Xps Pensions Regulatory News (XPS)

28 Jan 2008 11:01

eXpansys Plc28 January 2008 INTERIM RESULTS eXpansys plc ("eXpansys" or the "Group"), a leading online retailer of wirelesstechnology which floated on AIM in April 2007, announces its interim results forthe six months to 31 October 2007. Key points: * Revenue growth from previous half year of 30% to £32.3 million * Gross profit margin stable at 21.5% * Pre-exceptional EBITDA growth of 1O% to £1.3 million. Profit before tax and exceptional items of £0.5 million * Successful acquisition of YooNoo Limited, the leading on-line retailer of GPS equipment in the UK, now fully integrated and Group's sales of GPS equipment are strong * Acquisition of significant assets on attractive terms from O2. This also gave a unique opportunity to recruit some of the previous O2 personnel and to create a presence for the Group in Singapore, with excellent potential in sales channels, product set and geographical reach Roger Butterworth, Chief Executive, said: "The success of the e-commercechannel, including a contribution from new product lines, has been encouragingand the Directors intend to pursue the strategy of diversifying the Group'sproduct range. Whilst the Group has experienced challenges in its first year asa public company, the Board believes that there are significant opportunitiesfor a diversified, on-line retailer of electrical products with a strong andtrusted brand like 'eXpansys'. The Directors will continue to seek to capitaliseupon these opportunities and view the future with confidence." For further information, please contact: eXpansys plc Tel: +44 (0) 161 232 3410Roger Butterworth, CEO roger@eXpansys.comInvestor relations website www.eXpansys.com/investor.aspx Rawlings Financial PR Limited Tel: +44 (0) 1756 770 376Catriona Valentine catriona@rawlingsfinancial.co.uk About eXpansys The Group specialises in the sale of handheld electronic devices with wirelessconnectivity and boasts a wide offering ranging from smartphones and ultramobile personal computers, to cameras and GPS equipment. Under the umbrella ofwww.eXpansys.com, www.nomatica.com, www.portix.com and www.mobileplanet.com,eXpansys operates some 50 websites in 12 different languages that cater to themajor economies of the world and serve both retail customers and blue-chipcorporate accounts including Microsoft, Oracle, The Metropolitan Police and DellComputer. Based in Manchester, eXpansys has grown both organically and through acquisitionand has a global infrastructure that allows it to service its internationalcustomer base through a network of warehouses in the UK, France, USA, Hong Kongand Australia. CHIEF EXECUTIVE'S STATEMENT The six months to 31 October 2007 have been a challenging but exciting time foreveryone at eXpansys, following our successful AIM listing in April. The key objective for the Group, as stated in the AIM Admission Document, is togenerate sustainable profits with positive cash flow. Whilst we have encountereda number of issues since flotation that have affected our progress, we stillbelieve that by increasing gross margins through the shortening of our supplychain and, where possible, buying stock directly from the manufacturer andutilising the scalability of our business is the way to achieve this profitableand cash generative growth. Performance Turnover in the first half recovered strongly from the second half last yearfollowing the receipt of funds from the IPO, with 30% growth to £32.3 million.Pre-exceptional EBITDA grew 10% to £1.3 million compared to the equivalentperiod last year. Whilst we had expected to be debt free, a delayed paymentof some $0.8 million contributed to our continued utilisation of our overdraftfacility and we have incurred a higher than expected interest charge of £0.3million as a result. Exceptional items during the period included a stockprovision of £0.9 million and redundancy costs of £0.4 million. Our European operations have performed ahead of our expectations, achievingrecord results, and we continue to make good progress in the United States. Aswe stated in our update of 27 November, however, we have been experiencing somepricing pressure, particularly in the UK. In addition, with reductions inconsumer spend being seen across the retail sector and increased levels ofcompetition being experienced, some of our suppliers have imposed morerestrictive terms. As a result of these pressures, our attentions have beenfocused on the strategic direction of the business and examining new growthopportunities. A number of rationalisation measures are currently underway,including closure of non profitable offices and a reduction in staff numbers inthe UK and US. We have started the New Year with a reduced cost base and willcontinue to monitor this closely. During the period, the business adapted to meet the changing market place andthe decision was taken to broaden our product offering in order to deliver uponour growth plans. The opportunity to acquire YooNoo Limited, the leading on