Last checked at 23 Jul 2009 07:01
PRELIMINARY RESULTS 2009
eXpansys plc ("eXpansys" or the "Group"), a leading global online retailer of wireless technology, announces its preliminary results for the year ended 30 April 2009.
Key points
| Successful implementation of major review and improvement programme, following the global economic downturn and resulting unprecedented turbulent trading conditions | ||
| Business risk reduced, cost base challenged and management of working capital improved: | ||
| - | Operations rationalised and headcount reduced by 86 - employee related expenses lowered by £122,000 per month and operational expenses by £40,000 per month | |
| - | £1.5 million UK bank debt repaid in full, reducing monthly interest charge by £15,000 | |
| - | Cash inflow from operating activities of £1.0 million (2008: outflow £0.5 million) | |
| - | Significant reduction in inventory - down £5.0 million to £1.5 million | |
| - | Debtors reduced by £3.6 million to £2.1 million | |
| £1.92 million additional working capital raised via placing with Virtual Phone Shop Limited ("VPS"), a company controlled by Peter Jones | ||
| Group strengthened to trade through difficult economic environment | ||
| Well positioned to benefit from upturn in discretionary purchases in medium term | ||
Roger Butterworth, Chief Executive, said: "The last year was undoubtedly a very challenging time for the Group. Our products have always been discretionary spend items and the global economic downturn has hit Group sales hard. The Board, however, reacted swiftly and the resulting review and overhaul of Group operations has strengthened eXpansys significantly and created a leaner business, which is better able to handle harsh trading conditions and well positioned to take advantage of any upturn.
"The reduction in our sales was exacerbated by manufacturers withholding new product releases - our lifeblood - for better times. New products such as the Nokia N97, HTC Hero and Apple i-Phone 3GS are now beginning to come to market and I am pleased to report that eXpansys has benefited from these. Whilst we remain cautious, I am now more hopeful for the future of the business than I have been for some time and I believe the prospects of the Group in FY 2010 are very good indeed."
For further information, please contact:
| eXpansys plc | Tel: +44 (0) 161 232 3410 |
| Roger Butterworth, CEO | roger@expansys.com |
| Investor relations website | www.expansys.com/investor.aspx |
| Cenkos Securities plc | Tel: +44 (0) 20 7397 8926 |
| Stephen Keys | skeys@cenkos.com |
| Rawlings Financial PR Limited | Tel: +44 (0) 1653 618 016 |
| Catriona Valentine | catriona@rawlingsfinancial.co.uk |
About eXpansys
The Group specialises in the sale of handheld electronic devices with wireless connectivity and boasts a wide offering ranging from smartphones and ultra mobile personal computers, to cameras and GPS equipment. eXpansys operates some 50 websites in 15 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 and Hong Kong.
CHAIRMAN'S STATEMENT
There is no doubt that the results are disappointing and that this has been another tough year for the Group. Our swift action to reduce costs, rationalise the business and raise additional working capital have, however, improved our prospects considerably, creating a stronger, leaner Group which the Board believes is capable of achieving sustainable profitability in the short to medium term.
Major review and improvement programme
As the economic climate worsened, with the inevitable impact on revenue and margins, management conducted a major review of Group operations and implemented a successful business improvement programme, the details of which are in our Chief Financial Officer's Review. In short, we took immediate action to preserve and support the Group's core operations, closing the Singaporean venture, Mobile & Wireless Group ("MWg"), which, despite early promise, had become a major drain on the Group's cash resources; outsourcing our UK warehousing operations; reducing headcount and related costs; raising additional working capital and addressing our historical inventory and debtor issues.
Fundraising
After the year end, 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, to provide the Group with the additional working capital. VPS now holds 81% of the Company's share capital.
People
Stephen Vincent, a director of VPS, has today joined the Board of eXpansys as a Non-executive Director, following the successful completion of the Placing. Stephen's knowledge of our sector is profound and the expertise garnered as Finance Director of Phones International Group will be highly valued by the Group. On behalf of everyone at eXpansys, I welcome him to the Board.
I also take this opportunity to thank Barry Roberts, who resigned as Chairman at our AGM in October 2008, for his contribution to the Group and, on behalf of the Board, wish him all the best for the future.
