17 Nov 2009 07:00
Rubicon Software Group Plc
Final results for the year ended 30 June 2009
17 November 2009
Rubicon Software Group plc ("Rubicon" or "the Group"; AIM: RUBI), a leading provider of smart customer relationship management IT solutions, announces its audited results for the year ended 30 June 2009.
Highlights
£1million, 5 year agreement renewed with a key client that includes a substantial upfront payment
Investment received and strategic alliance formed with a new partner
Broadened our client base and diversified into new technology areas
Earnings before interest, tax, depreciation and amortisation ("EBITDA") loss reduced to £2,000 (2008: EBITDA loss £123,000)
Pre-tax loss for the year down to £194,000 (2008: £262,000)
For further information, please contact:
Rubicon Software Group plc
Alistair Hancock, Chief Executive Officer
Andrew Kirby, Finance Director
01276 706900
W.H. Ireland
Tim Cofman/Katy Birkin
0121 265 6330
Chairman's statement
Financial results
In the year to 30 June 2009, Rubicon generated revenue of £874,000, 29% down on the previous year's £1,231,000, but in line with expectations. This reduction reflects the loss of three clients at the end of 2008 and generally by the significant impact on our core market of the financial crisis. Despite these challenges we have broadened our target markets, won business in new sectors, and reaffirmed the strong relationships we have with existing clients.
Despite lower revenues, we have reduced the EBITDA loss to £2,000 (2008: EBITDA loss £123,000) and reduced pre-tax losses by 26% to £194,000 (2008: £262,000) through cost savings made in the light of the deteriorating business climate. Retained loss for the year was £194,000 (2008: £137,000), reflecting R&D tax credits received in 2008 that were not available in 2009.
| Reconciliation of retained losses to EBITDA | 2009 | 2008 |
| £'000 | £'000 | |
| Retained loss | (194) | (137) |
| Tax | - | (125) |
| Result from continuing activities before tax | (194) | (262) |
| Net interest | (15) | 2 |
| Operating result | (209) | (260) |
| Depreciation and amortisation | 207 | 137 |
| EBITDA | (2) | (123) |
Net cash outflow for the year was £32,000 (2008: £79,000) and the outflow for the second half of the year was reduced to £8,000.
Operational review
Existing clients
Towards the end of 2008, we lost three significant clients in the financial services sector from which we would have expected to generate substantial revenue during the course of this financial year. Two of these became insolvent and the third withdrew from the UK market as a consequence of the collapse of the second charge loans market.
We continue to enjoy excellent relationships with all of our remaining clients, with our software playing an integral part in their business operations.
On 29 June 2009 we announced a 5 year extension to the licence, support and maintenance agreement with First Response Finance Limited ("FRF") worth £1million. Rubicon's automated underwriting and loan processing CRM system remains pivotal to FRF's business.
Funding
During the course of the year we developed a new partner relationship with Information Systems Associates Inc ("ISA"), a United States based business providing IT asset inventory and audit services. As well as being awarded a contract for software development services, we secured investment and formed a strategic alliance in April 2009. The key elements agreed were:
In addition to this investment, we have received a significant advance payment from FRF in accordance with the licence, support and maintenance agreement referred to above. Together with the ISA investment this has strengthened the Group's cash position.
New business
We have also been broadening our client base and diversifying into new technology areas. During the year, this has included:
Rubicon's problem solving skills and experience continue to provide significant advantage to our customers. During the year, we have extended our network of sales consultants and partners and have undertaken a number of lead generation exercises with a view to growing our pipeline and reaching new clients.
Staff
On behalf of the Board, I would like to thank all of our staff for their loyalty, support and professionalism in what have been very difficult trading conditions.
Dividends
The Directors do not propose to pay a dividend for the period.
Current trading and outlook
With a strengthened post year end cash position as a result of the advance payment from FRF, clients in new sectors and strong relationships with existing clients, we are optimistic about the future and encouraged by signs of an upturn in business activity.
We have recently won a project in a competitive tender against major international consultancies and this may lead to significant revenues in the future. More generally, as current projects mature, we would expect to grow our recurring revenues and be engaged by these clients for new projects in the future.
Having taken action to reduce costs to match the economic environment and secured sufficient funding to support our plans, we are looking to grow our revenues and extend our offerings.
The report and accounts for the year ended 30 June 2009 will be posted to Shareholders shortly including a notice convening the Annual General Meeting to be held at Rubicon House, Guildford Road, West End, Surrey, GU24 9PW, on 15 December 2009 at 13.30.
Robert Burnham
Chairman
13 November 2009
Report of the Directors
The Directors present their report and the financial statements of the Group for the year ended 30 June 2009.
Principal activity and business review
The Group is principally engaged in consultancy and design, development and provision of computer software. The Group's services and solutions are sold to customers in a variety of sectors to automate business processes relating to client interaction, workflow management, Internet, Intranet and Local Area Network based solutions.
During the year the Group continued to concentrate on the sale and distribution of its products whilst maintaining an appropriate level of product development to ensure the future success of the business.
Strategy
During the course of the year, we have continued to review our strategy in order to maximise our opportunities, researching new markets, products and services to enable the business to grow profitably.
Business review
A review of the Group's performance in the year to 30 June 2009 and its current trading and outlook is contained in the Chairman's Statement.
