Last checked at 28 Jan 2010 07:00
INTERIM RESULTS
eXpansys plc ("eXpansys" or the "Group"), a leading online retailer of wireless technology, announces its interim results for the six months to 31 October 2009.
Key Points:
| | Management focused on stablising the business, following wide ranging and successful cost reduction programme |
| | Operating losses reduced significantly to £15,000 (2008: £1.0 million), compared to £2.3 million in the previous six months to 30 April 2009 |
| | Revenue now steady - just 6% down on the previous six months to 30 April 2009 - £20.4 million (2008: £25.3 million) |
| | Further reduction in administration costs to £3.1 million (2008: £4.6 million), compared with £4.3 million in the previous six months to 30 April 2009 |
| | £1.92 million working capital raised via placing with Virtual Phone Shop, a company controlled by Peter Jones, in June 2009 |
| | Renewed support from global suppliers following the placing |
Post half-year end:
| | Strong trading in Christmas period |
| | Revenue growth resumed |
Graham Dawber, Non-executive Chairman, said: "Now that the Group's cost reduction programme has been completed, it is pleasing to see the improvement in the Group's financial performance. Whilst the Board remains cautious on the outlook of the general economy, the Group is well placed to benefit from any upturn in discretionary purchases.
| Press and shareholder queries: | |
| Rawlings Financial PR Limited | Tel: +44 (0) 1653 618 016 |
| Catriona Valentine | |
| Keeley Clarke | |
| Investor relations website | www.expansys.com/investor.aspx |
| Cenkos Securities plc | Tel: +44 (0) 20 7397 8926 |
| Stephen Keys |
About eXpansys
The Group specialises in the sale of handheld electronic devices with wireless connectivity and boasts a wide offering ranging from smart phones and ultra mobile personal computers, to cameras and GPS equipment. eXpansys operates some 50 websites in 12 different languages, operating in 16 currencies.
Based in Manchester, eXpansys has grown both organically and through acquisition and has a global infrastructure that allows it to service its international customer base through a network of warehouses in the UK, France, USA, Hong Kong and Australia.
CHAIRMAN'S STATEMENT
Following an extensive cost reduction programme undertaken in the prior 18 months, eXpansys entered the new financial year a stronger and leaner business. I am pleased to report that the benefits of this programme are reflected in our much improved financial results for the six months to 31 October 2009.
Results
Operating losses were reduced significantly to £15,000 (2008: £1.0 million), compared to £2.3 million in the six months to 30 April 2009. The rapid decline in Group revenues which we had been experiencing has now ended with revenues for the period at £20.4 million (2008: £25.3 million) down just 6% on the six months to 30 April 2009. Pre-tax loss in the period was £24,000 (2008: £1.1 million) and loss per share was 0.1p (2008: 3.9p).
Inventories rose slightly from £1.5 million at 30 April 2009 to £2.1 million in the period under review (2008: £4.5 million) reflecting the renewed confidence of our key suppliers and in anticipation of better trading in the Christmas period. Net assets at 31 October 2009 were £5.5 million compared to £3.5 million at the prior year end.
Fundraising
During the period, the Company raised £1.92 million net of expenses in a Placing of 133,333,333 shares at 1.5 pence per share with Virtual Phone Shop Limited ("VPS"), a company controlled by Peter Jones, which provided the Group with additional working capital. After the period end, there was a transfer of ownership of the shares such that Peter Jones is now interested in 70.25% of the Company's share capital.
Our markets
The core business of the Group continues to be the supply of mobile technology products, particularly smartphones. This continues to be a dynamic market over the last year with the release of new phones running the Google Android operating system challenging the dominance of the Apple iPhone and further moves in many markets to de-couple the sale of smartphone handsets from the provision of wireless service. These changes have been good for the Group and we anticipate that the accelerating pace of technological change over the next year will also be of benefit.
People
Stephen Vincent, a director of VPS, joined the Board of eXpansys in July 2009 as a Non-executive Director, following the successful completion of the Placing. Stephen has broad knowledge of our sector and the expertise he has gained as Finance Director of Phones International Group is already making a significant contribution to our Group.
I would like to thank all the Group's employees for their ongoing commitment during this period.
Prospects
This has been a period of consolidation for the Group, following the successful but disruptive major cost reduction programme undertaken over the previous 18 months. I am pleased to report that, operationally, the Group is now in better shape than it has ever been with a cost base appropriate to its size. These efficiencies have enabled us to deliver a much improved result.
