Learning Technologies Group Regulatory News (LTG)

27 September 2013

IN-DEED ONLINE PLC

("In-Deed" or the "Company")

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2013

Chairman's Review

As predicted in the half year results of the Company, the winter of 2012/13 proved to be a testing environment for the Company's licensed conveyancing business, Runnett & Co Limited ('Runnett'). The seasonal downturn conspired with reduced activity from key customers, to produce material losses which had to be funded by cash loans from the Company. The ability to recover from these set backs was hampered by the loss of several senior key staff. In light of the low margins on the volume business it was concluded that efficiency gains were required which would come from operational improvements and a new IT system. The Company's detailed review of this significant investment, together with prospective returns, led the Board to question the financial viability of the Runnett business and the Company's business overall. The online volumes, whilst growing, remained relatively small and unprofitable, taking overheads into account.

As part of a detailed review, the Board appointed BDO LLP to examine its strategic options. These concluded that a sale of Runnett was the best option for Shareholders, with a sale to Runnett's management the only feasible route given the fragile nature of certain customer relationships. The Company therefore agreed to sell Xanther, the intermediate holding company of Runnett, to the Purchaser for £1 with a reverse premium of £325,000 which will support restructuring of the business, meet current liabilities and future losses. An insolvent closure was considered but due to certain payments under the earn out with the Original Vendors plus a possible requirement to put 'run off' insurance cover in place, the Board considered was in the best interests of Shareholders to conclude a solvent sale with the reverse premium. The sale was approved by shareholders and completed on 2 July 2013.

Without Runnett, the online business of the Company lacked critical mass and remained loss making. The Board therefore included the intellectual property behind the Company's website in the disposal thereby enabling the quickest closure and elimination of costs at the Company. Following completion of the disposal only two employees remain in the Company (being the executive Directors) and the sale of the intellectual property behind the website means the closure of the Company's business could be concluded quickly and with less cash expenditure. Following completion of the disposal the Company had approximately £800,000 of cash and no liabilities other than those relating to limited warranties and tax covenants.

Having disposed of all of its trading businesses and therefore (under Rule 15 of the AIM Rules) the company was re-classified as an Investing Company and adopted an Investing Policy, which was approved by the Shareholders. The Company has a generalist investing policy with the Company investing in all sectors. The Board has reviewed several opportunities and continue to have active discussions. It will update the market in due course.

Mailing of 2013 Annual Report and Notice of 2013 Annual General Meeting

The Annual Report of the Company for the year ended 31 March 2013 (the "Annual Report") and the Notice of 2013 Annual General Meeting (the "Notice of AGM") have been placed on the Company's website at www.in-deedplc.com and will be posted to shareholders later today.

The Company's 2013 Annual General Meeting will be held at 10am on 29 October 2013 at the offices of DWF LLP, Capital House, 85 King William Street, London, EC4N 7BL.

Enquiries

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2013

Company Statement of Comprehensive Income

For the year ended 31 March 2013

Consolidated Statement of Financial Position

As at 31 March 2013

Company Statement of Financial Position

As at 31 March 2013

Consolidated Statement of Changes in Equity

For the year ended 31 March 2013

Company Statement of Changes in Equity

For the year ended 31 March 2013

Group Statement of Cash Flows

For the year ended 31 March 2013

Company Statement of Cash Flows

For the year ended 31 March 2013

Notes to the Financial Statements

For the year ended 31 March 2013

1. General information

In-Deed Online PLC is a company incorporated in the United Kingdom. The address of its registered office and principal place of business are disclosed in the company information section of the financial statements.

The principal activity of the group is described on page 2.

2. Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board, International Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union, and the Companies Act 2006 where applicable to companies reporting under IFRSs.

3. Summary of significant accounting policies

Group and Company

The accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to each year presented unless otherwise stated.

Basis of preparation

The financial statements have been prepared under the historical cost convention.

Basis of consolidation

The group accounts consolidate the accounts of In-Deed Online PLC and all its subsidiary undertakings drawn up to 31 March.

Adoption of new and revised standards

The following standards, amendments and interpretations became effective during the year and have been adopted in these financial statements. Their adoption has not had any impact on the amounts reported in these financial statements:

IAS 1 Presentation of Financial Statements

IAS 24 Related Party Disclosures

IAS 32 Financial Instruments: Presentation

IFRS 7 Financial Instruments: Disclosures

IAS 7 Statement of Cash Flows

At the year end the following standards, amendments and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

IAS 1 Presentation of Financial Statements

IAS 12 Income Taxes

IAS 27 Separate Financial Statements

IAS 32 Financial Instruments: Presentation

IFRS 7 Financial Instruments: Disclosures

IFRS 10 Consolidated Financial Statements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

The directors have not yet had an opportunity to consider the potential impact of the adoption of these amendments. At the year end there were further standards, amendments and interpretations in issue but not yet effective which are not expected to be relevant to the company's operations and are therefore not disclosed separately.

Revenue

Revenue is recognised for the rendering of services when all the following conditions are satisfied:

· the amount of revenue can be measured reliably

· it is probable that the economic benefits associated with the transaction will flow to the entity

The point at which the company recognises its revenue is where contracts between the vendor and buyer have been exchanged.

Interest revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding and the effective interest rate.