Our staff have shown exceptional dedication in the face of extremely difficult trading conditions and I would like to thank them all for their commitment and enthusiasm.
Outlook
Despite the turbulent economic conditions and cash flow issues we have faced, I believe that eXpansys is through the worst and the Group is much better positioned to take advantage of any upturn in discretionary spend purchases.
Our priority for the first half of the current year is to cope with the difficult ongoing market conditions and complete our improvements to the Group's operations. The Board remains cautiously optimistic and, using our strong branding and global infrastructure, aims to return the Group to sustainable profitability in the short to medium term.
Graham Dawber
Non-executive Chairman
22 July 2009
CHIEF EXECUTIVE'S OPERATING REVIEW
In my half year statement to shareholders, I outlined the decisive actions we had taken to mitigate the increasingly difficult global market conditions and to change the eXpansys business over to a new business model with lower costs and considerably less stock risk. I am pleased to report that these actions were successful and that we made further progress throughout the second half of the year, which I expect to continue giving rise to considerable improvement in our results.
Our markets
While there have been regional variations in timing, all of the markets in which we operate have been adversely affected by the poor economic conditions of the last 12 months. Both consumers and businesses have drastically reduced their expenditure on significant discretionary purchases, including portable technology products, and this, combined with the shortage of cash caused by the losses in our MWg business and the reduced availability of both supplier credit and bank credit, has affected the eXpansys business severely.
Following the year end, we addressed our cash shortfall through an issue of new shares and increased credit facilities, provided by our new investor. In addition to this, we are beginning to see some return of consumer spending in our UK, USA and Far East operations. The business in mainland Europe, which was last to suffer the effects of the global downturn, however, is still significantly affected by it.
Business review
The Company's core market remains the online sale of portable electronic devices. We continue to operate through four subsidiaries, eXpansys UK Limited, eXpansys SAS in Montpellier, France, which services mainland Europe, eXpansys Inc in Chicago, selling throughout the Americas, and eXpansys (Hong Kong) Limited, which covers the China and Australasian region.
As I noted in my half year report, the Group's operations in Singapore were closed down at the end of October 2008, incurring substantial losses. These losses are fully accounted for in these full year results.
During the year under review, we sought to reduce our overheads substantially through the outsourcing of our UK warehousing and call centre functions. This has been achieved and the business in the UK has a greatly reduced overhead as a result. Whilst we reduced inventory substantially in the UK and elsewhere, better Electronic Data Interface ("EDI") links with our suppliers ensured stock was available for next day shipment to our UK customers. The process of reducing the stock that we own and have physical control of, while increasing the stock that we can call upon electronically, will continue throughout the current financial year.
New products remain a significant source of revenue for the Group. Our early adopter customer base values our ability to deliver the very latest technology as fast as possible and we were doubly affected when several major manufacturers decided to delay new product releases because of the adverse economic conditions. However, in June 2009, there were major new releases from Nokia, Apple and HTC.
Placing and major new shareholder
Following the £1.92 million working capital fundraising in June 2009, VPS - a division of Phones International Group - became our largest investor with a shareholding of 81% in the business. Phones International has been a business partner of eXpansys since 2001. Data Select, a wholly owned subsidiary of Phones International, has provided trade credit of £1.25 million, and has helped us to secure further credit from third party suppliers. This has resulted in a significant improvement in our cash flow and consequently in revenues, which will assist in our aim to deliver sustainable profitability going forward.
Prospects
The last year was undoubtedly a very challenging time for the Group. Our products have always been discretionary spend items and the global economic downturn has hit Group sales hard. The Board, however, reacted swiftly and the resulting review and overhaul of Group operations has strengthened eXpansys significantly and created a leaner business, which is better able to handle harsh trading conditions and well positioned to take advantage of any upturn.
The reduction in our sales was exacerbated by manufacturers withholding new product releases - our lifeblood - for better times. New products such as the Nokia N97, HTC Hero and Apple i-Phone 3GS are now beginning to come to market and I am pleased to report that eXpansys has benefited from these.
Whilst we remain cautious, I am now more hopeful for the future of the business than I have been for some time and believe the prospects of the Group in FY 2010 are very good indeed.
