RNS Number:7292J
Bartercard plc
29 September 2006
Bartercard PLC
Preliminary announcement of Results for the year ended 31 March 2006
Chairman's statement
Good progress has been made in Bartercard's first year on AIM with many parts of
the business producing record breaking performances.
A number of new licence sales were made during the year by Bartercard
International, including Turkey, Saudi and Syria. Since the year end the licence
for Greece has also been sold. We are greatly encouraged by the current level of
enquiries from potential licensees in numerous new countries, including many in
Europe, and management anticipate potentially our best year ever of licence
sales.
Bartercard Australia (BCA), the main profit engine for the group for over ten
years, had a difficult year. A booming cash economy resulted in less barter
trade taking place, reducing trading revenues in the process. Proactive steps
have been taken to improve revenues and reduce costs. A new Managing Director
was appointed in December, Trevor Dietz, who has over 12 years in executive
management in the Bartercard Group and over 20 years of management experience in
major banks. Under his direction an extensive review of BCA was conducted and
subsequently implemented many changes. The revitalisation Trevor has brought to
BCA resulted in it recently breaking its trading record for the first time in
many years. Member confidence in the Bartercard network was confirmed by the
success of the Worlds Largest Trade Show in Brisbane with over 3,000 members
attending and in excess of $5.2 million traded on the Sunday. A major boost to
BCA's profitability will come from the linking of its barter platform with
point-of-sale transaction systems (EFTPOS or EPOS). Four of Australia's major
banks - Commonwealth Bank of Australia, National Australia Bank, St George and
Westpac Bank have agreed to the system which will substantially reduce head
office administration costs.
Bartercard UK's (BCUK) performance has improved considerably, aided by a new
management team led by Geoff Searle as the new Managing Director. BCUK's
operating performance in trading has increased by 70% since January. Since the
year end the monthly trading record was broken multiple times, and substantially
in August, traditionally a poor trading month. The establishment of Bartercard
Real Estate has proved to be a considerable success and has exceeded our
expectations. BCUK is well positioned to make a significant profit in the
current financial year, which justifies the millions of dollars invested into
the UK operation in cash flow funding over the last four years.
The licence for the United Arab Emirates (UAE) was reacquired and the company's
investment of over $700,000 into the UAE is set to bear fruit with BCUAE
approaching break even in recent months. BCUAE will become the regional support
centre for the Middle East, substantially reducing costs of support from
Australia in the future.
The results for the year have been negatively affected by various accounting
items and events that will not be repeated. This means a trading loss of
$4,368,214 on turnover of $52,837,444 has been increased above our original
expectations. Listing on AIM via a reverse takeover of Universal Direct Group
involved substantial costs and no new money was raised at the time. Universal
Direct's businesses were loss making and proved impossible to turn around or
sell and had to be closed and the goodwill associated with the acquisition of
these businesses written off. The conversion to IFRS meant some major
accounting adjustments mainly the write off of all goodwill associated with the
Universal Direct Group plc acquired in the reverse takeover. These contributed
to the group making a loss before taxation of $8,779,666. However, these one-off
issues are now behind us and Bartercard is trading profitably.
The impact of all these issues on share price has led the board to conclude that
capital for future expansion would be best raised by selling the building in
Australia, which is expected to net the company circa $5million to $6million
after retiring all associated debt, which in turn will free up substantial cash
flow.
The lessons learned from the Universal business is for the company to remain
focussed on its core business and direct income producing related activities and
a substantial cost reduction programme has been implemented since the end of the
financial year, with substantial savings in wages, costs and expenses and
designed to ensure ongoing profitability in line with 15 years of predominantly
cash flow funded global growth.
I would like to thank all our staff for their hard work throughout what has been
a challenging twelve months.
The company is now positioned to profitably grow, led by a strong management
team and the overall operational picture is robust and the financial outlook
extremely positive.
Wayne Sharpe
Executive Chairman
Bartercard plc
Wayne Sharpe, Executive Chairman 07909 975488
College Hill 020 7457 2020
Richard Pearson
Roddy Watt
FINANCIAL COMPARISON FOR BARTERCARD PLC
The following headline figures give a comparison against Bartercard Plc's 12
months audited accounts to 31March 2005 as published.