However, the market remains uncertain and our operational strategy will be to keep our costs low, our stocks low and to exploit opportunities as they arise.
The Board is particularly encouraged by the Group's strong performance in the Christmas period. With all these things in mind, we believe that the Group is well placed to benefit from any upturn in discretionary purchases and view 2010 with cautious optimism.
Graham Dawber
Chairman
27 January 2010
Consolidated Income Statement
For the six months ended 31 October 2009
| Six months ended 31 October | |||
| 2009 Unaudited | 2008 Unaudited | ||
| Notes | £000 | £000 | |
| Revenue | 4 | 20,391 | 25,294 |
| Cost of sales | (15,511) | (19,181) | |
| Gross profit | 4,880 | 6,113 | |
| Selling and distribution costs | (1,930) | (1,676) | |
| Exceptional administrative income/(expense) | 5 | 152 | (890) |
| Other administrative expenses | (3,117) | (4,556) | |
| Total administrative expenses | (2,965) | (5,446) | |
| Operating loss from continuing operations | (15) | (1,009) | |
| Exceptional operating items | 5 | 152 | (890) |
| Other operating loss | (167) | (119) | |
| EBITDA and exceptional items | 222 | 497 | |
| Depreciation of plant and equipment | (108) | (151) | |
| Amortisation of intangible assets | (281) | (465) | |
| Exceptional items | 5 | 152 | (890) |
| Operating loss from continuing operations | (15) | (1,009) | |
| Finance revenue | 2 | 38 | |
| Finance costs | (11) | (118) | |
| Loss from continuing operations before taxation | (24) | (1,089) | |
| Tax | 6 | (138) | 719 |
| Loss for the half year from continuing operations | (162) | (370) | |
| Loss for the half year from discontinued operations | - | (1,361) | |
| Loss for the half year | (162) | (1,731) | |
| Loss for the half year attributable to: | |||
| Equity holders of the parent | (162) | (1,731) | |
| Minority interest | - | - | |
| Loss for the half year | (162) | (1,731) | |
| Earnings per share (pence) | |||
| Basic loss per share from continuing operations | (0.1)p | (0.8)p | |
| Diluted loss per share from continuing operations | (0.1)p | (0.7)p | |
| Basic loss per share from loss for the year | (0.1)p | (3.9)p | |
| Diluted loss per share from loss for the year | (0.1)p | (3.3)p | |
Consolidated Statement of Comprehensive Income
For the six months ended 31 October 2009
| Six months ended 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Loss for the half year | (162) | (1,731) |
| Other comprehensive income | ||
| Exchange differences on translation of foreign operations | 329 | 815 |
| Total comprehensive income for the period, net of tax | 167 | (916) |
| Attributable to: | ||
| Equity holders of the parent | 167 | (916) |
| Minority interest | - | - |
| 167 | (916) | |
Consolidated Statement of Financial Position
As at 31 October 2009
| As at 31 October | |||
| 2009 Unaudited | 2008 Unaudited | ||
| Notes | £000 | £000 | |
| ASSETS | |||
| Non current assets | |||
| Plant and equipment | 7 | 408 | 547 |
| Intangible assets | 7 | 5,164 | 5,313 |
| Deferred tax assets | 6 | 1,183 | 1,531 |
| 6,755 | 7,391 | ||
| Current assets | |||
| Inventories | 2,081 | 4,466 | |
| Trade and other receivables | 8 | 2,298 | 3,103 |
| Income tax receivable | - | 72 | |
| Cash and short term deposits | 502 | 342 | |
| 4,881 | 7,983 | ||
| Total assets | 11,636 | 15,374 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 9 | (5,654) | (7,359) |
| Financial liabilities | 10 | (150) | (1,076) |
| Income tax payable | (37) | - | |
| Government grants | (71) | (87) | |
| Provisions | (24) | (27) | |
| (5,936) | (8,549) | ||
| Non current liabilities | |||
| Financial liabilities | 10 | (160) | (220) |
| Deferred tax liabilities | 6 | - | (27) |
| (160) | (247) | ||
| Total liabilities | (6,096) | (8,796) | |
| NET ASSETS | 5,540 | 6,578 | |
| CAPITAL AND RESERVES | |||
| Equity share capital | 11 | 11,836 | 9,915 |
| Currency translation | 1,017 | 833 | |
| Accumulated losses | (7,313) | (4,170) | |
| eXpansys Group shareholders' equity | 5,540 | 6,578 | |
| Minority interest | - | - | |
| TOTAL EQUITY | 5,540 | 6,578 | |
Consolidated Statement of Changes in Equity
For the six months ended 31 October 2009
| Equity Share Capital Unaudited £000 | Merger Reserve Unaudited £000 | Currency Translation Reserve Unaudited £000 | Accumulated Losses Unaudited £000 | Total Unaudited £000 | |
| At 1 May 2009 | 9,165 | 750 | 688 | (7,151) | 3,452 |