lineretailer of GPS equipment in the UK, for a modest consideration was particularlyattractive. It is pleasing to report that YooNoo has been fully integrated andthat the Group's sales of GPS equipment have performed strongly. The Group alsocommenced the sale of additional consumer electronic equipment and the successof this approach has exceeded our expectations. At the period end, we became aware of the decision by O2 to exit their businessin Asia and capitalised upon the opportunity to buy its significant stock andother assets on attractive terms. Whilst completing this transaction, it becameapparent that there was a unique opportunity to recruit some of the previous O2Asia personnel and to create a presence for the Group in Singapore. The Grouphas established a 90% owned subsidiary, MWg Singapore, which has excellentpotential in several areas - sales channels, product set and geographical reach.This opportunity has, however, involved investment in start up and businessdevelopment costs. The Board evaluated the proposition fully and decided that itprovided a unique opening for the Group to generate growth in a new territorywith significant potential. The Board continues to explore various sources ofexternal funding for MWg and is actively seeking a partner to share in the costsand rewards of this opportunity. Our policy in the past has been to avoid aggressive pricing, as we have alwaysbelieved and demonstrated that the substantial majority of our stock can berealised profitably. In order to fund MWg and capitalise on the potential of theSingapore business, however, we undertook an aggressive pricing campaign,focusing on our older stocks in the UK. The Board concluded that longer termbenefits to the Group, through the realisation of older stock, outweighed theshort term negative effects of such a pricing policy. This policy precipitated are-examination of the stock values reflected in our accounts with additionalprovisions being required. The Board will continue to seek external funding or partners for MWg and will ensure that the costs incurred in relation to this opportunity remain in line with the rewards identified. Market and Business Review The business remains essentially unchanged from the business detailed in theCompany's Admission Document, other than the addition of the MWg business to theGroup. The items sold by the Group are, in many cases, luxury items, this leaveseXpansys vulnerable to an economic downturn in any of our key territories. Oursupply chain is, however, very efficient and our costs are much lower than highstreet retailers. We believe that we have the ability to be price competitiveand maintain market share at the expense of retailers with higher cost bases inall market conditions. We also believe that the broadening of our geographicspread into Asia will provide a good counterbalance to our European and NorthAmerican businesses and will make the Group more robust in the event of aneconomic downturn in any one key territory. Our UK business has been a disappointment with costs ahead of plan and grossmargins lower than anticipated. I believe that this reflects the experience of many other retailers in the current market and so we have taken steps to re-structure this business in line with the anticipated revenues and gross margins for 2008. In contrast, our business in the Eurozone, under the leadership of Frederic Pont, has performed particularly well. Mr Pont's remit has been extended to also cover the UK. The US business continues to improve and now makes a positive contribution to the Group and the Group's business in Asia is experiencing exceptional growth as a result of the O2 Asia deal. The market generally continues to move away from a subsidised handset model andtowards a model where customers buy handsets and connectivity separately. In thelast 6 months O2 SIMplicity and the Apple i-Phone have both contributed towardsthis trend and the recent appointment of eXpansys as the first T-Mobile PremierReseller of connectivity, with a special focus on SIM free smartphone handsets,underlines both the movement of the market in this direction and eXpansys'position at the heart of the market. Outlook The Directors constantly monitor consumer spending habits and it is pleasing tonote that the wide-spread acceptance of on-line retailing continues to grow withthe move from the high street to on-line retailing clearly evident. This hasbeen seen first hand by the Group with over a billion page-views on the eXpansyswebsites in the six month period. This change in spending patterns has, however,been offset by a worsening domestic retail environment and the Group'sperformance over the key Christmas period was not as good as had been expected,particularly in the UK. It is prudent to be cautious in our outlook for the UKconsumer and it is reasonable to expect pressures on margins that have beenexperienced so far this year to continue. At the same time, the Group iscontinuing with an aggressive pricing policy, focused on older