The Key Performance Indicators used by the Group during the year were:
Revenue
Revenue fell 29% from £1,231,000 in 2008 to £874,000 in 2009. As outlined in last year's annual report and the interim statement, we have faced the loss of 3 existing clients in the last 12 months, resulting in a reduction of both recurring and consultancy revenue for the period. This was partially offset by new software development project wins.
Operating costs
Operating costs in the year, excluding depreciation and amortisation, were reduced by £478,000 (35%) to £876,000. This decrease was largely as a result of reduced headcount and a renegotiation of office rent. There was a total of £17,000 of bad debts expense in the year (2008: £65,000) arising from a customer not paying for development work undertaken.
Loss for the year
The Group loss in 2009 was £194,000 (2008: £137,000) with the reduction relating to prior year tax credits received in 2008 that were not repeated in the current year.
Intangible assets
During the year the Group capitalised £39,000 (2008: £213,000) of development costs. These will be amortised over the three years following completion in line with the current intangible assets amortisation policy.
Cash and treasury
The Group generated net cash outflows of £8,000 in the second half of 2009 having incurred net outflows of £24,000 in the first half. The net outflow for the year was £32,000 (2008: outflow £79,000).
As detailed in the Chairman's statement, on 22 April 2009 Rubicon received an investment of £50,000, before associated expenses, from ISA in consideration of 2,500,000 shares, which equates to 6.2% of the issued share capital.
Results and dividends
The trading results for the year and the Group's and Company's financial position at the end of the year are shown in the attached financial statements.
The Directors do not propose the payment of a dividend.
Financial risk management objectives and policies
The Group's financial risk management objectives are detailed in note 14.
Directors
The Directors who served the Company during the year were:
Robert Burnham (Non-executive Chairman)
Alistair Hancock (Chief Executive Officer)
Mark Peters (Commercial Director) (resigned 31 August 2008)
Richard Blakesley (Non-executive Director)
David Webber (Non-executive Director)
Andrew Kirby (Finance Director) (appointed 15 October 2008)
Directors' interests
The beneficial interests of the Directors holding office at 30 June 2009 in the shares of the Company at that date are set out below, together with their holdings at 1 July 2008 or date of appointment if later.
| 30 June 2009 | 1 July 2008 | |||
| Ordinary shares | Ordinary shares | |||
| Issued | Options | Issued | Options | |
| number | number | number | number | |
| Robert Burnham | 635,556 | 375,000 | 360,556 | 375,000 |
| Alistair Hancock | 11,438,572 | - | 11,438,572 | - |
| Richard Blakesley | 11,950,041 | - | 11,950,041 | - |
| David Webber | 547,214 | - | 390,000 | - |
| Andrew Kirby | - | - | - | - |
Robert Burnham's share options are exercisable in three tranches. The first of 186,500 is exercisable 12 months after the date of grant, the second and third of 93,250 each are exercisable 24 and 36 months after the date of grant.
Substantial shareholders
At 31 October 2009 the Company has been notified that the following held or were beneficially interested in three per cent of more of the issued share capital of the Company.
| Ordinary shares | % of current issued share capital | |
| Richard Blakesley | 11,950,041 | 29.73 |
| Alistair Hancock | 11,438,572 | 28.45 |
| Mark Peters | 3,682,720 | 8.89 |
| Information Systems Associates Inc | 2,500,000 | 6.22 |
| Gavin Jones | 1,429,821 | 3.73 |
Employees
Where appropriate, the Directors keep all employees informed of strategic, commercial, financial and human resource matters.
In order to help align the aspirations of our employees to the objectives of the Group, the majority are either shareholders or have share options enabling them to benefit from long term equity growth.
The Group recognises its responsibility to ensure the fair treatment of all employees, regardless of any physical disability, gender, religion, race or nationality.
Payment policy and practice
It is the Group's policy to agree the terms of payment with suppliers when entering into a transaction and to pay suppliers within these terms. Average creditor days for the financial year were 58 days (2008: 43 days).
Environment
The Group aims to maintain good environmental good practices in all of its activities. Although there are no formal environmental policies, all employees are encouraged to conduct themselves in an environmentally considerate manner.
Qualifying third party indemnity provision
During the financial year, a qualifying third party indemnity provision for the benefit of all of the Directors was in force.
Post balance sheet event
On 17 July 2009, FRF paid Rubicon £300,000 plus VAT against a £1million five year licence, support and maintenance contract due to commence on 1 July 2009. The associated revenue will be recognised in the relevant accounting periods in accordance with the policy for the recognition of annual licence revenue.
Annual General Meeting
The Notice convening the Annual General Meeting ("AGM") together with the proposed resolutions is contained in the document accompanying this report. The AGM will be held on 15 December 2009.
Auditor
A resolution to re-appoint Grant Thornton UK LLP as auditor for the ensuing year will be proposed at the AGM in accordance with section 489 of the Companies Act 2006.
BY ORDER OF THE BOARD
Andrew Kirby
Secretary
13 November 2009
Statement of Directors' Responsibilities in respect of the Annual Report and financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and applicable law. The Directors have elected to prepare the Company financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice - UK GAAP).
The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have a general responsibility for taking such steps as are reasonably open to then to safeguarding the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In so far as each of the Directors are aware; there is no relevant audit information of which the Group's auditor is unaware; and the Directors have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
Corporate governance
The Directors recognise the importance of sound corporate governance, whilst taking into account the size and nature of the Company.