2006 2005
$A $A
Revenue 52,837,444 6,747,592
Loss before income tax and non-recurring items (4,368,214) (6,473,615)
Basic loss per share pre non-recurring items (cents) (1.71) (114.33)
Please note that Bartercard Plc was acquired through a reverse acquisition by
Bartercard International Limited (BCIB), a company incorporated and resident in
Bermuda, on 26th April 2005. All further comparative figures shown are those of
Bartercard International Limited (BCIB) audited accounts for the nine months to
31 March 2005.
BARTERCARD PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2006
12 Months 9 Months
2006 2005
Pre-non Non Total
recurring recurring
items items
$A $A $A $A
Revenue
Transaction fees 31,985,528 - 31,985,528 25,029,071
Ongoing subscription 6,759,500 - 6,759,500 5,056,023
Franchise fees 2,649,545 - 2,649,545 1,332,473
Publication fees 4,414,799 - 4,414,799 3,164,691
Licence fees 1,326,020 - 1,326,020 -
Other revenue 5,702,052 - 5,702,052 757,114
Total revenue 52,837,444 - 52,837,444 35,339,372
Costs and expenses:
Costs of trade exchange 24,482,146 - 24,482,146 16,485,602
Selling, general and 16,122,927 - 16,122,927 10,869,164
administrative
Depreciation and 1,235,694 - 1,235,694 2,718,882
amortization
(Gain)/loss on disposal of (173,949) - (173,949) 76,349
assets
Employee expense 15,092,558 - 15,092,558 9,677,098
Foreign exchange losses 136,875 - 136,875 206,406
Write down of investments - - - 376,024
Impairment loss - - - 180,634
Goodwill write-off - 4,078,771 4,078,771 -
Write-off of amounts lent to - 332,681 332,681 -
discontinued business
Total costs and expenses 56,896,251 4,411,452 61,307,703 40,590,159
Loss from operations (4,058,807) (4,411,452) (8,470,259) (5,250,787)
Other income/(expense):
Investment income 137,882 - 137,882 189,803
Finance costs (511,241) - (511,241) (205,347)
Rent income 63,952 - 63,952 91,335
Total (expense)/income (309,407) - (309,407) 75,791
Loss before taxation (4,368,214) (4,411,452) (8,779,666) (5,174,996)
Income tax credit 682,175 - 682,175 839,455
Retained Loss (3,686,039) (4,411,452) (8,097,491) (4,335,541)
Loss per share
Basic loss per share (cents) (1.71) (3.76) (11.23)
Diluted loss per share (cents) (1.71) (3.76) (11.23)
BARTERCARD PLC
CONSOLIDATED AND COMPANY BALANCE SHEET AS AT 31 MARCH 2006
Group Company
2006 2005 2006 2005
Assets $A $A $A $A
Current assets:
Cash and cash 506,501 1,574,468 84,809 856,752
equivalents
Trade and other 7,762,683 6,977,258 - 1,088,637
receivables
Inventories 19,825 - - -
Prepaid and other assets 358,431 725,915 3,437 -
Restricted cash 200,958 96,171 - -
Total current assets 8,848,398 9,373,812 88,246 1,945,389
Non current assets:
Property, plant and 5,677,763 6,087,663 - -
equipment
Intangible assets 935,343 940,382 - -
Investments 128,874 39,296 165,667,714 48,818
Deferred tax asset 5,733,223 5,061,877 - -
Total assets 21,323,601 21,503,030 165,755,960 1,994,207
Liabilities
Current
liabilities:
Bank overdrafts 320,229 325,098 - -
Obligations under 235,605 226,764 - -
finance leases
Trade and other payables 3,845,852 1,713,096 1,060,830 739,590
Loans payable - related 119,553 17,745 526,274 -
parties
Borrowings 908,293 944,031 - 24,409
Accrued expenses 2,841,556 2,626,087 636,576 285,584
Deferred revenue 399,839 786,217 - -
Provisions for employee 619,667 778,969 - -
benefits
Total current liabilities 9,290,594 7,418,007 2,223,680 1,049,583
Non current liabilities:
Borrowings 3,916,873 2,825,166 - -
Obligations under 219,393 166,055 - -
finance leases
Deferred tax liability 35,894 97,597 - -
Total liabilities 13,462,754 10,506,825 2,223,680 1,049,583
Share holders' equity
Share capital 6,642,638 12,423,183 6,642,638 1,227,768
Retained earnings/ (9,433,153) (1,335,662) (5,173,628) (1,740,355)
(accumulated losses)
Reserves 10,651,362 (91,316) 162,063,270 1,457,211
Total shareholders' equity 7,860,847 10,996,205 163,532,280 944,624
Total liabilities and shareholders' 21,323,601 21,503,030 165,755,960 1,994,207
equity
The financial statements were approved by the Board of Directors on 28 September
2006 and are signed on its behalf by Andrew Federowski.