Roger Butterworth
Chief Executive Officer
22 July 2009
CHIEF FINANCIAL OFFICER'S REVIEW
Focus on reducing risk and challenging costs
In light of the ongoing harsh economic conditions, our focus, this year, was fixed firmly on reducing business risk, improving management of working capital and challenging all costs. Despite the Group's poor financial performance, I am pleased to report that we successfully addressed these key issues.
We have taken decisive action by closing the Singaporean business, Mobile & Wireless Group ("MWg"), during October 2008 in order to reduce ongoing trading losses and improve cash flow. During the first half of the year, MWg incurred a trading loss of £370,000 (2008: trading loss of £1.1 million), with a loss on disposal of £1.0 million which have been shown as discontinued operations in the Income Statement.
Additional radical action was taken to reduce costs further. We closed our UK warehouse in December 2008, outsourcing the warehousing and logistics operations. These premises were successfully sublet in April 2009. A global redundancy programme was also undertaken during the year, incurring exceptional costs of £179,000. Headcount was reduced by 86 to 142 with a further reduction of 11 post year end. These combined actions have reduced monthly employee related expenses by £122,000 with a further £40,000 reduction in operational expenses.
Significant improvements in working capital
We made significant progress in the management of working capital within our ongoing operations, despite the very difficult economic conditions:
| repaying UK bank debt in full, £1.5 million, reducing the Group's dependency on unreliable support; | |
| generating positive cashflow from operating activities of £1.0 million, compared to 2008 cash outflow of £0.5m; | |
| reducing inventory by £5.0 million; | |
| decreasing receivables by £3.6 million; and | |
| achieving a net repayment of creditors, in addition to the banking facilities, of £4.4 million. |
Operating Results
Like for like revenue decreased by £9.0 million to £47.1 million (2008: £66.8 million which included £10.7 million attributable to non-core distribution business, Portix, sold in April that year).
A significant proportion of our oldest inventory was obtained through historical business acquisitions pre flotation. We had expected to sell these products profitably and had, therefore, avoided aggressive pricing policies. In order to focus on moving the restructured business forward, we focused on realising cash through the sale of this older stock and now believe it has become necessary to make provisions for this inventory, which led to exceptional costs of £2.1 million. This has depressed our gross profit margin for the year under review to 21.1%. Pre-exceptionals, the gross profit margin would have increased to 25.5%.
Exceptional administration expenses were also incurred during the year of £684,000 relating to redundancies and reorganisation costs and £734,000 bad debt write offs netted against a release of warranty provision of £286,000.
Non-exceptional administration costs for the full year were reduced by 10.0% to £8.9 million, (2008: £9.9 million) due to the restructuring highlighted above.
The disposal of the non-core UK distribution business in April 2008, resulted in a profit on disposal of £187,000, with an immediate cash consideration of £760,000 and £400,000 deferred consideration payable, dependent on two trading contracts being awarded to the acquiror. Unfortunately, £300,000 of the deferred consideration did not become payable, leading to a write off in the current year.
There were also reductions in interest charges on bank loans and overdrafts by £224,000 to £235,000, due to the repayment of the UK banking facilities during the year.
Post balance sheet events
On 15 June 2009, we issued 133,333,333 new ordinary shares, raising £2 million, to Virtual Phone Shop Limited, a company controlled by Peter Jones.