The Company has three Non-executive Directors. Richard Blakesley and David Webber are considered to be 'independent' within the definition contained in the Combined Code. Robert Burnham is not considered 'independent' because of his day to day involvement in the management of the business. The Board retains full and effective control over the Company. The Company holds regular Board meetings at which financial, operational and other reports are considered and, where appropriate, voted on. Apart from regular meetings, additional meetings will be arranged when necessary to review strategy, planning, operations, financial performance, risk, capital expenditure, human resource and environmental management. The Board is also responsible for monitoring the activities of the executive management. To enable the Board to perform its duties, all Directors will have full access to all relevant information. If necessary the Non-executive Directors may take independent professional advice at the Group's expense.
The Board met on eleven occasions in the current financial year including attendance by telephone.
The Directors have established an audit committee and a remuneration committee with formally delegated duties and responsibilities. The Directors have not established a nominations committee as all new appointments will require the approval of all Directors.
The audit committee
The audit committee which comprises David Webber, Robert Burnham and Richard Blakesley, is chaired by David Webber and meets at least twice a year. The committee reviews the Group's annual and interim financial statements, including meeting with the auditor before submission to the Board for approval. The committee also reviews regular reports from management on accounting and internal control matters. Where appropriate, the committee monitors the progress of action taken in relation to such matters. The committee also recommends the appointment of, and reviews the fees of, the external auditor.
The committee met twice during the year, all members were present.
The remuneration committee
The remuneration committee which comprises Richard Blakesley, Robert Burnham and David Webber, is chaired by Richard Blakesley and usually meets twice a year. It is responsible for reviewing the performance of the Executive Directors and for setting the scale and structure of their remuneration, paying due regard to the interests of Shareholders as a whole and the performance of the Group. The remuneration committee also determines allocations of any warrants or options granted under any share option scheme adopted by the Company in the future and is responsible for setting any performance criteria relevant to such warrants or options.
The Directors comply with Rule 21 of the AIM Rules relating to Directors' dealings and take all reasonable steps to ensure compliance by the Company's applicable employees. The Company has adopted and operates a share dealing code for Directors and employees in accordance with the AIM Rules.
The committee met once during the year, all members were present.
Internal control
The Board is responsible for maintaining a sound system of internal control to safeguard Shareholders' investment and the Group's assets and for reviewing its effectiveness. Such a system is designed to manage, but not eliminate, the risk of failure to achieve business objectives. There are inherent limitations in any control system and accordingly even the most effective system can provide only reasonable, not absolute, assurance against material misstatement or loss.
The Board reviews the effectiveness of the Group's systems of internal control on an ongoing basis. Annual budgets are prepared and detailed monthly management reports are presented to the Board and used to monitor financial performance and compliance with the Group's policies and procedures. All controls are covered including financial, operational and controls to manage risk. The monthly Board meetings are also used to consider the Group's major risks.
Internal audit
The Board reviews from time to time the need for an internal audit function and remains of the opinion that the systems of internal financial control are appropriate to the Group's size and present activities and an internal audit function is not necessary.
Going concern
The Board has reviewed the performance for the current year and forecasts for future periods. Based on this current information, the Board believes that the Group will continue in operational existence for the foreseeable future. On these grounds, the Board has continued to adopt the going concern basis for the preparation of the financial statements.
We have audited the Group financial statements of Rubicon Software Group Plc for the year ended 30 June 2009 which comprise the principal accounting policies, the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Group's members, as a body, in accordance with Sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Group's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/UKNP.
Opinion on financial statements
In our opinion the Group financial statements:
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
Other matter
We have reported separately on the parent company financial statements of Rubicon Software Group Plc for the year ended 30 June 2009.
James Rogers
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered AccountantsSlough
13 November 2009
Principal accounting policies
General information
Rubicon Software Group Plc is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. Rubicon Software Group Plc's shares are quoted on the AIM Market of the London Stock Exchange.
Basis of Group accounting
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the EU.
The financial statements have been prepared under the historical cost convention. The measurement bases and principal accounting policies of the Group are set out below.
The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 30 June 2009.
The financial statements are being prepared on a going concern basis which the Directors believe to be appropriate.
The Directors have considered the recent trading activity of the Group in conjunction with detailed forecasts for the 12 month period following the date of these accounts. These detailed forecasts reflect the strengthened post year end cash position, the recurring revenue base, less reliance on new business wins as well as the action taken during the year to reduce costs to match the current economic environment.
Note 14 to the financial statements include details of the financial instruments and exposure to credit risk and liquidity risk.
Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary companies drawn up to 30 June 2009. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.
Unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
The results and net assets of subsidiary companies acquired in June 2006 are included in the consolidated income statement and consolidated balance sheet using the merger method of accounting, as explained subsequently in the principal accounting policies.
Reverse acquisition accounting
In June 2006 the Company became the legal parent of Rubicon Software Limited and its subsidiaries in a share for share transaction. The Company's continuing operations and executive management were those of Rubicon Software Limited. Accordingly, the substance of the combination was that Rubicon Software Limited had acquired Rubicon Software Group Plc in a reverse acquisition.
