Water Intel. Regulatory News (WATR)

27 Mar 2008 07:01

Qonnectis plc27 March 2008 QONNECTIS PLC (AIM: QTI) INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Period of continued growth Qonnectis plc ('the Company'), the data monitoring service provider forutilities and major commercial users of energy and water, announces its resultsfor the six months ended 31 December 2007, a period of continued growth. Highlights: •Sales increased 81% to £291,281 •Gross margins maintained •Operating loss reduced to £197,168 (2007: £380,098) •Leakfrog (R) domestic monitor launched o •Major order from Thames Water o •Significant new orders post period Michael Tapia, Chief Executive of Qonnectis, commented: "Repeat and new sales of the Qonnectis Smart Metering products have continuedand, since the period end, further significant progress has been made with theCompany receiving orders for Leakfrog (R) from South West Water and ThreeValleys Water. "By applying increasing resources to both the selling and volume delivery of ourproducts, the Board expects continued rapid growth in the business." 27 March 2008 For further information, please contact: Qonnectis plc 01932 788 299Michael Tapia, Chief Executive HB Corporate 020 7510 8600Edward Hutton / Luke Cairns Bankside Consultants 020 7367 8888Michael Padley / Louise Davis CHAIRMAN'S STATEMENT This is the fourth year in succession in which Qonnectis has increased its salesin the 6 months ended 31st December, this time by 81% to £291,281. Gross margins have again been maintained above the 60% level and, as a result,the operating loss has reduced to (£197,168) ((£380,098) to 31 December 2006)whilst the loss before tax has narrowed to (£215,992) from the previous halfyear figure of (£378,240). This is also reflected in the loss per shareimproving to (0.10) pence from (0.18) pence. Repeat and new sales of the Qonnectis Smart Metering products, such as themyMeter service, have continued and, as expected, the main improvement duringthe period was through sales of the new Leakfrog (R) domestic leakage monitor. Most significantly, during this period the Company won a £200,000 order fromThames Water for the Company's innovative Leakfrog (R) product. The launch ofLeakfrog (R) to a wider customer base following the conclusion of an exclusivelicence arrangement with Thames Water allows Qonnectis to market it nationallyand internationally. Since the period end, further significant progress has been made, including theCompany receiving initial orders for Leakfrog (R) from South West Water andThree Valleys Water, with negotiations continuing with other water companies. Asannounced on 20 February 2008, the Company has entered into a Memorandum ofUnderstanding with Halma Water Management, an international distributor ofleakage products, so that they can distribute the Qonnectis Leakfrog (R)product. The Leakfrog (R) product has been extremely well received by the UK waterindustry and increasing interest in smart metering using Qonnectis' iStaq andmyMeter products, provides a strong base for the Company to build upon. Bycombining this with additional channels to market and applying increasingresources to both the selling and volume delivery of our products, the Boardexpects continued rapid growth in the business. Richard M. TaylorChairman 27 March 2008 Condensed consolidated interim income statementfor the six months ended 31 December 2007 Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 31 December 2007 31 December 2006 30 June 2007 Notes Restated under Restated under IFRS IFRS £ £ £ Revenue 291,281 161,185 304,776Cost of sales (113,571) (55,547) (110,985) Gross profit 177,710 105,638 193,791Operatingexpenses (374,878) (485,736) (896,730)Otheroperatingincome - - 49,313 Operating loss (197,168) (380,098) (653,626)Finance income 1,108 4,547 7,354Finance costs (19,931) (2,689) (5,000) Loss beforetaxation (215,992) (378,240) (651,272)Taxation - - - Loss for theperiod (651,272)- attributable to equity shareholders (215,992) (378,240) Loss per share- basic 4 (0.10 pence) (0.18 pence) (0.31 pence) All of the activities of the group are classed as continuing. There are no movements to be recognised other than the results for the period as set out above. Condensed consolidated interim balance sheetas at 31 December 2007 Unaudited Unaudited Audited 31 December 31 December 30 June