| Loss for the period | - | - | - | (162) | (162) |
| Currency translation differences | - | - | 329 | - | 329 |
| Total comprehensive income | - | - | 329 | (162) | 167 |
| Issue of shares | 1,921 | - | - | - | 1,921 |
| At 31 October 2009 | 11,086 | 750 | 1,017 | (7,313) | 5,540 |
| Equity Share Capital Unaudited £000 | Merger Reserve Unaudited £000 | Currency Translation Reserve Unaudited £000 | Accumulated Losses Unaudited £000 | Total Unaudited £000 | |
| At 1 May 2008 | 9,165 | 750 | 18 | (2,439) | 7,479 |
| Loss for the period | - | - | - | (1,731) | (1,731) |
| Currency translation differences | - | - | 815 | - | 815 |
| Total comprehensive income | - | - | 815 | (1,731) | (916) |
| At 31 October 2008 | 9,165 | 750 | 833 | (4,170) | 6,578 |
There are no minority interests during either period and therefore all equity is attributable to equity holders of the parent.
Consolidated Statement of Cash Flows
For the six months ended 31 October 2009
| Six months ended 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Operating activities | ||
| Loss for the half year | (15) | (1,009) |
| Adjustments to reconcile loss for the half year to net cash flow from operating activities | ||
| Tax on continuing operations | 36 | (185) |
| Net finance costs | (9) | (80) |
| Depreciation of property, plant and equipment | 108 | 151 |
| Amortisation of intangible assets | 281 | 465 |
| Currency movements | 41 | (145) |
| (Increase)/decrease in inventories | (541) | 2,055 |
| (Increase)/decrease in trade and other receivables | (216) | 2,598 |
| (Decrease)/increase in trade and other payables | (1,112) | (3,822) |
| Net cash flow from operating activities | (1,427) | 28 |
| Investing activities | ||
| Cash outflow due to discontinued operations of MWg | - | (365) |
| Payments to acquire property, plant and equipment | (61) | (80) |
| Payments to acquire intangible assets | (196) | (328) |
| Net cash flow from investing activities | (257) | (773) |
| Financing activities | ||
| Issue of equity share capital | 2,000 | - |
| Share issue costs | (78) | - |
| Repayment of borrowings | (30) | (24) |
| Repayments of capital element of finance leases and hire purchase contracts | (57) | (86) |
| Net cash flow from financing activities | 1,835 | (110) |
| Increase/(decrease) in cash | 151 | (855) |
| Cash and cash equivalents at the beginning of the period | 316 | 312 |
| Cash and cash equivalents at the period end | 467 | (543) |
The notes form an integral part of this consolidated half yearly financial information.
Notes to consolidated interim financial information
1. General information
eXpansys plc is a public limited company incorporated and domiciled in England and Wales and the address of its registered office is 3 Hardman Square, Spinningfields, Manchester, M3 3EB, United Kingdom.
The Company's shares are traded on the Alternative Investment Market.
This condensed consolidated half yearly financial information was approved for issue by the Board of Directors on 27 January 2010.
These financial statements are a condensed set of financial statements and are prepared in accordance with the requirements of IAS 34 and do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the Group's annual financial statements as at 30 April 2009. The financial statements for the half year ended 31 October 2009 are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 30 April 2009, prepared under IFRS, were approved by the Board of Directors on 22 July 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985.
2. Basis of preparation
The Interim financial statements for the six months ended 31 October 2009 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS).
3. Accounting policies
The accounting policies adopted are in accordance with International Financial Reporting Standards and are consistent with those in the statutory accounts for the year ended 30 April 2009 available on www.expansys.com except for the adoption of new Standards and Interpretations mandatory for the first time for the financial year beginning 1 May 2009, as noted below.
IFRS 8 Operating segments
This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group and instead requires a 'management approach' under which the segment information is presented on the same basis as that used for internal reporting procedures.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors, since they are responsible for strategic decisions.