Under reverse acquisition accounting an adjustment within shareholders funds is required to eliminate the cost of acquisition in the issuing company's books, and introduce a notional cost of acquiring the smaller issuing company based on the fair value of its shares. A further adjustment is required to show the share capital of the legal parent in the consolidated balance sheet rather than that of the acquirer. The resulting differences have been debited to the Merger Reserve.
Investments in subsidiaries
Investments in subsidiary companies are included at cost less provision for impairment.
Investments in associates
Associates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognised at cost and subsequently accounted for using the equity method.
Acquired investments in associates are subject to the equity method. However, any goodwill or fair value adjustment attributable to the Group's share in the associate is included in the amount recognised as investment in associates.
All subsequent changes to the Group's share of interest in the equity of the associate are recognised in the carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are reported within 'Share of profit from equity accounted investments' in profit or loss. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments of assets and liabilities.
The Group's share of post acquisition profit or loss of its associate is recognised in the income statement and its share of post acquisition movement in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment, when the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables; the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognised.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment losses from a group perspective.
Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies of the Group.
Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT and trade discounts.
Revenue is recognised as set out below:
Consultancy and software development contracts
Consultancy and software development contracts are recognised in line with the performance of the contract, typically:
Licence income - perpetual
If the sale is unconditional and the revenue earned is non-refundable, the value of software licence income is taken to the income statement in full upon delivery of the software to the client as this point represents full performance of the sale. If the sale is conditional then the value of the software licence income is taken to the income statement once user acceptance has been achieved, which binds the transaction as non-refundable.
Licence income - Annual or any other term
The value of software licence income is recognised evenly over the contracted licence period.
Support and maintenance
Support and maintenance income is recognised evenly over the contract term.
Share-based payment
The Company operates equity-settled share-based remuneration plans for certain employees (including Directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed to the income statement on a straight-line basis over the vesting period, together with a corresponding increase in equity (via a credit to the share option reserve), based upon the company's estimate of the shares that will eventually vest.
Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee.
Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate to share premium.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment.
Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
Leasehold improvements 10%
Office equipment 25%
Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued. The useful economic life of the asset is also reviewed regularly.
Software research and development costs
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.
Development costs incurred on specific projects are capitalised when they can be reliably measured and the projects to which they are attributable are separately identifiable, are technically feasible, demonstrate future economic benefit, and will be used or sold by the Group once completed. Development costs not meeting the criteria for capitalisation are expensed as incurred. Following completion of the development the capitalised cost is amortised on a straight line basis over the period during which the Group is expected to benefit, typically three years. This is shown separately in the income statement.
The cost of internally generated software comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include; third party costs and employee costs incurred on software development, along with an appropriate portion of relevant overheads.
Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.
Impairment of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.
Leased assets
In accordance with International Accounting Standard ("IAS") 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.
Rental income in respect of operating leases is recognised on a straight line basis over the lease term.
Pension costs
The Group provides a defined contribution pension scheme for all Directors and employees.
A defined contribution scheme is a pension scheme under which the Group pays fixed contributions to an independent entity. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution.
The assets of the scheme are held separately from those of the Group. The annual contributions payable are charged to the income statement.
Taxation
Current tax is the tax currently payable or receivable based on the result for the period.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits.
Equity
Equity comprises the following:
Financial assets
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. The Group currently only has loans and receivables in these financial statements.
Loans receivable are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.
Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the assets' carrying amount and the present value of estimated future cash flows.
An assessment for impairment is undertaken on each financial asset at least at each balance sheet date.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are categorised as at 'fair value' through profit or loss and 'amortised cost'. The Group currently has no liabilities categorised as 'fair value' through profit or loss.
Other financial liabilities are initially recognised at fair value, net of transaction costs, and are subsequently recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in financial cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on the accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.
The Group's financial liabilities include borrowings, trade and other payables.
Management of capital
The Group's objectives when managing capital are:
to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group sets the level of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
Significant judgements and estimates
In making their judgment with regard to going concern, the Directors have considered the recent trading activity of the Group in conjunction with detailed forecasts for the 12 month period following the date of these accounts.
The useful life assumption of intangible assets is disclosed in the software development accounting policy.
Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.
Standards in issue but not yet effective
IAS 1 - Presentation of Financial Statements (revised 2007) (effective 1 January 2009).
IAS 1 - (Amendment) Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009).
IAS 23 - Borrowing Costs (revised 2007) (effective 1 January 2009).
IAS 27 - Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009).
IAS 27 - (Amendment) Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009).
IAS 32 - (Amendment) Financial Instruments: Presentation.
IAS 39 - (Amendment) Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009).
IFRS 1 - (Amendment) First-time Adoption of International Financial Reporting Standards.
IFRS 2 - (Amendment) Share-based Payment - Vesting Conditions and Cancellations (effective 1 January 2009).
IFRS 3 - Business Combinations (Revised 2008) (effective 1 July 2009).
IFRS 8 - Operating Segments (effective 1 January 2009).
IFRIC 15 - Agreements for the Construction of Real Estate (effective 1 January 2009).
IFRIC 16 - Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008).
IFRIC 17 - Distributions of Non-cash Assets to Owners (effective 1 July 2009).
IFRIC 18 - Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009).
None of these standards will have an impact on the Group's financial statements except IAS 1, the effect of which will be that it will have an impact on the presentation of the Group financial statements going forward.