Cate Hulme
Chief Financial Officer
22 July 2009 GROUP INCOME STATEMENT
For the year ended 30 April 2009
| 2009 | 2008 | |
| £000 | £000 | |
| Restated* | ||
| Revenue | 47,052 | 66,789 |
| Exceptional cost of sales | (2,057) | (1,576) |
| Other cost of sales | (35,077) | (52,421) |
| Total cost of sales | (37,134) | (53,997) |
| Gross profit | 9,918 | 12,792 |
| Distribution costs | (3,182) | (3,657) |
| Exceptional administrative expenses | (1,132) | (418) |
| Other administrative expenses | (8,903) | (9,889) |
| Total administrative expenses | (10,035) | (10,307) |
| Operating loss from continuing operations | (3,299) | (1,172) |
| Exceptional operating loss | (3,189) | (1,994) |
| Other operating (loss) / profit | (110) | 822 |
| Finance revenue | 35 | 28 |
| Finance costs | (235) | (459) |
| (Loss) / profit on disposal of distribution business | (300) | 187 |
| Loss from continuing operations before taxation | (3,799) | (1,416) |
| Tax credit | 465 | 366 |
| Loss for the year from continuing operations | (3,334) | (1,050) |
| Discontinued operations | ||
| Loss for the year from discontinued operations | (1,379) | (1,124) |
| Loss for the year | (4,713) | (2,174) |
| Loss for the year attributable to: | ||
| Equity holders of the parent | (4,713) | (2,174) |
| Minority interest | - | - |
| Loss for the year | (4,713) | (2,174) |
| Earnings per share (pence) | ||
| Basic and diluted loss per share from continuing operations | (7.4)p | (2.6)p |
| Basic and diluted loss per share from loss for the year | (10.5)p | (5.3)p |
*restated for the segregation of results of operations discontinued during 2009
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 30 April 2009
| 2009 | 2008 | |
| £000 | £000 | |
| *restated | ||
| Income and expense recognised directly in equity | ||
| Currency translation differences | 669 | 43 |
| Deferred taxation on share based payment | - | (179) |
| Net income / (expense) recognised directly in equity | 669 | (136) |
| Loss for the year from continuing operations before taxation | (3,779) | (1,416) |
| Tax credit | 465 | 366 |
| Loss for the year from discontinued operations | (1,379) | (1,124) |
| Total recognised expense relating to the year | (4,044) | (2,310) |
| Attributable to: | ||
| Equity holders of the parent | (4,044) | (2,310) |
| Minority interest | - | - |
| (4,044) | (2,310) |
*restated for the segregation of results of operations discontinued during 2009
GROUP BALANCE SHEET
As at 30 April 2009
| 2009 | 2008 | |
| £000 | £000 | |
| ASSETS | ||
| Non current assets | ||
| Plant and equipment | 470 | 751 |
| Intangible assets | 4,949 | 4,812 |
| Deferred income tax assets | 1,289 | 812 |
| 6,708 | 6,375 | |
| Current assets | ||
| Inventories | 1,540 | 6,912 |
| Trade and other receivables | 2,082 | 6,459 |
| Income tax receivable | 37 | - |
| Cash and short term deposits | 405 | 2,179 |
| 4,064 | 15,550 | |
| Total assets | 10,772 | 21,925 |
| LIABILITIES | ||
| Current liabilities | ||
| Trade and other payables | (6,754) | (11,250) |
| Financial liabilities | (248) | (2,124) |
| Income tax payable | - | (79) |
| Government grants | (86) | (44) |
| Provisions | (22) | (625) |
| (7,110) | (14,122) | |
| Non current liabilities | ||
| Financial liabilities | (203) | (263) |
| Deferred tax liabilities | (7) | (60) |
| (210) | (323) | |
| Total liabilities | (7,320) | (14,445) |
| Net assets | 3,452 | 7,480 |
| Capital and reserves | ||
| Equity share capital | 9,165 | 9,165 |
| Merger reserve | 750 | 750 |
| Currency translation | 688 | 19 |
| Retained earnings | (7,151) | (2,454) |
| eXpansys Group shareholders' equity | 3,452 | 7,480 |
| Minority interest | - | - |
| Total equity | 3,452 | 7,480 |
The financial statements of eXpansys plc ("the Group") for the year ended 30 April 2009 were authorised for issue by the Board of Directors on 22 July 2009 and the balance sheet was signed on the Board's behalf by
| R Butterworth CEO | C Hulme CFO |
GROUP CASH FLOW STATEMENT
For the year ended 30 April 2009
| 2009 | 2008 | |
| £000 | £000 | |
| *restated | ||
| Operating activities | ||
| Operating loss from continuing operations | (3,299) | (1,172) |
| Adjustments to reconcile loss for the year to net cash flow from operating activities | ||
| Exceptional write down of deferred consideration | (300) | - |
| Depreciation of plant and equipment | 321 | 590 |
| Amortisation of intangible assets | 775 | 575 |
| Share based payments | 16 | 1 |
| Currency movements | (112) | 4 |
| Decrease / (increase) in inventories | 4,968 | (598) |
| Decrease / (increase) in trade and other receivables | 3,597 | (484) |
| (Decrease) / increase in trade and other payables | (4,415) | 2,520 |
| Cash generated from continuing operations | 1,551 | 1,436 |