stock, in orderto fund the start up costs necessary to capitalise on the opportunity in MWg.Whilst the Directors are confident that actions taken will deliver success, theywill have an impact on results for the full year, which the Directors expect tobe materially below market expectations. The success of the e-commerce channel, including a contribution from new productlines, has been encouraging and the Directors intend to pursue the strategy ofdiversifying the Group's product range. Whilst the Group has experiencedchallenges in its first year as a public company, the Board believes that thereare significant opportunities for a diversified, on-line retailer of electricalproducts with a strong and trusted brand like 'eXpansys'. The Directors willcontinue to seek to capitalise upon these opportunities and view the future withconfidence. Roger ButterworthChief Executive Officer25 January 2008 CONSOLIDATED INCOME STATEMENTFor the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited Notes £000 £000 Revenue 4 32,337 29,264------------------------------------------------------------------------------- Exceptional costs of sale 5 (946) -Other costs of sale (25,059) (22,682) -------- -------- Total costs of sale (26,005) (22,682)-------------------------------------------------------------------------------Gross profit 6,332 6,582------------------------------------------------------------------------------- Exceptional selling and distribution costs 5 - (223)Other selling and distribution costs (1,797) (1,546) -------- --------Total selling and distribution costs (1,797) (1,769)------------------------------------------------------------------------------- Exceptional administrative expenses 5 (399) (317)Other administrative expenses (4,744) (4,283) -------- --------Total administrative expenses (5,143) (4,600)------------------------------------------------------------------------------- Operating (loss) / profit from continuing operations (608) 213------------------------------------------------------------------------------- Exceptional operating loss 5 (1,344) (540)Other operating profit 736 753 -------- --------EBITDA and exceptional items 1,261 1,149Depreciation of plant and equipment (290) (221)Amortisation of intangible assets (235) (175)Exceptional items 5 (1,344) (540)------------------------------------------------------------------------------- Operating (loss) / profit from continuing operations (608) 213 Finance revenue 7 12Finance costs (268) (185) -------- --------(Loss) / profit from continuing operations before taxation (869) 40Tax credit 6 52 292 -------- --------(Loss) / profit for the half year from continuing operations (817) 332Loss for the half year from discontinued operations - - -------- --------(Loss) / profit for the half year (817) 332 -------- --------(Loss) / profit for the half year attributable to:Equity holders of the parent (817) 296Minority interest - 36 -------- --------(Loss) / profit for the half year (817) 332 -------- -------- Earnings per share (pence) Basic (loss) / earnings per share from continuing operations (2.0)p 1.4pDiluted (loss) / earnings per share from continuing operations (2.0)p 1.4p Basic (loss) / earnings per share from loss for the year (2.0)p 1.4pDiluted (loss) / earnings per share from loss for the year (2.0)p 1.4p -------- --------Pre exceptional earnings per share (pence) Basic earnings per share from continuing operations before exceptionals - 3.9pDiluted earnings per share from continuing operations before exceptionals - 3.9p -------- -------- The notes form an integral part of this consolidated half yearly financialinformation. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Income and expense recognised directly in equityCurrency translation differences (86) (60) -------- --------Net expense recognised directly in equity (86) (60) (Loss) / profit for the half year (817) 332 -------- --------Total recognised (expense) / income relatingto the half year (903) 272 -------- -------- Attributable to:Equity holders of the parent (903) 236Minority interest - 36 -------- -------- (903) 272 -------- -------- The notes form an integral part of this consolidated half yearly financialinformation. CONSOLIDATED BALANCE SHEETFor the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited Notes £000 £000 ASSETS Non current assets Plant and equipment 7 1,534 871Intangible assets 7 4,917 5,004Deferred tax assets 6 655 403 -------- -------- 7,106 6,278 -------- --------Current assets Inventories 10,797 6,426Trade and other receivables 8 7,235 4,870Government grants - 8Cash and short term deposits 239 411 -------- -------- 18,271 11,715 -------- --------Total assets 25,377 17,993 -------- -------- LIABILITIES Current liabilities Trade and other payables 9 (12,749) (12,605)Financial liabilities 10 (1,994) (2,003)Income tax payable (120) (102)Government grants (38) -Provisions 11 (980) (16) -------- -------- (15,881) (14,726) -------- --------Non current liabilities Financial liabilities 10 (324) (1,843)Deferred tax liabilities 6 (66) (32)Provisions 11 (727) - -------- -------- (1,117) (1,875) -------- --------Total liabilities (16,998) (16,601) -------- -------- NET ASSETS 8,379 1,392 -------- -------- CAPITAL AND RESERVES Equity share capital 9,511 948Currency translation (110) (79)(Accumulated losses) / retained earnings (1,022) 467 -------- -------- eXpansys Group shareholders' equity 8,379 1,336Minority interest - 56 -------- --------TOTAL EQUITY 8,379 1,392 -------- -------- The notes form an integral part of this consolidated half yearly financialinformation. CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Operating activities(Loss) / profit for the half year (608) 213Adjustments to reconcile profit for the half yearto net cash inflow from operating activitiesTax on continuing operations 8 (40)Net finance costs (261) (173)Depreciation of property, plant and equipment 290 221Amortisation of intangible assets 221 175Currency movements 1 101(Increase) / decrease in inventories (4,739) 249Increase in trade and other receivables (2,438) (1,056)Increase in trade and other payables 4,013 247Increase in provisions 1,691 6 -------- --------Net cash flow from operating activities (1,822) (57) -------- -------- Investing activitiesOutflow on acquisition of YooNoo Limited (196) -Cash acquired with YooNoo Limited 272 -Payments to acquire property, plant and equipment (26) (49)Payments to acquire intangible assets (272) (318) -------- --------Net cash flow from investing activities (222) (367) -------- --------Financing activitiesShare issue costs (4) -New borrowings - 235Repayment of borrowings (24) (300)Repayments of capital element of finance leases and hire purchase contracts (120) (86) -------- --------Net cash flow from financing activities (148) (151) -------- --------Decrease in cash (2,192) (575)Cash and cash equivalents at the beginning of the half year 739 (143) -------- --------Cash and cash equivalents at the half year end (1,453) (718) -------- -------- The notes form an integral part of this consolidated half yearly financialinformation. NOTES TO CONSOLIDATED HALF YEARLY FINANCIAL INFORMATION 1. General Information eXpansys plc is a public limited company incorporated and domiciled in Englandand 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 forissue by the board of directors on 25 January 2008. These Interim Financial Statements are a condensed set of financial statementsand are prepared in accordance with the requirements of IAS 34. The InterimFinancial Statements for the six months ended 31 October 2007 are unaudited anddo not comprise statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The financial information for the six months ended 31October 2006, prepared under UK GAAP, was audited as part and included in theAdmission Document, and the report of the auditors was unqualified. Statutory accounts for the year ended 30 April 2007, prepared under UK GAAP,were approved by the Board of Directors on 27 July 2007 and delivered to theRegistrar of Companies. The report of the auditors on those accounts wasunqualified, did not contain an emphasis of matter paragraph and did not containany statement under Section 237 of the Companies Act 1985. 2. Basis of preparation The Interim Financial Statements for the six months ended 31 October 2007 havebeen prepared using accounting policies consistent with International FinancialReporting Standards (IFRS) for the first time. The Group has historically prepared its audited annual financial statementsunder UK GAAP and this is the first year that the Group is required to preparefinancial statements that comply with IFRS. As such, the accounting policies andbasis of preparation differ from those set out in the Report and FinancialStatements for the year ended 30 April 2007. The disclosure required by IFRS 1 First-time Adoption of International FinancialReporting Standards for the transition from UK GAAP to IFRS and the details ofthe elections made on conversion to IFRS were set out in the IFRS RestatementReport, available on www.eXpansys.com. A summary of the restatement of the UK GAAP financial statements to IFRS isincluded in note 15. 3. Accounting policies The accounting policies adopted are in accordance with International FinancialReporting Standards and are consistent with those in the IFRS Restatement Reportavailable on www.eXpansys.com. The preparation of financial statements requires management to make estimatesand assumptions that affect the amounts reported for assets and liabilities asat the balance sheet date and the amounts reported for revenues and expensesduring the year. The nature of estimation means that actual outcomes coulddiffer from those estimates. Estimates and assumptions used in the preparationof the financial statements are continually reviewed and revised as necessary.Whilst every effort is made to ensure that such estimates and assumptions arereasonable, by their nature they are uncertain, and as such, changes inestimates and assumptions may