Last checked at 29 Jun 2010 07:00
X-PHONICS PLC
("X-Phonics" or the "Company")
Preliminary results for the period ended 30 September 2009
CHAIRMAN'S STATEMENT
I present the financial statements for the year to 30th September 2009.
As reported in the interim statement for the 6 months to 31st March 2009 there has continued to be little improvement in the music industry and in particular, the fortunes of smaller businesses such as ours.
Against this background we have continued to tightly control and limit expenditure whilst benefitting from the modest revenues that have resulted from those artists in which we have retained an interest.
Over the last six months we have continued to seek alternative opportunities that could make use of the company's infrastructure and listing on AIM in market sectors where there is scale, growth and a revenue model that is better suited to a public market.
Having looked a number of possible opportunities I am pleased to be able to tell you that the Company is currently in advanced discussions with a third party which may or may not lead to a substantial investment being made in the Company.
I hope to be able to report progress upon this matter in due course.
The Company's shares are currently suspended due to it being unable to send its annual audited accounts for the year ended 30 September 2009 to shareholders. This is expected to occur shortly, however, the Company shares will remain suspended due to delays in the preparation of its half-yearly report for the six months ending 31 March 2010 which will not be announced before the end of June 2010.
Robin Davies
Chairman
28th June 2010
| Contacts: |
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| X-Phonics plc | www.xphonicsgroup.co.uk |
| Mike Hosie, Finance Director | +44 (0) 208 987 0800 |
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| WH Ireland Limited | www.wh-ireland.co.uk |
| John Wakefield / Marc Davies | +44 (0) 117 945 3470 |
Consolidated Group Income Statement
For the year ended 30th September 2009
|
| Note | 30 Sep 09 |
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30 Sep 08 |
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| £ |
| £ |
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| Revenue | 2 | 94,066 |
| 84,567 |
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| Cost of sales |
| (37,194) |
| (149,716) |
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| Gross Profit/(loss) |
| 56,872 |
| (65,149) |
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| Administrative expenses: |
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| Exceptional | 5 | - |
| (327,639) |
| Normal |
| (154,722) |
| (411,606) |
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| Operating loss | 3 | (97,850) |
| (804,394) |
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| Finance income | 8 | 47 |
| 653 |
| Finance costs | 8 | (546) |
| (882) |
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| Loss on ordinary activities before taxation |
| (98,349) |
| (804,623) |
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| Income tax expense | 9 | - |
| - |
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| Loss for the financial year |
| (98,349) |
| (804,623) |
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| Attributable to equity holders of the company |
| (98,349) |
| (804,623) |
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| Earnings per share for loss attributable to the equity holders of the company (pence) |
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| Basic | 10 | (0.15) |
| (1.22) |
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| Diluted | 10 | (0.15) |
| (1.22) |
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All of the activities of the group are classed as continuing.
The group has no recognised gains or losses other than the results for the
period as set out above.
Group Balance Sheet
30th September 2009
|
| Note | 30 Sep 09 |
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30 Sep 08 | |
| Assets |
| £ |
| £ | |
| Non-current assets |
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| Intangible Assets - Goodwill | 11 | - |
| - | |
| Property, plant and equipment | 12 | 17,460 |
| 36,782 | |
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| 17,460 |
| 36,782 | |
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| Current assets |
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| Trade and other receivables | 13 | 49,328 |
| 84,259 | |
| Cash and cash equivalents |
| 7,457 |
| 6,359 | |
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| 56,785 |
| 90,618 | |
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| Total assets |
| 74,245 |
| 127,400 | |
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| Liabilities and Equity |
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| Current liabilities |
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| Trade and other payables | 14 | 427,164 |
| 383,118 | |
| Financial liabilities - borrowings - bank overdrafts |
| 1,148 |
| - | |
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| Total liabilities |
| 428,312 |
| 383,118 | |
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| Equity |
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| Capital and reserves attributable to equity holders of the company |
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| Called-up equity share capital | 18 | 2,803,119 |
| 2,803,119 | |
| Share premium account |
| 743,474 |
| 743,474 | |
| Merger reserve |
| (738,578) |
| (738,578) | |
| Accumulated losses |
| (3,162,082) |
| (3,063,733) | |
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| Total Equity |
| (354,067) |
| (255,718) | |
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| Total Liabilities and Equity |
| 74,245 |
| 127,400 | |
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These financial statements were approved by the directors on 28th June 2010.