Notes 2007 2006 2007 Restated Restated under IFRS under IFRS £ £ £ASSETSNon-current assetsProperty plant and 6,519 9,204 8,683equipmentGoodwill 3,523,852 3,523,852 3,523,852 3,530,371 3,533,056 3,532,535 -------- -------- -------- Current assetsInventories 16,626 21,246 11,906Trade and other receivables 159,961 118,044 94,785Cash and cash equivalents 6 46,593 166,070 44,046 223,180 305,360 150,737 -------- -------- -------- TOTAL ASSETS 3,753,551 3,838,416 3,683,272 -------- -------- -------- EQUITYCapital and reservesShare capital 10,270,588 10,270,588 10,270,588Share premium 1,675,050 1,675,050 1,675,050Retained earnings (8,840,652) (8,351,628) (8,624,660) TOTAL EQUITY 3,104,986 3,594,010 3,320,978 -------- -------- -------- LIABILITIESNon-current liabilitiesBorrowings - 24,000 6,000 - 24,000 6,000 -------- -------- -------- Current liabilitiesTrade and other payables 624,565 179,347 320,294Borrowings 24,000 41,059 36,000 648,565 220,406 356,294 -------- -------- -------- TOTAL LIABILITIES 648,565 244,406 362,294 -------- -------- -------- TOTAL EQUITY AND 3,753,551 3,838,416 3,683,272LIABILITIES -------- -------- -------- The condensed consolidated interim financial information was authorized forissue by the directors on 27 March 2008. Condensed consolidated statement of changes in equityas at 31 December 2007 Share Share Retained Total capital premium earnings equity £ £ £ £ As at 1 July 2006 9,658,588 1,675,050 (7,973,388) 3,360,250Loss for the period - - (378,240) (378,240)Shares issued in the 612,000 - - 612,000period As at 31 December 2006 10,270,588 1,675,050 (8,351,628) 3,594,010 -------- -------- -------- -------- As at 1 July 2006 9,658,588 1,675,050 (7,973,388) 3,360,250Loss for the period - - (651,272) (651,272)Shares issued in the 612,000 - - 612,000period As at 30 June 2007 10,270,588 1,675,050 (8,624,660) 3,320,978 -------- -------- -------- -------- As at 1 July 2007 10,270,588 1,675,050 (8,624,660) 3,320,978Loss for the period - - (215,992) (215,992) As at 31 December 2007 10,270,588 1,675,050 (8,840,652) 3,104,986 -------- -------- -------- -------- Condensed consolidated interim cash flow statementfor the six months ended 31 December 2007 Unaudited Unaudited Audited 6 months 6 months 12 months ended 31 ended 31 ended 30 December December June Notes 2007 2006 2007 £ £ £ Cash flows from operatingactivitiesCash utilisedby operations 5 (210,630) (440,739) (538,386)Interest paid (19,931) (2,689) (5,000)Taxation paid - - - Net cashutilised byoperatingactivities (230,561) (443,428) (543,386) Cash flows from investingactivitiesPurchases ofproperty plantand equipment - (4,518) (6,332)Interestreceived 1,108 4,547 7,354 Net cash frominvestingactivities 1,108 29 1,022 -------- -------- -------- Cash flows from financingactivitiesIssue of sharecapital - 612,000 612,000Issue ofconvertiblebonds 250,000 - -Repayment ofborrowings (18,000) (18,000) (36,000) Net cash fromfinancingactivities 232,000 594,000 576,000 -------- -------- -------- Net increasein cash andcashequivalents 2,547 150,601 33,636Cash and bankoverdrafts atstart ofperiod 44,046 10,410 10,410 Cash and bankoverdrafts atend of period 6 46,593 161,011 44,046 -------- -------- -------- Notes to condensed consolidated interim financial information For the six months ended 31 December 2007 1. General information Qonnectis PLC (the "company") and its subsidiaries (together, the "Group") areengaged in the research, development and supply of an integrated solution forremote data communications to established businesses, such as energy and waterutilities, primarily in the United Kingdom and Western Europe. The company is a public limited company domiciled in England, registered number03923150, and is listed on the Alternative Investment Market ("AIM") of theLondon Stock Exchange. 