have a material impact in the financialstatements. The key sources of estimation uncertainty that have significant risk of causingmaterial adjustment to carrying amounts of assets and liabilities within thenext financial year are the measurement of: * indefinite life intangible assets (including goodwill);* warranty provisions;* inventories;* trade receivables; and* the estimation of share-based payment costs. The measurement of intangible assets other than goodwill on a businesscombination involves estimation of future cash flows and the selection of asuitable discount rate. The Group determines whether indefinite life intangibleassets are impaired on an annual basis and this requires an estimation of thevalue in use of the cash generating units to which the intangible assets areallocated. This involves estimation of future cash flows and choosing a suitablediscount rate. Any estimates of future economic benefits made in relation tothese assets may differ from the benefits that ultimately arise, and materiallyaffect the recoverable value of the asset. The measurement of warranty provisions involves estimation of the level ofrepairs and returns expected on certain products sold within the last twelvemonths, based on historical warranty claim information, as well as recent trendsthat might suggest that past cost information may differ from future claims.Factors that could impact the estimated claim information include parts andlabour costs. Calculation of inventory provisions requires judgements to be made which includeforecast consumer demand and inventory loss trends. Provisions for irrecoverable receivables are based on extensive historicalevidence, and the best available information in relation to specific issues, butare nevertheless inherently uncertain. The estimation of share-based payment costs requires the selection of anappropriate valuation method, consideration as to the inputs necessary for thevaluation model chosen and the estimation of the number of awards that willultimately vest, inputs for which arise from judgements relating to the futurevolatility of the Company's share price, expected dividend yields, risk freeinterest rates and expected lives of the options. The directors draw upon avariety of external sources to aid in the determination of the appropriate datato use in such calculations. 4. Segment information The Group is managed and reported on a worldwide basis, according to fouroperating divisions aligned to the four trading subsidiaries: * eXpansys UK Limited, incorporated in United Kingdom, shipping to United Kingdom and the rest of the world from warehouses in Manchester, United Kingdom and Melbourne, Australia;* eXpansys Nomatica SAS, incorporated in France, shipping to Continental Europe from its warehouse in Montpelier, France;* Mobile Planet Inc, incorporated in United States of America, shipping to United States and Canada, from its warehouse in Bloomington, Chicago, United States of America; and* eXpansys Hong Kong Limited, incorporated in Hong Kong, shipping to the Far East from its warehouse in Hong Kong. Therefore the primary segment reporting format is determined to be geographicalsegments by origin as the Group's risks and rates of return are affectedpredominantly by differences in geographic location. Segmental analysis bydestination would not be materially different. Transfer prices between business segments are set on an arms length basis in amanner similar to transactions between third parties. Segment revenue, segmentexpense and segment result includes transfers between business segments. Thosetransfers are eliminated in consolidation. The following tables present revenue and profit and certain asset and liabilityinformation regarding the Group's business segments for the six months ended 31October 2007 and 2006. All operations are continuing. UK & rest Continental USA & Far of world Europe Canada East Total £000 £000 £000 £000 £000 Six months ended 31 October 2007Unaudited RevenueSales to external customers 16,832 6,348 7,848 1,309 32,337Inter-segment sales 6,494 1,976 2,688 1,267 12,425 ------ ------ ------ ------ ------Segment revenue 23,326 8,324 10,536 2,576 44,762 ------ ------ ------ ------ ------ResultsSegment result (212) 407 (31) (162) 2Segment result (excluding exceptional items) 794 395 178 (39) 1,328 ------ ------ ------ ------ ------ UK & rest Continental USA & Far of world Europe Canada East Total £000 £000 £000 £000 £000 Six months ended 31 October 2006Unaudited RevenueSales to external customers 14,059 6,211 7,649 1,345 29,264Inter-segment sales 7,945 752 2,164 1,291 12,152 ------ ------ ------ ------ ------Segment revenue 22,004 6,963 9,813 2,636 41,416 ------ ------ ------ ------ ------ResultsSegment result 51 254 304 50 659Segment result (excluding exceptionals) 305 540 304 50 1,199 ------ ------ ------ ------ ------ 5. Exceptional items Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Exceptional stock provision 946 -Non recoverable distribution expenses - 223Costs relating