Consolidated income statement
| | Notes | 2009 £ | 2008 £ | |
| Revenue | 1 | 874 | 1,231 | |
| Other operating income | 2 | - | 14 | |
| Depreciation and amortisation | | (207) | (137) | |
| Other operating charges | | (876) | (1,368) | |
| | | | | |
| Operating result | 3 | (209) | (260) | |
| | | | | |
| | | | | |
| Finance income | | 18 | 1 | |
| Finance charges | 6 | (3) | (3) | |
| | | | | |
| Result from continuing activities before tax | (194) | (262) | | |
| | | | | |
| Loss per share | | Pence | Pence | |
| Basic and diluted | 8 | (0.5) | (0.4) | |
All of the activities of the Group are classed as continuing.
The accompanying accounting policies and notes form part of these financial statements.
Consolidated balance sheet
| Notes | 2009 £ | 2008 £ | |
| Assets | |||
| Non-current assets | |||
| Trade and other receivables due after one year | 11 | - | 15 |
| Property, plant and equipment | 10 | 18 | 32 |
| Intangible assets | 9 | 226 | 380 |
| 244 | 427 | ||
Current assets
| Trade and other receivables due within one year | 11 | 198 | 272 |
| 198 | 272 | ||
| Total assets | 442 | 699 | |
Equity
| Called up equity share capital | 18 | 402 | 377 |
| Share premium account | 413 | 393 | |
| Share option reserve | 15 | 13 | |
| Merger reserve | 596 | 596 | |
| Retained earnings | 20 | (1,281) | (1,087) |
| Total equity | 145 | 292 | |
| Liabilities | |||
| Non-current liabilities | |||
| Trade and other payables | 13 | 1 | 4 |
| 1 | 4 | ||
| Current liabilities | |||
| Trade and other payables | 12 | 296 | 403 |
| 296 | 403 | ||
| Total liabilities | 297 | 407 | |
| Total liabilities and equity | 442 | 699 |
These financial statements were approved by the Directors on 13 November 2009and are signed on their behalf by:
A Kirby
Director
The accompanying accounting policies and notes form part of these financial statements.
Consolidated cash flow statement
| Notes | 2009 £ | 2008 £ | |
| Operating activities | |||
| Result for the period before tax and finance costs | (209) | (260) | |
| Amortisation of intangible assets | 193 | 122 | |
| Depreciation of property, plant and equipment | 14 | 15 | |
| Change in trade and other receivables | 55 | 261 | |
| Change in trade and other payables | (153) | (90) | |
| Share option charges | 2 | 4 | |
| Taxes received | 33 | 91 | |
| Cash flows from operating activities | (65) | 143 | |
| Investing activities | |||
| Purchase of property, plant and equipment | - | (7) | |
| Additions to intangible assets | (39) | (213) | |
| Interest received | 18 | 1 | |
| Net cash used in investing activities | (21) | (219) | |
| Financing activities | |||
| Proceeds from the issue of shares | 45 | - | |
| Directors loan | 15 | - | |
| Finance lease payments | (3) | - | |
| Interest paid | (3) | (3) | |
| Net cash movement from financing | 54 | (3) | |
| Net movement in cash | (32) | (79) | |
| Opening cash balance | (22) | 57 | |
| Closing cash balance | (54) | (22) | |
The accompanying accounting policies and notes form part of these financial statements.
Consolidated statement of changes in equity
| Share capital | Share premium | Share options reserve | Merger reserve | Retained earnings | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 July 2007 | 377 | 393 | 9 | 596 | (950) | 425 |
| Loss for the period | - | - | - | - | (137) | (137) |
| Share options | - | - | 4 | - | - | 4 |
| Balance at 30 June 2008 | 377 | 393 | 13 | 596 | (1,087) | 292 |
| Balance at 1 July 2008 | 377 | 393 | 13 | 596 | (1,087) | 292 |
| Loss for the period | - | - | - | - | (194) | (194) |
| Share issue | 25 | 20 | - | - | - | 45 |
| Share options | - | - | 2 | - | - | 2 |
| Balance at 30 June 2009 | 402 | 413 | 15 | 596 | (1,281) | 145 |
Notes to the financial statements
1 Segment reporting
The revenue and loss before tax are attributable to the one principal activity of the Group being software development in the United Kingdom. An analysis of revenue is given below:
| | 2009 | 2008 |
| | £’000 | £’000 |
| United Kingdom | 874 | 1,231 |
| | ======== | ======== |
2 Other operating income
| | 2009 | 2008 |
| | £’000 | £’000 |
| Other operating income | - | 14 |
| | ======== | ======== |
In 2008 other operating income consisted of £14,000 of rent receivable in respect of operating leases. This agreement was terminated in November 2007 and consequently there was no operating income in the year ended 30 June 2009.