Adoption of this Standard did not have any effect on the financial position or performance of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS 14 Segment Reporting. Additional disclosures about each of these segments are shown in Note 4.
IAS 1 Revised Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements and the interim financial statements have been prepared under the revised disclosure requirements.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 May 2009, but are not currently relevant for the Group:
IAS 23 (amendment) 'Borrowing Costs'
IFRS 2 (amendment) 'Share Based Payment'
IAS 32 (amendment) 'Financial Instruments: Presentation'
IFRIC 13 'Customer loyalty programmes'
IFRIC 15 'Agreements for the construction of real estate'
IFRIC 16 'Hedges of a net investment in a foreign operation'
IAS 39 (amendment) 'Financial instruments: Recognition and measurement'
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates. Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary. Whilst every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain, and as such, changes in estimates and assumptions may have a material impact in the financial statements.
The key sources of estimation uncertainty that have significant risk of causing material adjustment to carrying amounts of assets and liabilities within the next financial year are the measurement of:
- indefinite life intangible assets (including goodwill);
- inventories; and
- trade receivables.
The measurement of intangible assets other than goodwill on a business combination involves estimation of future cash flows and the selection of a suitable discount rate. The Group determines whether indefinite life intangible assets are impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate. Any estimates of future economic benefits made in relation to these assets may differ from the benefits that ultimately arise and materially affect the recoverable value of the asset.
Calculation of inventory provisions requires judgements to be made which include forecast consumer demand and inventory loss trends.
Provisions for irrecoverable receivables are based on extensive historical evidence and the best available information in relation to specific issues, but are nevertheless inherently uncertain.
4. Segment information
The Group is managed and reported on a worldwide basis, according to operating divisions aligned to the main trading subsidiaries and has four reportable operating segments as follows:
| | eXpansys UK Limited, incorporated in the United Kingdom, shipping to the United Kingdom and the rest of the world from its warehouses in the United Kingdom; |
| | eXpansys Nomatica SAS, incorporated in France, shipping to Continental Europe from its warehouse in Montpelier, France; |
| | eXpansys Inc, incorporated in United States of America, shipping to United States and Canada, from its warehouse in Bloomington, Chicago, United States of America; |
| | eXpansys Hong Kong Limited, incorporated in Hong Kong, shipping to the Far East from its warehouse in Hong Kong. |
No operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which is measured in the same way as operating profit or loss in the consolidated financial statements.
Transfer prices between business segments are set on an arms length basis in a manner similar to transactions between third parties. Segment revenue, segment expense and segment result includes transfers between business segments. Those transfers are eliminated in consolidation.
The following tables present revenue and profit and certain asset and liability information regarding the Group's business segments for the six months ended 31 October 2009 and 2008.
All operations are continuing, except for MWg which was discontinued during October 2008 and whose results are disclosed as discontinued in the income statement.
| UK & rest of world | Continental Europe | USA & Canada | Far East | Singapore | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Six months ended 31 October 2009 | ||||||
| Unaudited | ||||||
| Revenue | ||||||
| Sales to external customers | 6,154 | 9,608 | 3,392 | 1,237 | - | 20,391 |
| Inter-segment sales | 2,414 | 237 | 230 | 301 | - | 3,182 |
| Segment revenue | 8,568 | 9,845 | 3,622 | 1,538 | - | 23,573 |
| Results | ||||||
| Segment result | 372 | 344 | (24) | (105) | - | 587 |
| Segment result (excluding exceptional items) | 300 | 368 | (24) | (105) | - | 539 |
| UK & rest of world | Continental Europe | USA & Canada | Far East | Singapore | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Six months ended 31 October 2008 | ||||||
| Unaudited | ||||||
| Revenue | ||||||
| Sales to external customers | 8,650 | 9,872 | 4,381 | 2,391 | - | 25,294 |
| Inter-segment sales | 5,770 | 1,647 | 954 | 1,116 | - | 9,487 |
| Segment revenue | 14,420 | 11,519 | 5,335 | 3,507 | - | 34,781 |
| Results | ||||||
| Segment result | (971) | 446 | 53 | 4 | - | (468) |
| Segment result (excluding exceptional items) | (662) | 446 | 53 | 4 | - | (159) |
5. Exceptional items
| Six months ended 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Redundancy costs | 49 | (44) |
| Exceptional bad debt provision | - | (851) |
| Restructuring costs in eXpansys UK | - | (281) |
| Release of warranty provision | - | 286 |
| Release of costs accrued for office reorganisation | 103 | - |
| Exceptional operating income/(costs) | 152 | (890) |
6. Tax
The (charge)/credit included in the income statement is as follows:
| Six months ended 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| UK corporation tax | - | - |
| Foreign tax | 35 | (47) |
| Adjustments in relation to prior periods | - | (1) |
| Deferred tax | (173) | 767 |
| (138) | 719 | |
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual income tax rate used for the year to 31 April 2010 is 28%.