to renegotiation of covenants - 31Redundancy costs in eXpansys Nomatica SAS - 286Redundancy costs in eXpansys UK and Mobile Planet 380 -Costs in relation to letter of credit facilities 18 - -------- -------- 1,344 540 -------- --------6. Tax The credit included in the income statement is as follows: 2007 2006 Unaudited Unaudited £000 £000 UK corporation tax (6) (136)Foreign tax (52) (19)Adjustments relation to prior periods - 56Deferred tax 110 391 -------- -------- 52 292 -------- -------- Income tax expense is recognised based on management's best estimate of theweighted average annual income tax rate expected for the full financial year.The estimated average annual income tax rate used for the year to 30 April 2008is 30%. Deferred tax The deferred tax included in the balance sheet is as follows: 2007 2006 Unaudited Unaudited £000 £000 Deferred tax liabilityAccelerated capital allowances 66 32 -------- -------- Deferred tax assetDepreciation in advance of capital allowances 94 112Other timing differences 141 44Tax losses 420 247 -------- -------- 655 403 -------- -------- 7. Tangible and intangible assets Plant and Intangible equipment assets £000 £000 Six months ended 31 October 2007(Unaudited)Opening net book value at 1 May 2007 876 4,846Additions 942 385Depreciation and amortisation (290) (235)Foreign exchange difference 6 (79) -------- --------Closing net book value at 31 October 2007 1,534 4,917 -------- -------- Plant and Intangible equipment assets £000 £000 Six months ended 31 October 2006(Unaudited)Opening net book value at 1 May 2006 886 5,081Additions 216 318Depreciation and amortisation (221) (175)Foreign exchange difference (10) (220) -------- --------Closing net book value at 31 October 2006 871 5,004 -------- -------- 8. Trade and other receivables 31 October 2007 2006 Unaudited Unaudited £000 £000 Trade receivables 5,158 2,455Less provisions for impairment of receivables (206) (47) -------- --------Trade receivables - net 4,952 2,408Other taxes - 617Other debtors 502 341Prepayments and accrued income 1,781 1,504 -------- -------- 7,235 4,870 -------- -------- 9. Trade and other payables 31 October 2007 2006 Unaudited Unaudited £000 £000 Trade payables 10,882 11,582Social security and other tax payables 318 247Other payables 117 151Accruals and deferred income 1,432 625 -------- -------- 12,749 12,605 -------- -------- 10. Financial liabilities Current Non-current 31 October 31 October 2007 2006 2007 2006 Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 Bank overdraft 1,692 1,129 - -Obligations under finance leases and hire purchase contracts 251 296 149 246Instalments due on bank loan 51 578 175 1,597 -------- -------- -------- -------- 1,994 2,003 324 1,843 -------- -------- -------- -------- 11. Provisions Onerous lease Returns Warranties TOTAL Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 At 31 October 2006 and 1 May 2007Current - 16 - 16Non-current - - - - -------- -------- -------- -------- - 16 - 16Arising during the year 582 46 1,063 1,691 -------- -------- -------- --------At 31 October 2007 582 62 1,063 1,707 -------- -------- -------- -------- Analysed as:Current 291 62 627 980Non-current 291 - 436 727 -------- -------- -------- -------- 582 62 1,063 1,707 -------- -------- -------- -------- 12. Business combinations On 27 July 2007, the Group acquired 100% of the shares in YooNoo Limited, aprivate company incorporated in England and Wales. The company is involved inthe retail of global positioning systems within the UK. Total consideration comprised initial cash consideration and fees of £196,000,and deferred consideration of up to £900,000 which is subject to adjustmentsbased on gross margin achieved in the first twelve months following acquisition.The current best estimate of the directors' of the deferred consideration to bepaid is minimal. Book and fair values of the net assets at date of acquisition were as follows: Fair Provisional Book value fair value Value adjustments to Group Unaudited Unaudited Unaudited £000 £000 £000 Plant and equipment 58 - 58Cash 272 - 272Trade receivables 42 (22) 20Other receivables 57 - 57Inventories 339 (16) 323Trade payables (514) - (514)Other payables (129) (3) (132) -------- -------- --------Net assets 125 (41) 84 -------- --------Goodwill arising on acquisition 112 --------Consideration 196 -------- Fair value adjustments relate principally to provisions against doubtful debtsand stock. Included in the £112,000 of goodwill recognized above are certain intangibleassets that cannot be individually separated and reliably measured from theacquiree due to their nature, and the directors believe is attributable toYooNoo's strong position within the UK GPS market and the synergies expected toarise after its acquisition by the Group. Discharged by: £000 Unaudited Cash 155Deferred consideration -Costs associated with the acquisition, settled in cash 41 --------Total consideration 196 -------- 13. Warrants On 30 October 2007 a warrant to subscribe to one million 0.25p ordinary shares at par was issued to O2 Holdings Limited. These are exercisable in full during six periods lasting two weeks each, only when a payment due from eXpansys under the Stock Purchase Agreement is late. The transaction has been measured at the fair value of the equity instruments as there was no additional service performed in exchange for these options. The fair value of this award was not material. 