3 Operating result
This is stated after charging:
| | 2009 | 2008 |
| | £’000 | £’000 |
| Share-based payment | 2 | 4 |
| Amortisation of intangible assets | 193 | 122 |
| Depreciation of owned property, plant and equipment | 11 | 10 |
| Depreciation of assets held under finance leases and hire purchase agreements | 3 | 5 |
| Fees payable to the Company’s auditor for: the audit of the Group’s annual accounts | 17 | 20 |
| Tax services | 3 | 5 |
| Other accounting services | 2 | 1 |
| Operating lease costs: | | |
| - Buildings | 49 | 110 |
| | ======== | ======== |
4 Directors and employees
| The average number of staff employed by the Group during the financial year amounted to: | 2009 | 2008 |
| | Number | Number |
| | 12 | 17 |
| | ============ | ============ |
| The aggregate payroll costs of the above were: | 2009 | 2008 |
| | £’000 | £’000 |
| Wages and salaries | 519 | 764 |
| Social security costs | 54 | 86 |
| Other pension costs | 14 | 16 |
| | ------------ | ------------ |
| | 587 | 866 |
| Capitalised development costs | (39) | (213) |
| | ------------ | ------------ |
| | 548 | 653 |
| | ============ | ============ |
5 Directors and key management
| Remuneration in respect of directors was as follows: | 2009 | 2008 |
| | £’000 | £’000 |
| Emoluments receivable | 268 | 297 |
| Share based payment | 2 | 2 |
| Value of Group pension contributions to money purchase schemes | 5 | 7 |
| | ----------------- | ----------------- |
| | 275 | 306 |
| | ============ | ============ |
| | | |
| Emoluments of highest paid director: | 2009 | 2008 |
| | £’000 | £’000 |
| Emoluments receivable | 112 | 97 |
| Value of Group pension contributions to money purchase schemes | 3 | 3 |
| | ------------ | ------------ |
| | 115 | 100 |
| | ============ | ============ |
| The number of directors who are accruing benefits under Group pension schemes is as follows: | 2009 | 2008 |
| | Number | Number |
| Money purchase schemes | 2 | 3 |
| | ============ | ============ |
| | | |
| Remuneration in respect of key management including directors was as follows: | 2009 | 2008 |
| | £’000 | £’000 |
| Emoluments receivable | 329 | 380 |
| Value of Group pension contributions to money purchase schemes | 6 | 9 |
| | ------------ | ------------ |
| | 335 | 389 |
| | ============ | ============ |
6 Finance charges
| | 2009 | 2008 |
| | £’000 | £’000 |
| Interest payable on bank borrowing | 2 | 2 |
| Finance charges | 1 | 1 |
| | ------------ | ------------ |
| | 3 | 3 |
| | ============ | ============ |
7 Income tax
| | 2009 | 2008 |
| | £’000 | £’000 |
| Corporation tax credit | - | (34) |
| Adjustment to tax in respect of previous periods | - | (91) |
| | ------------ | ------------ |
| | - | (125) |
| | ============ | ============ |
Factors affecting current tax credit
| | 2009 | 2008 |
| | £’000 | £’000 |
| Loss on ordinary activities before taxation | (194) | (262) |
| | ============ | ============ |
| Loss on ordinary activities multiplied by the small company rate of corporation tax in the UK of 21% (2008: 19%) | (41) | (50) |
| Expenses not deductible for tax purposes | 42 | 2 |
| Enhanced expenditure | - | (20) |
| Other timing differences not recognised | 3 | 23 |
| Adjustment to tax in respect of previous periods | - | (91) |
| Tax at a different rate | - | 6 |
| Increased tax losses | (4) | 5 |
| | ----------------- | ----------------- |
| Total current tax credit | - | (125) |
| | ============ | ============ |
8 Loss per share
| | 2009 | 2008 |
| | £’000 | £’000 |
| Loss attributable to ordinary shareholders | (194) | (137) |
| | ============ | ============ |
| | | |
| Weighted average number of shares (basic) | 37,962,092 | 37,699,995 |
| | | |
| Basic loss per share | (0.5)p | (0.4)p |
| | | |
At 30 June 2009, the Company had 1,513,750 share options outstanding. None of these options were exercised in the period. The options are anti-dilutive because the Group is loss making.
9 Intangible assets
| | Development expenditure |
| | £’000 |
| Carrying amount 1 July 2007 | 289 |
| Additions | 213 |
| Amortisation charge for the year | (122) |
| | ------------ |
| Carrying amount at 30 June 2008 | 380 |
| | ============ |
| Additions | 39 |
| Amortisation charge for the year | (193) |
| | ------------ |
| Carrying amount at 30 June 2009 | 226 |
| | ============ |
Amortisation charged on intangible assets is included within depreciation and amortisation in the consolidated income statement.
| | Leasehold improvements | Office equipment | Total |
| | £’000 | £’000 | £’000 |
| Cost at 1 July 2007 | 60 | 197 | 257 |
| Additions | - | 7 | 7 |
| | ------------ | ------------ | ------------ |
| Cost at 30 June 2008 | 60 | 204 | 264 |
| Additions | - | - | - |
| | ------------ | ------------ | ------------ |
| Cost at 30 June 2009 | 60 | 204 | 264 |
| | ============ | ============ | ============ |
| Depreciation at 1 July 2007 | 42 | 175 | 217 |
| Charge for the year | 6 | 9 | 15 |
| | ------------ | ------------ | ------------ |
| Depreciation at 30 June 2008 | 48 | 184 | 232 |
| Charge for the year | 6 | 8 | 14 |
| | ------------ | ------------ | ------------ |
| Depreciation at 30 June 2009 | 54 | 192 | 246 |
| | ============ | ============ | ============ |
| | | | |
| Net book value at 1 July 2007 | 18 | 22 | 40 |
| | ============ | ============ | ============ |
| Net book value at 30 June 2008 | 12 | 20 | 32 |
| | ============ | ============ | ============ |
| Net book value at 30 June 2009 | 6 | 12 | 18 |
| | ============ | ============ | ============ |
Included within the net book value of £18,000 is £5,000 (2008: £8,000) relating to assets held under finance leases and hire purchase agreements. The depreciation charged to the financial statements in the year in respect of such assets amounted to £3,000 (2008: £5,000).