BARTERCARD PLC
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2006
Group Company
12 Months 9 Months
2006 2005 2006 2005
$A $A $A $A
Cash flows from operating activities
Cash receipts from customers 52,022,884 36,094,655 - -
Cash paid to suppliers and (53,362,654) (36,240,541) (1,031,008) (702,936)
employees
Interest received 77,751 8,961 10,645 -
Finance costs (511,241) (219,708) (40) -
Income tax paid on foreign (50,874) 198,947 - -
operations
Net cash from operating activities (1,824,134) (157,686) (1,020,403) (702,936)
Cash flows from investing activities
Acquisition of property, plant (295,514) (522,850) - -
and equipment
Proceeds on sale of property 372,727 3,000 - -
plant and equipment
Purchase of investments (20,000) - - (36,695)
Proceeds from sale of 335,000 - - -
investments
Outflow to security deposits (104,687) 31,915 - -
Net cash generated/(used) in investing 287,526 (487,935) - (36,695)
activities
Cash flows from financing activities
Proceeds from issue of shares 1,184,300 1,044,539 1,184,300 1,557,427
Share issue transaction costs (1,437,705) - (1,437,705) -
paid
Bank financing - receipts 2,000,000 883,021 - 24,409
Bank financing - payments (944,031) (256,760) (24,409) -
Loans (168,063) (35,230) 526,274 -
Finance lease principal (160,991) (205,907) - -
repayments
Net cash generated from financing activities 473,510 1,429,663 248,460 1,581,836
Net (Decrease)/Increase In Cash and Cash (1,063,098) 784,042 (771,943) 842,205
Equivalents
Net effects of exchange rate changes on cash - (73) - -
and cash equivalents
Cash and cash equivalents at beginning of 1,249,370 465,401 856,752 14,547
period
Cash and cash equivalents at end of period 186,272 1,249,370 84,809 856,752
Reconciliation Of Cash and Cash Equivalents
Cash and cash equivalents 506,501 1,574,468 84,809 856,752
Bank overdraft (320,229) (325,098) - -
Closing Cash Carried Forward 186,272 1,249,370 84,809 856,752
This method represents the direct method of determining operating cash flow.
The accompanying accounting policies and notes form an integral part of these
financial statements.
BARTERCARD PLC
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2006
Group
Share capital Retained Foreign Other reserve Merger Share Total
earnings exchange reserve premium
reserve
$A $A $A $A $A $A $A
Balance, 1 July 2004 9,872,892 4,759,679 (242,219) - - - 14,390,352
as previously stated
First time adoption - (1,203,715) - - - - (1,203,715)
of IFRS
Balance, 1 July 2004 9,872,892 3,555,964 (242,219) - - - 13,186,637
restated
Foreign currency - - 150,439 - - - 150,439
translation
adjustment
Unrealised gain on - - 464 - - - 464
investments available
for sale
Net profit/(loss) for (4,335,541) - - - - (4,335,541)
the year -
Total gains/(losses) - (4,335,541) 150,903 - - - (54,184,638)
for the year
Add back of minority - (556,085) - - - - (556,085)
interest portion
Shares issued 2,550,291 - - - - - 2,550,291
-
Balance, 31 March 12,423,183 (1,335,662) (91,316) - - - 10,996,205
2005 and 1 April 2005
Foreign currency - - (97,542) - - - (97,542)
translation
adjustment
Net profit/(loss) for - (8,097,491) - - - - (8,097,491)
the year
Total gains/(losses) - (8,097,491) (97,542) - - - (8,195,033)
for the year
Shares issued 5,411,525 - - - 154,357,584 1,505,843 161,274,952
Reverse acquisition (11,192,070) - 1,834,399 (148,293,083) - 1,435,477 (156,215,277)
adjustment
Balance, 31 March 6,642,638 (9,433,153) 1,645,541 (148,293,083) 154,357,584 2,941,320 7,860,847
2006
Company
Share Retained Capital Share Merger Share Foreign Total
capital earnings redemption option reserve premium exchange
reserve reserve reserve
$A $A $A $A $A $A $A $A
Balance, 1 April 1,184,483 3,121,309 26,033 - - - - 4,331,825
2004
Foreign currency (73,878) (194,682) (1,624) - - - - (270,184)
translation
adjustment
Net profit/(loss) - (4,666,982) - - - - - (4,666,982)
for the year
Total gain/(loss) (73,878) (4,861,664) (1,624) - - - - (4,937,166)
for the year
Shares issued 117,163 - - - 1,432,802 - 1,549,965
Balance, 31 March 1,227,768 (1,740,355) 24,409 - - 1,432,802 - 944,624
2005
Foreign currency 3,345 (1,463) 66 - - 2,675 (107,410) (102,787)
translation
adjustment
Net profit/(loss) (3,431,810) - - - - - (3,431,810)
for the year -
Total gain/(loss) 3,345 (3,433,273) 66 - - 2,675 (107,410) (3,534,597)
for the year
Shares issued 5,411,525 - - - 154,357,584 1,505,843 - 161,274,952
Share options - - - 4,847,301 - - - 4,847,301
issued
Balance, 31 March 6,642,638 (5,173,628) 24,475 4,847,301 154,357,584 2,941,320 (107,410) 163,532,280
2006
BARTERCARD PLC
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 31 MARCH 2006
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) as developed
and published by the International Accounting Standards Board (IASB) for use in
the EU. No standards have been applied early. The consolidated financial
statements have been prepared on a historical cost basis, except for "
available-for-sale" financial assets that have been measured at fair value. The
financial statements of the Company are presented in Australian dollars. It
should be noted that accounting estimates and assumptions are used in preparing
the financial statements. Although these estimates are based on management's
best knowledge of current events and actions, actual results may ultimately
differ from these estimates.