| Discontinued operations: MWg Singapore | (152) | (1,499) |
| Income tax paid | (182) | (4) |
| Interest paid | (200) | (430) |
| Net cash flow from operating activities | 1,017 | (497) |
| Investing activities | ||
| Payments to acquire subsidiary undertaking | - | (303) |
| Cash acquired with subsidiary undertaking | - | 271 |
| Inflow on disposal of distribution business | - | 760 |
| Discontinued operations: MWg Singapore | (158) | (171) |
| Payments to acquire plant and equipment | (136) | (64) |
| Payments to acquire intangible assets | (560) | (572) |
| Net cash flow from investing activities | (854) | (79) |
| Financing activities | ||
| Proceeds from share issues | - | 400 |
| New borrowings | 26 | - |
| Repayment of borrowings | (18) | (28) |
| Repayments of capital element of finance leases and hire purchase contracts | (168) | (222) |
| Net cash flow from financing activities | (160) | 150 |
| Increase / (decrease) in cash | 3 | (426) |
| Cash and cash equivalents at the beginning of the year | 313 | 739 |
| Cash and cash equivalents at the year end | 316 | 313 |
*restated for the segregation of results of operations discontinued during 2009
NOTES
1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Finance Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 April 2009 and applied in accordance with Companies Act 1985.
The Group financial statements are presented in Sterling (being the Group's functional and measurement currency) and all values are rounded to the nearest thousand pounds (£000) except where indicated otherwise.
The principal accounting policies adopted by the Group are set out in note 2.
The financial information set out above does not constitute the Group's statutory financial statements for the year ended 30 April 2009 but is derived from those financial statements. The comparative figures are those of the financial statements for the year ended 30 April 2008. The report of the auditors was unqualified and did not contain a statement under s.237 (2) or (3) Companies Act 1985. The statutory financial statements for the year ended 30 April 2009 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
The financial statements of eXpansys plc and its subsidiaries (the 'Group') for the year ended 30 April 2009 were authorised for issue by the Board of Directors on 22 July 2009 and the balance sheet was signed on the Board's behalf by Roger Butterworth and Cate Hulme.
The financial information contained in this Preliminary Statement does not constitute statutory accounts as defined by Section 240 of the Companies Act.
The annual report is available to shareholders and members of the public on the Company's website at www.expansys.com.
2. Accounting policies
Judgements and key sources of estimation uncertainty
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; and | |
| taxation. |
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.
The complex nature of tax legislation across the tax jurisdictions in which the Group operates necessitates the use of many estimates and assumptions, where the outcome may differ from that assumed. The extent to which tax losses can be utilised depends on the extent to which taxable profits are generated in the relevant jurisdictions in the foreseeable future, and on the tax legislation then in force, and as such the value of associated deferred tax assets is uncertain.
3. Segment information
The Group is managed and reported, on a worldwide basis, according to operating divisions aligned to the main trading subsidiaries:
| eXpansys UK Limited, incorporated in United Kingdom, shipping to United Kingdom and the rest of the world from warehouses in United Kingdom; | |
| eXpansys Nomatica SAS, incorporated in France, shipping to Continental Europe from its warehouse in Montpelier, France; | |
| eXpansys Inc (formerly 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; | |
| eXpansys Hong Kong Limited, incorporated in Hong Kong, shipping to the Far East from its warehouse in Hong Kong; and | |
| Mobile & Wireless Group PTE Limited (MWg), incorporated in Singapore during November 2007 and discontinued in October 2008, shipping on a world wide basis through the warehouses in the rest of the Group and direct from suppliers. |
Therefore the primary segment reporting format is determined to be geographical segments by origin as the Group's risks and rates of return are affected predominantly by differences in geographic location. Segmental analysis by destination would not be materially different.
Secondary segment information (business segments) has not been reported separately as all of the revenue and expenses and all the assets relate to the one continuing activity, being the sale of portable communication and computing devices.