2. Summary of significant accounting policies The principal policies applied in the preparation of this condensed consolidatedfinancial information are set out below. These policies have been consistentlyapplied to all the periods presented unless otherwise stated. a) Basis of preparation The condensed consolidated interim financial information for the six monthsended 31 December 2007 has been prepared in accordance with the accountingpolicies which will be adopted in presenting the full year annual report andfinancial statements for the year ended 30 June 2008. These financial statementswill be prepared in accordance with International Financial Reporting Standards("IFRS") as adopted by the European Union. For periods to 30 June 2007, thegroup prepared financial statements in accordance with Generally AcceptedAccounting Principles in the United Kingdom ("UK GAAP"). The IFRS standards thatwill be applicable at 30 June 2008 are not known with certainty at the time ofpreparing this interim financial information. The interim financial information is unaudited and does not constitute statutoryfinancial statements within the meaning of section 240 of the Companies Act1985. This interim financial information does not include all of the disclosuresrequired in full financial statements, and should be read in conjunction withthe consolidated financial statements of the Group for the year ended 30 June2007. The financial statements for the year ended 30 June 2007, which werepresented under UK GAAP, have been delivered to the Registrar of Companies. Thereport of the auditors on those financial statements provided an emphasis ofmatter on their opinion relating to going concern and was not qualified and didnot contain a statement under either Section 237 (2) (accounting records orreturns inadequate or accounts not agreeing with records and returns) or Section237 (3) (failure to obtain necessary information and explanations) of theCompanies Act 1985. The interim financial information has been prepared under the historical costconvention. b) Going concern The interim financial information has been prepared on the assumption that thecompany is a going concern. The validity of this assumption is dependent on thecompany's ability to generate sufficient cash flow from revenues or additionalborrowing or equity financing to enable it to meet its debts as they fall duefor the foreseeable future. When assessing the foreseeable future the directorshave considered a period of twelve months from the date of approval of theinterim financial information. Should the going concern assumption not be valid then adjustments would have tobe made to reduce the balance sheet values of assets to their recoverableamounts, to provide for any further liabilities which might then arise and toreclassify fixed assets and long-term liabilities as current assets andliabilities. c) Consolidation The consolidated interim financial information includes the financialinformation of the company and all of its subsidiary undertakings up to 31December 2007. Subsidiaries are consolidated from the date on which control istransferred to the group and are de-consolidated from the date on which controlceases. Intra-group transactions and balances between group companies areeliminated on consolidation. d) Goodwill Purchased goodwill represents the difference between the cost of an acquiredentity and the fair values of that entity's identifiable assets and liabilities.Goodwill on acquisitions of subsidiaries is included in intangible assets.Goodwill is tested annually for impairment and carried at cost less accumulatedimpairment losses. There is no re-instatement of goodwill that was amortised prior to transition toIFRS. e) Property, plant and equipment Property, plant and equipment are shown at cost less subsequent depreciation andimpairment. Cost includes any incidental costs of acquisition. Depreciation onassets is calculated using the straight-line method to allocate the cost, lessany residual value, of each asset over its expected useful economic life asfollows: • Development tools and equipment 4 years • Computer equipment 4 years • Fixtures, fittings and equipment 5 years f) Inventories Inventories are stated at the lower of cost or net realisable value. g) Revenue recognition Revenue comprises the fair value of the sale of goods and services, net ofvalue-added tax, rebates and discounts and after eliminating sales within thegroup. Revenue is recognised as follows: i) Sales of goods: The company recognises revenue at the date that the customer's order is shipped. ii) Sales of services: Sales of services are recognised in the accounting period in which the services are rendered. iii) Interest income: Interest income is recognised on a time-proportion basis. iv) Dividend income: Dividend income is recognised when the right to receive payment is established. h) Research and development Research expenditure