11 Trade and other receivables
| | 2009 | 2008 |
| | £’000 | £’000 |
| Trade and other receivables due within one year | | |
| Trade receivables | 63 | 108 |
| Prepayments and accrued income | 64 | 36 |
| Other receivables | 71 | 128 |
| | ------------ | ------------ |
| | 198 | 272 |
| | ============ | ============ |
| Trade and other receivables due after one year | | |
| Trade receivables | - | 15 |
| | ------------ | ------------ |
| | - | 15 |
| | ============ | ============ |
Some of the unimpaired trade receivables are past due as at the reporting date. Financial assets past due but not impaired can be shown as follows:
| | 2009 | 2008 |
| | Past due but not impaired £’000 | Past due but not impaired £’000 |
| Trade receivables | | |
| Less than 60 days | 58 | 43 |
| More than 60 days | 5 | 14 |
| | ------------ | ------------ |
| | 63 | 57 |
| | ============ | ============ |
All amounts are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
An amount of £4,100 has been provided in the current year for a specific piece of work that has been under dispute since August 2008 (2008: £7,000).
12 Trade and other payables - current
| | 2009 | 2008 |
| | £’000 | £’000 |
| Bank overdraft | 54 | 22 |
| Trade payables | 51 | 88 |
| Other taxation and social security | 57 | 87 |
| Amounts due under finance leases and hire purchase agreements | 3 | 4 |
| Other payables | 15 | 11 |
| Deferred income | 31 | 150 |
| Accruals | 85 | 41 |
| | ------------ | ------------ |
| | 296 | 403 |
| | ============ | ============ |
Included in other payables as at 30 June 2009 is a Director's loan of £15,000. The loan was interest free for the purpose of providing short term working capital to the business whilst awaiting a significant client payment. The loan was repaid on 4 August 2009. The fair value of the Director's loan is not materially different from the carrying value.
13 Trade and other payables - Non current
| | 2009 | 2008 |
| | £’000 | £’000 |
| Amounts due under finance leases and hire purchase agreements | 1 | 4 |
| | ============ | ============ |
14 Financial instruments and derivatives
The Group's principal financial instruments comprise cash and bank overdrafts. The purpose of these financial instruments is to finance the Group's operations. The Group has other financial assets and liabilities that arise directly from its operations, such as trade and other receivables and payables.
The Group does not enter into derivative transactions such as forward foreign currency contracts.
The main risks arising from the Group's financial instruments are credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.
Credit risk
The credit risk is the carrying amount of the financial assets as shown in note 11.
The Group's trade and other receivables are actively monitored to avoid a significant concentration of credit risk.
Liquidity risk
The Group monitors its liquidity position actively to ensure the business has sufficient resources to meet its requirements and to invest cash assets safely and profitably.
At 30 June 2009 the Group maintained an overdraft facility with its bank and managed cash balances within this facility. This facility was closed on 22 July 2009 as the Group did not believe that it was necessary for the business to maintain a facility in the future.
Market risk
The Group considers its exposure to interest rate and foreign exchange to be immaterial.
Fair values
The Directors consider that the fair value of all the financial assets and liabilities is the same as the carrying value in the financial statements.
The financial asset categorisation is presented as follows:
| | Non- financial assets | Loans and receivables | Total |
| 2008 | £’000 | £’000 | £’000 |
| | | | |
| Trade and other receivables | 36 | 251 | 287 |
| Other non-financial assets | 412 | - | 412 |
| | ------------ | ------------ | ------------ |
| Total | 448 | 251 | 699 |
| | ============ | ============ | ============ |
| | Non- financial assets | Loans and receivables | Total |
| 2009 | £’000 | £’000 | £’000 |
| | | | |
| Trade and other receivables | 64 | 134 | 198 |
| Other non-financial assets | 244 | - | 244 |
| | ------------ | ------------ | ------------ |
| Total | 308 | 134 | 442 |
| | ============ | ============ | ============ |
The disclosure of the carrying value in respect of IAS39 categorisation of financial liabilities is as follows:
| | Other financial liabilities at amortised cost | Liabilities not within scope of IAS39 | Total |
| 2008 | £’000 | £’000 | £’000 |
| | | | |
| Trade and other payables | 279 | 98 | 377 |
| Bank overdraft | 22 | - | 22 |
| Finance lease liability - current | - | 4 | 4 |
| Finance lease liability – non-current | - | 4 | 4 |
| | ------------ | ------------ | ------------ |
| Total | 301 | 106 | 407 |
| | ============ | ============ | ============ |
| | Other financial liabilities at amortised cost | Liabilities not within scope of IAS39 | Total |
| 2009 | £’000 | £’000 | £’000 |
| | | | |
| Trade and other payables | 167 | 72 | 239 |
| Bank overdraft | 54 | - | 54 |
| Finance lease liability - current | - | 4 | 4 |
| | ------------ | ------------ | ------------ |
| Total | 221 | 76 | 297 |
| | ============ | ============ | ============ |
Contractual un-discounted cash flows in respect of financial liabilities are as follows:
| | 0-90 days | 91 days to 12 months | 13 months to 3 years | Total |
| | £’000 | £’000 | £’000 | £’000 |
| Trade payables | 17 | 34 | - | 51 |
| Bank overdraft | 54 | - | - | 54 |
| Finance lease liabilities | - | 3 | 1 | 4 |
| | ------------ | ------------ | ------------ | ------------ |
| Total | 71 | 37 | 1 | 109 |
| | ============ | ============ | ============ | ============ |
15 Commitments under finance leases and hire purchase agreements
Future commitments under finance leases and hire purchase agreements are as follows:
| | Within 1 year | 1 to 5 years | Total |
| 2009 | £’000 | £’000 | £’000 |
| Net present values | 3 | 1 | 4 |
| | ------------ | ------------ | ------------ |
| Lease payments | 3 | 1 | 4 |
| | ============ | ============ | ============ |
| | Within 1 year | 1 to 5 years | Total |
| 2008 | £’000 | £’000 | £’000 |
| Net present values | 4 | 4 | 8 |
| | ----------------- | ----------------- | ----------------- |
| Lease payments | 4 | 4 | 8 |
| | ============ | ============ | ============ |
| | 2009 | 2008 |
| Finance leases and hire purchase agreements are analysed as follows: | £’000 | £’000 |
| Current obligations | 3 | 4 |
| Non-current obligations | 1 | 4 |
| | ----------------- | ----------------- |
| | 4 | 8 |
| | ============ | ============ |
Amounts due under finance leases and hire purchase agreements are secured on the assets to which they relate.