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 on consolidation.
Segment assets consist primarily of plant and equipment, intangible assets, inventories, trade and other receivables and cash and cash equivalents. Unallocated assets comprise goodwill and intercompany balances.
Segment liabilities comprise operating liabilities. Unallocated liabilities comprise intercompany balances and financial liabilities.
Capital expenditure comprises additions to plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.
The following tables present revenue and (loss) / profit and certain asset and liability information regarding the Group's business segments for the years ended 30 April 2009 and 2008.
During the year the MWg business was discontinued, therefore, 2008 results were restated for the segregation of the results of these operations.
| Continuing Operations | Discontinued Operations | |||||
| UK & rest of world | Continental Europe | USA & Canada | Far East | Total | MWg | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Year ended 30 April 2009 | ||||||
| Revenue | ||||||
| Sales to external customers |
14,310 |
20,317 |
8,532 |
3,893 |
47,052 |
2,099 |
| Inter-segment sales | 8,775 | 3,209 | 1,445 | 1,142 | 14,571 | 277 |
| Segment revenue | 23,085 | 23,526 | 9,977 | 5,035 | 61,623 | 2,376 |
| Results | ||||||
| Segment result | (1,941) | 86 | (502) | (942) | (3,299) | 370 |
| Group operating loss | (3,299) | |||||
| Net finance costs | (200) | |||||
| Exceptional write off of deferred consideration | (300) | |||||
| Loss before taxation for continuing operations | (3,799) | |||||
| Tax expense | 465 | |||||
| Loss for the year for continuing operations | (3,334) | |||||
| Assets and liabilities | ||||||
| Segment assets | 5,853 | 3,069 | 820 | 324 | 10,066 | |
| Unallocated assets | 706 | |||||
| Total assets | 10,772 | |||||
| Segment liabilities | (5,780) | (1,923) | (819) | (598) | (9,120) | |
| Unallocated liabilities | 1,800 | |||||
| Total liabilities | (7,320) | |||||
| Other segment information | ||||||
| Plant and equipment capital expenditure | 82 | 18 | 6 | 30 | 136 | - |
| Intangible assets capital expenditure | 560 | - | - | - | 560 | - |
| Impairment of trade receivables | 736 | - | - | - | 736 | - |
| Depreciation | 204 | 41 | 22 | 54 | 321 | - |
| Amortisation | 608 | 104 | 10 | 53 | 775 | - |
| Continuing Operations | Discontinued Operations | |||||
| UK & rest of world | Continental Europe | USA & Canada | Far East | Total | MWg | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Year ended 30 April 2008 | ||||||
| Revenue | ||||||
| Sales to external customers |
32,738 |
17,422 |
12,968 |
3,661 |
66,789 |
2,866 |
| Inter-segment sales | 13,778 | 3,921 | 4,376 | 2,803 | 24,878 | - |
| Segment revenue | 46,516 | 21,343 | 17,344 | 6,464 | 91,667 | 2,866 |
| Results | ||||||
| Segment result | (1,080) | 390 | (469) | (13) | (1,172) | (1,124) |
| Group operating loss | (1,172) | |||||
| Profit on disposal of division | 187 | |||||
| Net finance costs | (431) | |||||
| Loss before taxation for continuing operations | (1,416) | |||||
| Tax credit | 366 | |||||
| Loss for the year for continuing operations | (1,050) | |||||
| Assets and liabilities | ||||||
| Segment assets | 11,354 | 3,373 | 1,714 | 788 | 17,229 | 1,219 |
| Unallocated assets | 3,477 | |||||
| Total assets | 20,706 | |||||
| Segment liabilities | (9,624) | (2,363) | (1,330) | (368) | (13,685) | (2,281) |
| Unallocated liabilities | 1,521 | |||||
| Total liabilities | (12,164) | |||||
| Other segment information | ||||||
| Plant and equipment capital expenditure | 257 | 23 | 16 | 96 | 392 | 183 |
| Intangible assets capital expenditure | 810 | - | - | - | 810 | - |
| Impairment of trade receivables | 103 | - | - | - | 103 | - |
| Depreciation | 474 | 44 | 24 | 18 | 560 | 30 |
| Amortisation | 575 | - | - | - | 575 | - |
2008 results were restated for the segregation of results of operations discontinued during 2009.