14. Commitments As at 31 October 2007, the Group has a commitment to pay a supplier £43,000 overthe next two years, for participation in their distribution network (2006:£173,000). 15. Transition to IFRS For all periods up to and including the year ended 30 April 2007, eXpansys plcand its subsidiaries (the Group) prepared its financial statements in accordancewith United Kingdom Generally Accepted Accounting Principles (UK GAAP). The financial statements for the year ended 30 April 2008 will be the first theGroup is required to prepare in accordance with IFRS as adopted by the EuropeanUnion, in accordance with the regulations of the Alternative Investment Market.The Group publishes comparative information for one year in its Annual Reportand Financial Statements, therefore the date of transition to IFRS is 1 May2006, this being the start of the earliest period of comparative information. The Group has started from an opening balance sheet as at 1 May 2006 and madethose changes in accounting policies and other restatements required by IFRS 1for the first time adoption of IFRSs. A detailed IFRS Restatement Report with reconciliations and explaining theadjustments made by the Group in restating its UK GAAP balance sheet as at 1 May2006 and its previously published UK GAAP financial statements for the yearended 30 April 2007, was approved by the directors on 28 December 2007 and isavailable from the company's website www.eXpansys.com The preliminary IFRS financial statements for the year ended 30 April 2007 whichcomprise the consolidated IFRS balance sheet as at 1 May 2006 and the 30 April2007 and the consolidated IFRS income statement for the year ended 30 April 2007together with the accounting policies note, have been audited by Ernst & YoungLLP. The audit report from Ernst & Young LLP is unqualified. However, there is a possibility that the preliminary financial statements mayrequire adjustment before being incorporated into final IFRS financialstatements if certain accounting standards issued by the IASB are subject tofurther amendments before the publication of the final 2008 IFRS financialstatements. Summary of differences between UK GAAP and IFRS on loss for the periodattributable to equity shareholders Year ended 30 April 2007 Audited £000 Loss for the year ended in accordance with UK GAAP (605)IAS 18 Returns provision adjustment (5)IAS 19 Holiday pay provision adjustment (6)IAS 20 Government grants adjustment (56)IFRS 3 Reversal of goodwill amortisation 209IAS 12 Income taxes adjustment 4Restatement of minority interests (48) --------Loss for the year attributable to equity shareholders of the parent company in accordance with IFRS (507) -------- Summary of differences between UK GAAP and IFRS on net assets 30 April 1 May 2007 2006 Audited Audited £000 £000 Net assets in accordance with UK GAAP 9,416 1,141IAS 18 Returns provision adjustment (15) (10)IAS 19 Holiday pay provision adjustment (19) (12)IAS 20 Government grants adjustment (56) -IAS 21 Foreign currency adjustment for goodwill (308) -IFRS 3 Reversal of goodwill amortisation 209 -IAS 12 Income taxes adjustment 186 4Restatement of minority interests (73) - -------- --------Net assets in accordance with IFRS 9,340 1,123 -------- -------- Significant changes in accounting policiesSignificant changes in accounting policies, which have arisen from eXpansys'transition to IFRS, are noted below. Presentation of financial statementThe primary financial statements are presented in accordance with IAS 1Presentation of Financial Statements. Although similar, such a presentationdiffers from the UK GAAP equivalent. Under UK GAAP, 'exceptional item' was a defined term. Under IAS 1, there is nodefinition of 'exceptional item'; however the standard provides examples ofcircumstances where, if such items of income and expense are material, thenature and amount should be disclosed separately. Included in these examples aremany one off items which the Group has previously described as 'exceptional'.Accordingly the Group will continue to identify such items separately. There are a number of reclassifications between balance sheet captions thatarise from the application of various IFRS. The most significant reclassifications are:* website development costs (£1,087,000 as at 30 April 2007), which, under UK GAAP, are classified as a tangible fixed asset, whereas under IAS 38 Intangible assets are capitalised as an intangible asset, as only computer software that is integral to a related item of hardware is included in plant and equipment;* goodwill is disclosed separately from intangible assets;* deferred