16 Leasing commitments
At 30 June 2009 the Group had commitments under non-cancellable operating leases as set out below:
| | 2009 | 2008 |
| | Buildings | Buildings |
| | £’000 | £’000 |
| Operating leases which expire: | | |
| Within 1 year | 56 | 113 |
| Within 2 to 5 years | - | 112 |
| | ----------------- | ----------------- |
| | 56 | 225 |
| | ============ | ============ |
17 Deferred taxation
The amounts unprovided for deferred taxation are set out below:
| | 2009 | 2008 | ||
| | Provided | Unprovided | Provided | Unprovided |
| | £’000 | £’000 | £’000 | £’000 |
| Tax losses available | - | 118 | - | 120 |
| | ============ | ============ | ============ | ============ |
18 Share capital
| | 2009 | 2008 |
| Authorised share capital: | £’000 | £’000 |
| | | |
| 100,000,000 Ordinary shares of 1p each | 1,000 | 1,000 |
| | ============ | ============ |
| | 2009 | 2008 | ||
| Allotted, called up and fully paid: | Number | £’000 | Number | £’000 |
| Ordinary shares of 1p each | 40,199,995 | 402 | 37,699,995 | 377 |
| | ============ | ============ | ============ | ============ |
On 21 May 2009, the Company issued 2,500,000 new ordinary shares to ISA at a price of 2p per share, corresponding to 6.6% of total shares issued. Proceeds received in excess of the nominal value of the shares, net of associated issue expenses totalling £4,906, are included in share premium.
19 Share options
The Group adopted the Rubicon Software Group EMI Scheme 2006 on 8 June 2006.
An aggregate of 3,278,000 options have been granted to employees of the Group, in return for such employees releasing certain earlier EMI schemes options which were granted to them by Rubicon Software Limited. This is the only share incentive scheme of the Group currently in place.
| Weighted average exercise price (p) | 30 June 2009 | Weighted average exercise price (p) | 30 June 2008 | |
| Outstanding at 1 July | 2.1 | 1,763,750 | 3.6 | 3,278,000 |
| Lapsed during the year | 0.1 | (250,000) | 5.5 | (1,514,250) |
| Number of outstanding options at 30 June | 2.2 | 1,513,750 | 2.1 | 1,763,750 |
As at 30 June 2009, there were 1,513,750 share options outstanding (2008: 1,763,750). Of these, 756,875 were capable of being exercised (2008: 881,875). The Black-Scholes valuation methodology was used for the valuation of all options.
20 Retained earnings
| | 2009 | 2008 |
| | £’000 | £’000 |
| Balance brought forward | (1,087) | (950) |
| Loss for the financial year | (194) | (137) |
| | ----------------- | ----------------- |
| Balance carried forward | (1,281) | (1,087) |
| | ============ | ============ |
21 Related party transactions
Director's fees of £24,000 were paid to David Webber and Richard Blakesley in respect of their non-executive duties (2008: £21,000).
At the year end, other payables were made up of a loan from Richard Blakesley of £15,000. The loan was interest free for the purpose of providing short term working capital to the business whilst awaiting a significant client payment. The loan was repaid on 4 August 2009.
For the period 20 November 2000 to 14 August 2009 Alistair Hancock provided a personal guarantee of £68,866 to NatWest Bank in relation to the bank overdraft facility. This personal guarantee has now been removed.
In the prior year, Virtual Sonar Limited was a company that was considered a related party due to the fact that certain Directors of Rubicon Software Plc also held shares in that company. On 16 October 2008, 41.3% of the shares in Virtual Sonar Limited were transferred from Alistair Hancock and Mark Peters to the Group for no consideration. During the year ended 30 June 2009, the Group also carried out £5,815 of consultancy for Virtual Sonar Limited, an associate company. At 30 June 2009 there were no balances outstanding.