4. Exceptional items
| 2009 | 2008 | |
| £000 | £000 | |
| Cost of sales | ||
| Exceptional stock write downs in order to generate cash | 2,057 | 1,576 |
| Administrative expenses | ||
| Costs relating to restructuring of Group financing arrangements | - | 29 |
| Costs in relation to redundancies in eXpansys UK and eXpansys Inc | 179 | 389 |
| Provision against two debts due from overseas businesses in financial difficulties | 734 | - |
| Cost of Australian office reorganisation | 295 | - |
| Release of warranty provision | (286) | - |
| Cost of UK warehousing reorganisation | 210 | - |
| 1,132 | 418 | |
| Total exceptional costs | 3,189 | 1,994 |
All of the exceptional items in the table above are deemed allowable for corporation tax purposes.
2008 results were restated for the segregation of results of operations discontinued during 2009.
5. Discontinued operations
In October 2008, the Board took the decision to close MWg and therefore this business has been treated as discontinued in the financial statements.
The results of MWg for 2009 and 2008 are presented below:
| 2009 | 2008 | |
| £000 | £000 | |
| Revenue | 2,099 | 2,866 |
| Cost of sales | (1,339) | (1,998) |
| Gross margin | 760 | 868 |
| Expenses | (1,104) | (1,977) |
| Operating loss | (344) | (1,109) |
| Finance costs | (26) | (15) |
| Loss before tax from discontinued operation | (370) | (1,124) |
| Loss on disposal of discontinued operation | (1,009) | - |
| Tax | - | - |
| Loss for the year from discontinued operations | (1,379) | (1,124) |
The business commenced trade in November 2007 and therefore the results for 2008 financial year include only six months of trade. The results for 2009 financial year also include only six months of trade since the business was closed at the end of October 2008.
The major classes of assets and liabilities of MWg as at 31 October 2008 were as follows:
| £000 | |
| Assets | |
| Property, plant and equipment | 158 |
| Inventory | 404 |
| Trade receivables | 701 |
| Cash | 70 |
| 1,333 | |
| Liabilities | |
| Trade payables | (633) |
| Other liabilities | (2,317) |
| (2,950) | |
| Net liabilities of disposal group | (1,617) |
The net cash flows attributable to MWg are as follows:
| 2009 | 2008 | |
| £000 | £000 | |
| Operating cash flows | (152) | (1,499) |
| Investing activities | (158) | (171) |
| Net cash outflow | (310) | (1,670) |
| 2009 | 2008 | |
| Basic and diluted loss per share from discontinued operations | (3.1)p | (2.7)p |
6. Earnings per ordinary share
Basic earning per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
| 2009 | 2008 | |
| £000 | £000 | |
| Loss for the year from continuing operations | (3,334) | (1,050) |
| Loss for the year from discontinued operations | (1,379) | (1,124) |
| Less minority interests | - | - |
| Loss attributable to equity holders of the parent | (4,713) | (2,174) |
| 2009 | 2008 | |
| thousands | thousands | |
| Basic weighted average number of shares | 44,838 | 40,914 |
| Dilutive potential ordinary shares: | ||
| Employee and consultant options | 6,080 | 1,231 |
| Warrants over options | 403 | 904 |
| Diluted weighted average number of shares | 51,321 | 43,049 |
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
Earnings per share from continuing operations before exceptional items
The Group presents as exceptional items on the face of the income statement, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to facilitate better assessment of trends in financial performance.
To this end, basic and diluted earnings from continuing operations per share is also presented on this basis and using the weighted average number of ordinary shares for both basic and diluted amounts as per the table above.
