financial instruments: The fair value of the liability portion of a convertible loan is determined using a market interest rate for an equivalent non-convertible loan. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders' equity.

 

Equity instruments issued by the Group are recognised at proceeds received net of direct issue costs. 

3. FINANCE COSTS

		6 months	6 months	12 months
		ended	ended	ended
		31 Dec 2008	31 Dec 2007	30 June 2008
		£’000	£’000	£’000
Interest payable on secured loans		(20)	102	325
		––––––––––––	––––––––––––	–––––––––––––––

4. LOSS PER SHARE

The 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 year.

	6 months	6 months	12 months
	ended	ended	ended
	31 Dec 2008	31 Dec 2007	30 June 2008
	£'000	£'000	£'000
Loss attributable to equity shareholders of the company	(1,715)	(1,181)	(3,381)
	2008	2007	2008
	Number	Number	Number
Weighted average number of ordinary shares in issue	76,495	52,293	65,804
(thousands)
	2008	2007	2008
Basic and fully diluted loss per share (pence)	(2.24p)	(2.3p)	(5.14p)

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.

5.	INVESTMENTS
			6 months	6 months	12 months
			ended	ended	ended
			31 Dec 2008	31 Dec 2007	30 June 2008
			£'000	£'000	£'000
	Available-for-sale investment		160	160	160

The Company holds 0.5% of Altair Financial Services International plc, an unquoted company specialising in the area of prepaid debit cards. The investment is held at cost, which, in the opinion of the directors, approximates fair value. There were no movements on the investment from 1 July 2006 to 31 December 2008.

6.	TRADE AND OTHER RECEIVABLES
		6 months	6 months	12 months
		ended	ended	ended
		31 Dec 2008	31 Dec 2007	30 June 2008
		£'000	£'000	£'000
	Trade receivables	1,309	367	1,059
	Other receivables	434	703	1,240
	Prepayments	116	162	137
		1,859	1,232	2,436

7.	TRADE AND OTHER PAYABLES
		6 months	6 months	12 months
		ended	ended	ended
		31 Dec 2008	31 Dec 2007	30 June 2008
		£'000	£'000	£'000
	Trade payables	164	499	496
	Other payables	727	702	1,063
	Other taxation and social security	357	1,333	836
	Accruals and deferred income	888	334	859
		2,136	2,868	3,254

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

 

8. 8.	BORROWINGS
	Current liabilities	6 months	6 months	12 months
		ended	ended	ended
		31 Dec 2008	31 Dec 2007	30 Jun 2008
		£’000	£’000	£’000
	Secured loans	381	318	340
	Convertible loan notes	-	768	-
		381	1,086	340

Non-current liabilities	6 months	6 months	12 months
	ended	ended	ended
	31 Dec 2008	31 Dec 2007	30 Jun 2008
	£’000	£’000	£’000
Secured loans	502	914	761

 

General Capital Venture Finance Limited and Michael Gerson Finance Plc has provided the loan facilities. The facility is repayable over 5 years at a fixed interest rate of 15%.

  

9.	SHARE CAPITAL
		6 months	6 months	12 months
		ended	ended	ended
		31 Dec 2008	31 Dec 2007	30 June 2008
		£'000	£'000	£'000
	Authorised
	At 1 July (169,412,642 ordinary shares of 10p each)	16,941	6,941	6,941
	Increase in the ordinary share capital in the year	-	-	10,000
	At 31 December (169,412,642 ordinary shares of 10p each)	16,941	6,941	16,941
	Deferred shares of 7.5p each: 307,449,810 (2007: 307,449,810)	23,059	23,059	23,059
	At 31 December	40,000	30,000	40,000
	Issued
	At 1 July (79,088,009 ordinary shares of 10p each)	7,909	5,194	5,194
	Shares issued in the year	242	1,655	2,715
	At 31 December (81,516,175 ordinary shares of 10p each)	8,151	6,849	7,909
	Deferred shares of 7.5p each: 307,449,792 (2007: 307,449,792)	23,059	23,059	23,059
	At 31 December	31,210	29,908	30,968

 

The fully diluted share capital at 31 December 2008 may be analysed as follows: 

	No. of Ordinary 10p shares
	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
Shares in issue at 31 Dec	81,516,175	69,412,642	79,088,009
Employee share options	17,519,080	7,632,000	16,039,080
Other options	4,559,683	9,359,692	7,263,825
Convertible loan notes	-	2,194,176	-
Fully diluted number of shares	103,594,938	88,598,510	102,390,914

10.	SHARE PREMIUM  Group and Company	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
				As restated
		£'000	£'000	£'000
	At 1 July	44,732	37,790	36,801
	Premium on shares issued	547	3,802	8,193
	Expenses of share issues	-	(115)	(262)
	At 31 December	45,279	41,477	44,732

11.	MERGER RESERVE Group and Company	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
		£'000	£'000	£'000
	At 1 July and 31 December	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 as required by s131 of the Companies Act 1985.

  

12.	SHARE-BASED PAYMENT RESERVE Group and Company	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
		£'000	£'000	£'000
				As restated
	At 1 July	1,354	1,083	868
	Equity settled share-based payments - employees	-	-	539
	Options exercised during the year	-	-	(53)
	At 31 December	1,354	1,083	1,354

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

13.	WARRANT RESERVE Group and Company	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
		£'000	£'000	£'000
				As restated
	At 1 July	816	190	1,204
	Equity settled share-based payments - warrants	-	1,014	88
	Warrants exercised during the year	-	-	(476)
	At 31 December	816	1,204	816

The warrant reserve (share warrants granted under the terms of the Company's funding activities in relation to new debt, broking fee and follow on funding strategies) represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet.

14.	RETAINED EARNINGS Group	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
		£'000	£'000	£'000
	At 1 July	(84,755)	(81,903)	(81,903)
	Loss for the year attributable to equity shareholders of the Company	(1,715)	(1,181)	(3,381)
	Options exercised during the year	-	-	53
	Warrants exercised during the year	-	-	476
	Conversion of loan notes	-	(115)	-
	At 31 December	(86,470)	(83,199)	(84,755)

  

15.	RECONCILIATION OF LOSS BEFORE TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Group	6 months ended 31 Dec 2008	6 months ended 31 Dec 2007	12 months ended 30 June 2008
		£'000	£'000	£'000
	Loss before tax	(1,735)	(1,064)	(3,661)
	Depreciation of property, plant and equipment	52	49	105
	Share-based payment expense	-	-	627
	Finance costs	-	-	324
	Operating cash out flow before movements in working capital	(1,683)	(1,015)	(2,605)
	(Increase)/decrease in receivables	578	(149)	(1,352)
	Decrease in payables	(1,033)	(1,146)	(743)
	Cash used by operations	(2,138)	(2,310)	(4,700)
	Interest paid	(65)	(119)	(151)
	Net cash used in operating activities	(2,203)	(2,429)	(4,851)

16. PUBLICATION OF NON-STATUTORY FINANCIAL STATEMENTS

The results for the six months ended 31 December 2008 and 2007 are unaudited and unreviewed by the auditors. The results for the year ended 30 June 2008 do not constitute statutory financial statements as defined in section 240 of the Companies Act 1985, but have been derived from the full audited financial statements for the year ended 30 June 2008. The report of the auditors on the financial statements for the year ended 30 June 2008 was unqualified.

ENDIR PUUUGWUPBGBW