Taxation

The tax expense represents the sum of the tax currently payable. Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Intangible assets

Expenditure on research activities are recognised as an expense in the year in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

· the technical feasibility of completing the intangible asset so that it will be available for use or sale;

· the intention to complete the intangible asset and use or sell it;

· the ability to use or sell the intangible asset;

· how the intangible asset will generate probable future economic benefits;

· the availability of adequate technical, financial and other resources to complete the development and use or sell the intangible asset; and

· the ability to measure reliably the expenditure attributable to the intangible asset during its development

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the year in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses.

The amortisation rates applicable are:-

Website development costs - 25% straight line

The amortisation charge for the year is disclosed within administrative expenses within the Statement of Comprehensive Income.

Property, plant and equipment

Fixtures & fittings and equipment are stated at cost less accumulated depreciation.

Any item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Depreciation

Depreciation is calculated to write off the cost less the estimated residual value of assets over their expected useful lives. The estimated useful lives, residual values and depreciation method are reviewed by class of asset at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The rates applicable are:-

Fixtures & fittings - 25% straight line

Computer equipment - 25% straight line

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is based on estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where the impairment subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on deposit.

Share-based payment transactions of the company

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share-based transactions are set out in note 21. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the company's estimate of equity instruments that will eventually vest, with a corresponding increase to equity. At the end of each reporting period, the company revises its estimate of the number of equity instruments expected to vest. The impact of the revision on the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payment reserve.

The policy described above is applied to all equity settled share based payment transactions.

Equity settled share based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Leases

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis, except where another systematic basis is more representative of the time pattern in which economic benefits of the leased asset are consumed.

Financial Instruments

Financial assets and financial liabilities are recognised in the company's Statement of Financial Position when the company has become a party to the contractual provisions of the instrument:

I. Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

II. Derecognition of financial assets

The company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the company retains substantially all the risks and rewards of ownership of a transferred financial asset, the company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

III. Impairment of financial assets

The company assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets are impaired. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. 

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows. 

IV. Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

V. Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

VI. Other financial liabilities

Trade payables, and other payables that have fixed or determinable payments are classified as other financial liabilities. Other financial liabilities are initially measured at fair value, and subsequently measured at amortised cost

VII. Derecognition of financial liabilities

The company derecognises a financial liability only when the contractual obligations to the cash flows of the liability expire. Expiry occurs where full settlement of the amount outstanding is made in the form of cash payment or where an agreement is made with the relevant counter party which extinguishes the liability of the company.

4. Critical accounting judgements and key sources of estimation uncertainty

Group and Company

The preparation of financial statements under IFRS requires the company to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. If in the future should such estimates and assumptions deviate from actual circumstances, the original estimates and assumptions would be modified as appropriate in the period in which circumstances change.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:

Valuation of intangible assets

As explained in note 23, the company disposed of its intangible assets after the year end. In light of this, the directors have incorporated an impairment provision to reduce the carrying value of the company's intangible assets to £Nil at the year end.

5. Revenue

Revenue for the year comprises of fees rendered for the arrangement of conveyancing contracts, exclusive of value added tax. This includes revenue for contracts which have been completed and invoiced, and those where contracts have been exchanged. Revenue is accrued in line with the company's accounting policy. 

As described in note 23, the above subsidiaries were disposed of after the year end, and the contingent consideration will not therefore be payable. Full provision has also been made in these accounts against the carrying value of the investment.

Goodwill arose in the acquisition because the acquisition included the reputation and customer relationships of Runnett & Co Limited as part of the acquisition. These assets could not be separately recognised from goodwill because they are not capable of being separated from the Group and sold, transferred, licensed, rented or exchanged, either individually or together with any related contracts.

Intangible assets relate to costs incurred in the development and implementation of the company's web portal which is considered as having a finite useful life. The amortisation method and rate applied are disclosed within the summary of significant accounting policies.

As described in note 23, all rights over the intangible assets have been disposed of after the year end.

Intangible assets relate to costs incurred in the development and implementation of the company's web portal which is considered as having a finite useful life. The amortisation method and rate applied are disclosed within the summary of significant accounting policies.

As described in note 23, all rights over the intangible assets have been disposed of after the year end.

The share classes noted above carry one vote per share and carry a right to dividends.

The above equity-settled share based payment reserve relates to share options granted by the company to 5 of its employees under a share option plan (2012: six employees and one of its suppliers). Further information about share-based payments is set out in note 21.

Operating lease payments are in respect of the rental of premises and ongoing computer hosting, with terms of one and two years from inception respectively.

20. Financial instruments

Group and Company

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain future development of the business. Given the stage of the company's development there are no formal targets set for return on capital. There were no changes to the company's approach to capital management during the year.

The directors manage capital to ensure that the company will be able to continue as a going concern, whilst maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the company currently consists of cash and equity only.

Financial risk management

The company's activities expose it to market risk (which would include currency risk and interest rate risk), credit risk and liquidity risk. As the company operates within the United Kingdom whereby all transactions are made in GBP there is no currency risk.

This note presents qualitative and quantitative information about the company's exposure to each of the above risks, their objectives, policies and procedures for managing risk. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

The company's overall risk management approach focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the financial performance of the company. The company does not currently use derivative financial instruments to hedge financial risk exposures and therefore it is exposed to movements in interest rates.