is recognised as an expense as incurred. Costs incurred ondevelopment projects (relating to the design and testing of new or improvedproducts) are recognised as intangible assets when it is probable that theproject will be a success, considering its commercial and technologicalfeasibility, and costs can be measured reliably. Other development expendituresare recognised as an expense as incurred. Development costs previouslyrecognised as an expense are not recognised as an asset in a subsequent period.Development costs that have a finite useful life and that have been capitalisedare amortised from the commencement of the commercial production of the producton a straight line basis over the period of its expected benefit, not exceedingfive years. i) Leased assets Payments made under operating lease agreements (net of any incentives receivedfrom the lessor) are charged to the income statement on a straight-line basisover the period of the lease. j) Foreign currency translation Transactions in foreign currencies are translated at the exchange rate at thedate of the transaction. Monetary assets and liabilities denominated in foreigncurrencies are restated at the rates of exchange ruling at the year end or atcontracted rates. Exchange differences arising on foreign currency transactionsare recognised in the income statement. k) Taxation Taxation is provided at amounts expected to be paid using rates that have beenenacted or substantively enacted. Deferred tax is provided in full, using theliability method, on temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the consolidated financialstatements. Deferred tax assets are recognised to the extent that it is probablethat future taxable profit will be available against which the assets can beutilised. Deferred tax assets and liabilities are not discounted. l) Pensions Contributions to individuals' defined contribution pension schemes arerecognised in the income statement in the period in which they become payable. 3. Transition to IFRS This interim financial information has been prepared for the first time underIFRS, as described in note 2. The group's transition date is 1 July 2006. Thegroup prepared its opening IFRS balance sheet at that date. The reporting dateof this interim consolidated financial information is 31 December 2007. TheGroup's IFRS adoption date is 1 July 2007. Estimates under IFRS at 1 July 2006 should be consistent with estimates made forthe same date under UK GAAP, unless there is evidence that those estimates werein error. Reconciliations of profit and equity have been provided below to facilitatecomparison of the interim financial information with those previously reportedfor the prior period. a) Reconciliation of equity as at 1 July 2006 The group has elected to take advantage of provisions within IFRS 1, "First-timeadoption of International Financial Reporting Standards", which offer certainexemptions from applying IFRS to the opening IFRS balance sheet prepared as at 1July 2006, as follows: Business combinations The group has applied the business combinations exemption in IFRS 1. Accordinglyit has not restated business combinations that took place prior to the 1 July2006 transition date. b) Reconciliation of equity as at 31 December 2006 As reported Derecognition As restated under of goodwill under UK GAAP amortisation IFRS £ £ £ ASSETSNon-current assetsProperty plantand equipment 9,204 - 9,204Goodwill 3,418,923 104,929 3,523,852 3,428,127 104,929 3,533,056 --------- --------- --------- Current assetsInventories 21,246 - 21,246Trade andotherreceivables 118,044 - 118,044Cash and cashequivalents 166,070 - 166,070 305,360 - 305,360 --------- --------- --------- TOTAL ASSETS 3,733,487 104,929 3,838,416 --------- --------- --------- EQUITYCapital and reservesShare capital 10,270,588 - 10,270,588Share premium 1,675,050 - 1,675,050Retainedearnings (8,456,557) 104,929 (8,351,628) TOTAL EQUITY 3,489,081 104,929 3,594,010 --------- --------- --------- LIABILITIESNon-current liabilitiesBorrowings 24,000 - 24,000 24,000 - 24,000 --------- --------- --------- Current liabilitiesTrade andother payables 179,347 - 179,347Borrowings 41,059 - 41,059 220,406 - 220,406 --------- --------- ---------TOTALLIABILITIES 244,406 - 244,406 --------- --------- ---------TOTAL EQUITYANDLIABILITIES 3,733,487 104,929 3,838,416 --------- --------- --------- c) Reconciliation of equity as at 30 June 2007 As reported Derecognition As restated under of goodwill under UK GAAP amortisation IFRS £ £ £ASSETSNon-current assetsProperty plantand equipment 8,683 - 8,683Goodwill 3,313,995 209,857 3,523,852 3,322,678 209,857 3,532,535 --------- --------- --------- Current assetsInventories 11,906 - 11,906Trade andotherreceivables 94,785 - 94,785Cash and cashequivalents 44,046 - 44,046 150,737 - 150,737 --------- --------- ---------TOTAL ASSETS 3,473,415 209,857 3,683,272 --------- --------- --------- EQUITYCapital and reservesShare capital 10,270,588 - 10,270,588Share premium 1,675,050 - 1,675,050Retainedearnings (8,834,517) 209,857 (8,624,660) TOTAL EQUITY 3,111,121 209,857 3,320,978 --------- --------- --------- LIABILITIESNon-current liabilitiesBorrowings 6,000 - 6,000 6,000 - 6,000 --------- --------- --------- Current liabilitiesTrade andother payables 320,294 - 320,294Borrowings 36,000 - 36,000 356,294 - 356,294 --------- --------- ---------TOTAL LIABILITIES 362,294 - 362,294 --------- --------- ---------TOTAL EQUITYANDLIABILITIES 3,473,415 209,857 3,683,272 --------- --------- --------- d) Reconciliation of net loss for the six months ended 31 December 2006 As reported Derecognition As restated under of goodwill under UK GAAP amortisation IFRS £ £ £ Revenue 161,185 - 161,185Cost of sales (55,547) - (55,547) Gross profit 105,638 - 105,638Operatingexpenses (590,665) 104,929 (485,736)Other operating income - - - Operating loss (485,027) 104,929 (380,098)Finance income 4,547 - 4,547Finance costs (2,689) - (2,689) Loss beforetaxation (483,169) 104,929 (378,240)Taxation - - - Loss for theperiod (483,169) 104,929 (378,240) --------- --------- -----------Loss per share - basic (0.23 pence) 0.05pence (0.18 pence) e) Reconciliation of net loss for the year ended 30 June 2007 As reported Derecognition As restated under of goodwill under UK GAAP amortisation IFRS £ £ £ Revenue 304,776 - 304,776Cost of sales (110,985) - (110,985) Gross profit 193,791 - 193,791Operatingexpenses (1,106,587) 209,857 (896,730)Otheroperatingincome 49,313 - 49,313 Operating loss (863,483) 209,857 (653,626)Finance income 7,354 - 7,354Finance costs (5,000) - (5,000) Loss beforetaxation (861,129) 209,857 (651,272)Taxation - - - Loss for theperiod (861,129) 209,857 (651,272) --------- --------- -----------Loss per share - basic (0.40 pence) 0.09 pence (0.31 pence) 3. Loss per share 6 months ended 31 6 months ended 31 12 months ended December 2007 December 2006 30 June 2007 Restated under Restated under IFRS IFRS £ £ £ BasicNet loss forthe period (215,992) (378,240) (651,272)Weightedaverage numberof ordinarysharesoutstanding 218,608,023 208,408,023 213,508,023 Loss per share (0.10 pence) (0.18 pence) (0.31 pence) -------- -------- -------- No diluted earnings per share figure has been presented as an issue of shareswould decrease the net loss per share. 4. Cash utilised by operations 6 months ended 31 6 months ended 31 12 months ended December 2007 December 2006 30 June 2007 Restated under Restated under IFRS IFRS £ £ £ Loss for theperiod (215,992) (378,240) (651,272)Adjusted for: • Taxation - - - • Depreciation 2,164 1,230 3,565 • Interest income (1,108) (4,547) (7,354) • Interest expense 19,931 2,689 5,000 Changes in workingcapital: • Inventories (4,720) (2,037) 7,303 • Trade and other receivables (65,176) (18,713) 4,546 • Trade and other payables 54,271 (41,121) 99,826 Cash utilisedby operations (210,630) (440,739) (538,386) -------- -------- -------- 5. Cash and cash equivalents Cash and bank overdrafts include the following for the purposes of the cash flowstatement: As at As at As at 31 December 31 December 30 June 2007 2006 2007 £ £ £ Cash and cash equivalents 46,593 166,070 44,046Bank overdraft - (5,059) - Cash and bank overdrafts 46,593 161,011 44,046-------------------- -------- -------- -------- 6. Events occurring after the balance sheet date On 1 February 2008 the company announced the allotment of shares to SecurityChange Limited in satisfaction of a £250,000 secured convertible loan facilitydated 28 August 2007. The conversion price was 1p per share which represented apremium to the closing market price of the shares the day before the loanfacility was announced on 29 August 2007. This information is provided by RNS The company news service from the London Stock Exchange