The amounts for earnings per share from continuing operations after exceptional items are as follows:
| 2009 | 2008 | |
| Basic loss per share from continuing operations | (7.4)p | (2.6)p |
Net loss from continuing operations before exceptional items and attributable to equity holders of the parent is derived as follows:
| 2009 | 2008 | |
| £000 | £000 | |
| Loss for the year from continuing operations | (3,334) | (1,050) |
| Less minority interests | - | - |
| Loss from continuing operations attributable to equity holders of the parent | (3,334) | (1,050) |
| Loss / (profit) on disposal of distribution business | 300 | (187) |
| Exceptional items after tax attributable to equity holders of the parent | 3,189 | 1,994 |
| Profit from continuing operations before exceptional items attributable to equity holders of the parent | 155 | 757 |
The amounts for earnings per share from continuing operations before exceptional items are as follows:
| 2009 | 2008 | |
| Basic earnings per share from continuing operations before exceptional items | 0.3p | 1.9p |
| Diluted earnings per share from continuing operations before exceptional items | 0.3p | 1.8p |
7. Reconciliation of movements in equity
| Equity share capital | Merger reserve | Currency translation reserve | Retained earnings | |
| £000 | £000 | £000 | £000 | |
| At 1 May 2007 | 8,765 | 750 | (24) | (150) |
| Issue of shares | 400 | - | - | - |
| Share based payment | - | - | - | 49 |
| Deferred tax movement on share based payments | - | - | - | (179) |
| Loss for the year | - | - | - | (2,174) |
| Exchange differences on retranslation of net assets of subsidiary undertakings | - | - | 43 | - |
| At 30 April 2008 | 9,165 | 750 | 19 | (2,454) |
| Share based payment | - | - | - | 16 |
| Loss for the year | - | - | - | (4,713) |
| Exchange differences on retranslation of net assets of subsidiary undertakings | - | - | 669 | - |
| At 30 April 2009 | 9,165 | 750 | 688 | (7,151) |
| Share holder equity | Minority Interests | Total equity | ||
| £000 | £000 | £000 | ||
| At 1 May 2007 | 9,341 | - | 9,341 | |
| Issue of shares | 400 | - | 400 | |
| Share based payment | 49 | - | 49 | |
| Deferred tax movement on share based payments | (179) | - | (179) | |
| Loss for the year | (2,174) | - | (2,174) | |
| Exchange differences on retranslation of net assets of subsidiary undertakings | 43 | - | 43 | |
| At 30 April 2008 | 7,480 | - | 7,480 | |
| Share based payment | 16 | - | 16 | |
| Loss for the year | (4,713) | - | (4,713) | |
| Exchange differences on retranslation of net assets of subsidiary undertakings | 669 | - | 669 | |
| At 30 April 2009 | 3,452 | - | 3,452 |
Equity share capital
The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital, comprising 0.25p ordinary shares.
Merger reserve
As a result of the acquisition of eXpansys Nomatica SAS in a share for share exchange, merger relief was taken and no share premium was recognised, rather the premium arising was credited to merger reserve.
Currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
8. Post balance sheet events
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, and the ultimate controlling party has become Peter Jones.
9. Additional cash flow information
(a) Analysis of Group net debt
| At | New finance | At | ||
| 1 May 2007 | Cash flow | lease | 30 April 2008 | |
| £000 | £000 | £000 | £000 | |
| Cash at bank and in hand | 739 | 1,440 | - | 2,179 |
| Bank overdrafts | - | (1,866) | - | (1,866) |
| 739 | (426) | - | 313 | |
| Finance leases | (492) | 222 | (29) | (299) |
| Bank loans | (250) | 28 | - | (222) |
| (3) | (176) | (29) | (208) | |
| At | New finance | At | ||
| 1 May 2008 | Cash flow | lease | 30 April 2009 | |
| £000 | £000 | £000 | £000 | |
| Cash at bank and in hand | 2,179 | (1,774) | - | 405 |
| Bank overdrafts | (1,866) | 1,777 | - | (89) |
| 313 | 3 | - | 316 | |
| Finance leases | (299) | 167 | - | (132) |
| Bank loans | (222) | (8) | - | (230) |
| (208) | 162 | - | (46) |
(b) Cash flows relating to operating exceptional items
Net cashflow from operating activities includes the following exceptional cash flows:
| 2009 | 2008 | |
| £000 | £000 | |
| Non recoverable distribution expenses | - | 223 |
| Costs relating to restructuring of Group financing arrangements | - | 29 |
| Costs in relation to redundancies in eXpansys UK and eXpansys Inc | 179 | 172 |
| Cost of UK warehousing reorganisation | 210 | - |
| 179 | 424 |