Consolidated Group Cash Flow Statement
For the year ended 30th September 2009
|
| Note | 30 Sep 09 |
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30 Sep 08 |
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| £ |
| £ |
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| Net cash used in operating activities | 20 | 2,233 |
| (124,690) |
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| Net cash from investing activities |
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| Purchases of property, plant and equipment |
| - |
| (1,217) |
| Interest received |
| 47 |
| 653 |
| Interest paid |
| (546) |
| (882) |
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| Net cash flow before financing activities |
| 1,734 |
| (126,136) |
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| Net cash from financing activities |
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| Borrowings drawn/(eliminated) |
| (1,784) |
| (4,224) |
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| Net (decrease)/increase in cash, cash equivalents and overdrafts |
| (50) |
| (130,360) |
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| Cash, cash equivalents and overdrafts at beginning of year |
| 6,359 |
| 136,719 |
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| Cash, cash equivalents and overdrafts at end of year |
| 6,309 |
| 6,359 |
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Notes to the Financial Statements
For the year ended 30th September 2009
1. Accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and as applied in accordance with the provisions of Companies Act 2006.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and all group undertakings. X-Phonics plc was incorporated on 17 May 2005 and on 1 July 2005 the company acquired the entire share capital of X-Phonics Music Limited by way of a share for share exchange. As the shareholders were the same before and after this transaction, the share for share exchange qualifies as a common control transaction and falls outside the scope of IFRS 3, Business Combinations. No goodwill has been recorded and the difference between the parent company's cost of investment and X-Phonics Music Limited's share capital and share premium is presented as a merger reserve within equity on consolidation. Comparative amounts are restated as if the combination had taken place at the beginning of the earliest comparative period presented.
Revenue
Revenue compromises amounts recognised by the group in respect of goods and services supplied, exclusive of VAT and trade discounts.
Advances to artistes
Advances to artistes and expenses incurred supporting new acts are assessed and the value of the un-recouped portion to be included in debtors is determined by the prospects of future recoupement, based on past sales performance, current popularity and projected sales.
In the period ended 30th September 2009 (2008: £nil), no such carry forward of expenditure was considered appropriate.
Music publishing and record royalties and record producer services
Music publishing and record royalties are accounted for on a notified earnings basis, with any advances, if any, carried forward until the end of the relevant contract period. Royalties received for record producer services are accounted for on a cash basis. Royalties payable are expensed on an accruals basis except that music publishing advances are carried forward and recognised as an asset, where such advances relate to proven artistes or songwriters and where it is estimated that sufficient future royalties will be recouped against those advances.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is allocated on acquisition to cash-generating units that are anticipated to benefit from the combination. Goodwill is not amortised but is reviewed annually for impairment. Impairment is determined by assessing the recoverable amount of a cash-generating unit to which the goodwill relates. This estimate of recoverable amount is performed at each balance sheet date. The estimate of recoverable amount requires significant judgement, and is based on a number of factors such as the near-term business outlook for the cash-generating unit, including both its operating profit and operating cash flow performance. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any provision for impairment in value.
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 Property - over the period of the lease
Fixtures & Fittings - 20% straight line
Motor Vehicles - 25% straight line
Equipment - 20% straight line
Leasing and Hire purchase agreements
Assets obtained under hire purchase contracts and finance leases are capitalised as tangible non-current assets. Assets acquired by finance lease are depreciated over the shorter of the lease term and their useful lives. Assets acquired by hire purchase are depreciated over their useful lives. Finance leases are those where substantially all of the benefits and risks of ownership are assumed by the company. Obligations under such agreements are included in liabilities net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the income statement so as to produce a constant periodic rate of charge on the net obligation outstanding in each period. Assets held under hire purchase agreements are capitalised and disclosed under tangible non-current assets at their fair value. The capital element of the future payments is treated as a liability and the interest is charged to the income statement on a straight line basis.
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease.
Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. 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. 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 liabilities are always provided for in full. Deferred tax assets are recognised only to the extent that the directors consider that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction. Exchange gains and losses are recognised in the income statement.
Financial instruments
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Investments
All investments are initially recorded at cost, being the fair value of the consideration given and including acquisition costs associated with the investment.
Trade and other receivables
Trade receivables and other receivables are recognised and carried forward at invoice amounts less provisions for any doubtful debts. Bad debts are written off when identified.
Cash and cash equivalents
Cash and cash equivalents are included in the balance sheet at cost. Cash and cash equivalents comprise cash at bank and in hand and short term deposits with an original maturity of three months or less.
2. Going Concern
The company has generated modest revenues and has funded operations primarily from the proceeds of public and private placements of its shares. It does not presently have sufficient funds to meet all of its forecast obligations for the next 12 months and is negotiating with a selection of investors for further funding. Based on discussions already held, the directors of the company have reasonable expectation that the company will receive adequate funding, based on a possible restructuring of the business model along with indications provided by future investors regarding future financing. Accordingly the directors of the company have prepared these accounts on a going concern basis. However, whether or not the investors will actually provide such funding represents a material uncertainty which casts significant doubt on the company's ability to continue as a going concern and it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that would result if the going concern basis were not appropriate.
3. Publication of non-statutory accounts
The financial information set out in this preliminary statement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985.
The accounts for the year ended 30 September 2009 will be posted to shareholders shortly and laid before the Annual general Meeting to be held at the Company's registered office: Grand Prix House, 126-129 Power Road, London W4 5PY on 30th July 2010 at 10.30a.m.
Copies will also be available via the website (www.x-phonicsgroup.co.uk) in accordance with AIM Rule 26.