Deferred tax
The deferred tax included in the balance sheet is as follows:
| As at 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Deferred tax liability | ||
| Accelerated capital allowances | - | 27 |
| Deferred tax asset | ||
| Depreciation in advance of capital allowances | 283 | 183 |
| Other timing differences | 4 | 4 |
| Tax losses | 896 | 1,344 |
| 1,183 | 1,531 | |
7. Tangible and intangible assets
| Plant and equipment | Intangible assets | |
| £000 | £000 | |
| Six months ended 31 October 2009 | ||
| (Unaudited) | ||
| Opening net book value at 1 May 2009 | 470 | 4,949 |
| Additions | 61 | 196 |
| Depreciation and amortisation | (108) | (281) |
| Foreign exchange difference | (15) | 300 |
| Closing net book value at 31 October 2009 | 408 | 5,164 |
| Plant and equipment | Intangible assets | |
| £000 | £000 | |
| Six months ended 31 October 2008 | ||
| (Unaudited) | ||
| Opening net book value at 1 May 2008 | 751 | 4,812 |
| Additions | 80 | 328 |
| Disposals as part of discontinued business | (152) | - |
| Depreciation and amortisation | (151) | (465) |
| Foreign exchange difference | 19 | 638 |
| Closing net book value at 31 October 2008 | 547 | 5,313 |
8. Trade and other receivables
| As at 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Trade receivables | 1,420 | 2,163 |
| Less provisions for impairment of receivables | (29) | (882) |
| Trade receivables - net | 1,391 | 1,281 |
| Other taxes | 70 | 137 |
| Other debtors | 411 | 452 |
| Prepayments and accrued income | 426 | 1,233 |
| 2,298 | 3,103 | |
9. Trade and other payables
| As at 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Trade payables | 3,701 | 4,552 |
| Social security and other tax payables | 417 | 538 |
| Other payables | 120 | 259 |
| Accruals and deferred income | 1,416 | 2,010 |
| 5,654 | 7,359 | |
10. Financial liabilities
| As at 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Current | ||
| Bank overdraft | 36 | 885 |
| Obligations under finance leases and hire purchase contracts | 60 | 154 |
| Instalments due on bank loan | 54 | 37 |
| 150 | 1,076 | |
| As at 31 October | ||
| 2009 Unaudited | 2008 Unaudited | |
| £000 | £000 | |
| Non-current | ||
| Obligations under finance leases and hire purchase contracts | 13 | 59 |
| Instalments due on bank loan | 147 | 161 |
| 160 | 220 | |
11. Equity share capital
On 15 June 2009 133,333,333 new ordinary shares were issued pursuant to a Placing of new ordinary shares at 1.5 pence per share, raising £2 million with costs incurred of £0.08 million.
Following the admission of the 133,333,333 ordinary shares to AIM on 16 June 2009, the Company's total issued share capital was 178,171,007 ordinary shares of 0.25 pence each.
Equity share capital on the balance sheet includes the allotted share capital as above and share premium of £10,641,000.
12. Related party transactions
Following the share issue in June 2009, one of the Group's suppliers, Data Select Limited, became a related party. Data Select Limited is ultimately controlled by Peter Jones, who obtained a controlling interest in eXpansys plc in June 2009. Since that date, purchases of products and services from Data Select Limited amounted to £2,743,000 and sales to Data Select Limited amounted to £113,000. At 31 October 2009, the amount owed to Data Select Limited was £1,855,000.
Statement of Directors' Responsibilities
The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the business.
The Directors of eXpansys plc are listed in the eXpansys plc Annual Report and Financial Statements for 30 April 2009. A current list of directors is maintained on the eXpansys website www.eXpansys.com
On behalf of the Board on 27 January 2010
Roger Butterworth
Chief Executive Officer
Cate Hulme
Chief Finance Officer