tax assets and current tax liabilities are disclosed as separate items on the face of the balance sheet; and* minority interests were disclosed separately from equity in the UK GAAP balance sheet. Under IAS 27 minority interests have been presented as part of equity and have therefore been reclassified. In addition the change in net assets from remeasurement that is attributable tothe minority interest is an increase of £25,000 at 1 May 2006 and decrease of£73,000 at 30 April 2007. IFRS 3 Business combinationsUnder UK GAAP, goodwill on acquisitions was capitalised and amortised, on astraight line basis, over its estimated useful economic life of between 5 and 20years. Under IFRS 3, positive goodwill arising on a business combination is consideredto have an indefinite life and consequently is not amortised, but instead issubject to impairment testing both annually and when there are indications thatthe carrying value may not be recoverable in full. Amortisation of goodwill arising on the purchase of businesses ceased at 1 May2006 resulting in an increase in profit for the year ended 30 April 2007 of£209,000. As of both 1 May 2006 and 30 April 2007, an impairment review wascarried out as required by IAS 38. The board believes that there has been noimpairment of goodwill. As permitted by IFRS 1, eXpansys has applied IFRS 3 prospectively from thetransition date, rather than restating all previous business combinations. IAS 12 Income taxUnder IAS 12, deferred tax must be recognised on the difference between thecarrying value of the shares, being the charges to the income statement underIFRS2 and any future tax deductions under Schedule 23, in relation to eachoption grant. This resulted in a deferred tax asset of £181,000 as at 30 April 2007, thusincreasing net assets by the same amount. The deferred tax credit in the incomestatement was only increased by £2,000, since the estimated future taxdeductions exceeded the IFRS2 expense charged to the income statement for thescheme, and the excess is therefore taken to equity. There is a further £5,000 deferred tax asset recognised as at 30 April 2007relating to the IFRS adjustment for holiday pay. IAS 18 RevenueUnder IAS 18, revenue is recognised on despatch when the significant risks andrewards are deemed to have passed to the customer and a returns provision isrecognised in accordance with IAS 37 Provisions. This resulted in a reduction in net assets at 1 May 2006 and 30 April 2007 of£10,000 and £15,000 respectively and an increase in loss for the year ended 30April 2007 of £5,000. IAS 19 Employee benefitsUnder UK GAAP, no provision is made for annual leave accrued. Under IAS 19, eXpansys' policy is now to recognise the expected cost ofcompensated short term absences at the time the related service is provided. The impact of this change in policy is to reduce profit for the year ended 30April 2007 by £6,000 and net assets as at 30 April 2007 by £19,000. IAS 20 Government grantsUnder IAS 20, eXpansys must now recognise government grant income received whenit is reasonable to expect that the grants will be received and that all relatedconditions will be met. Since the current grants receivable relate to costs, therevenue is deferred and recognised in the income statement in order to match tothe employee expenditure that it is intended to compensate. The impact of this change in policy is to reduce profit for the year ended 30April 2007 and net assets as at 30 April 2007 by £56,000. IAS 21 The effects of changes in foreign exchange ratesIAS 21 requires that any goodwill and fair value adjustments to the carryingamount of assets and liabilities arising on acquiring a foreign operation shouldbe treated as the foreign operation's assets and liabilities and translated atthe closing rate in accordance with the method noted above. Under UK GAAP, goodwill was treated as denominated in Sterling, being thefunctional currency of eXpansys plc, and was therefore not retranslated at eachbalance sheet date. The impact of retranslation of the goodwill relating to Mobile Planet Inc (basedin USA with a functional currency of US Dollars) and eXpansys Nomatica SAS(based in France with a functional currency of Euros) on equity at 30 April 2007are reductions of £298,000 and £10,000 respectively and with no impact on theloss for the year ended 30 April 2007. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors' confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union and that theinterim management report herein includes a fair review of the business. The directors of eXpansys plc are listed in the eXpansys plc Annual Report andFinancial Statements for 30 April 2007 and there have been no changes since thedate of publication. A current list of directors is maintained on the eXpansyswebsite www.eXpansys.com. On behalf of the Board on 25 January 2008 Roger ButterworthChief Executive Officer Cate HulmeChief Finance Officer This information is provided by RNS The company news service from the London Stock Exchange