Whilst the Group has been applying International Financial Reporting Standards
for some time, this is the first year that the Bartercard plc company has
adopted IFRS and accordingly the provisions in IFRS 1 "First time adoption of
International Financial Reporting Standards" have been applied to the company's
individual financial statements. The company was acquired through a reverse
acquisition by Bartercard International Limited (BCIB), a company incorporated
and resident in Bermuda. BCIB is an established IFRS reporting entity and
through the adoption of IFRS 3 'Business Combinations', the current year results
are accounted for with BCIB being the effective parent.
The date of the transition to IFRS for the Company was 1 April 2004. A summary
of the accounting policies applied in the preparation of the financial
statements is given below. These policies have been consistently applied to all
the periods presented, unless otherwise stated. No standards have been applied
early and no standards that are in issue but not yet effective will have any
material impact on these financial statements.
The Company has taken advantage of certain exemptions available under IFRS 1 "
First time adoption of International Financial Reporting Standards" as explained
below:
Business Combinations
The Company has elected not to apply IFRS 3, Business Combinations,
retrospectively to past business combinations prior to the date of transition.
Going Concern
In September 2006, the directors initiated a sale and leaseback arrangement for
the group's property in Australia with a view to raising $5-$6m of cash.
The directors consider that, in preparing the financial statements, they have
taken into account all information that could reasonably be expected to be
available. On this basis, they consider that it is appropriate to prepare the
financial statements on the going concern basis. This assumes that the proceeds
raised from the sale of the property will in turn support the group for the
foreseeable future.
Principles of Consolidation
The consolidated financial statements comprise the financial statements of
Bartercard plc and its wholly owned and majority-owned subsidiaries as at 31
March 2006. The financial statements of subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that
may exist and intercompany balances and transactions have been eliminated on
consolidation. Unrealised losses are eliminated unless costs cannot be
recovered.
Subsidiaries are consolidated from the date on which control is transferred to
the Group and cease to be consolidated from the date on which control is
transferred out of the Group. Where there is a loss of control of a subsidiary,
the consolidated financial statements include the results for the part of the
reporting period during which the Company has control. On acquisition of a
subsidiary, all of the subsidiary's assets and liabilities which exist at the
date of acquisition are recorded at the fair values reflecting their condition
at that date. Goodwill arising on consolidation, representing the excess of the
fair value of the consideration given over the fair values of the identifiable
net assets acquired, is capitalised net of any provisions for impairments.
As mentioned above, BCIB acquired Bartercard plc in a reverse acquisition during
the year. This has been accounted for through IFRS 3 'Business Combinations'
and these financial statements disclose the revenue and results for the combined
entity for the full financial year. As the acquisition took place on 26 April
2005, there is no material difference between the results for the combined
business from the date of acquisition and that for the full financial year.
Critical Judgements and Accounting Estimates
In the application of IFRS, management is required to make judgments, estimates
and assumptions about carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and various other factors that are believed
to be reasonable under the circumstance, the results of which form the basis of
making the judgements. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Judgements made by management in the application of IFRS that have significant
effects on the financial statements and estimates with a significant risk of
material adjustments in the next year are disclosed, where applicable, in the
relevant notes to the financial statements. Accounting policies are selected
and applied in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability, thereby ensuring that the
substance of the underlying transactions or other events is reported.
Accounting estimates have been applied to calculate accruals for employee
entitlements, accrued fees and commissions payable to company owned brokerages
and to assess impairments on non current assets.
Financial Instruments
Financial assets and financial liabilities are recognised on the group's balance
sheet when the group becomes a party to the contractual terms of the instrument.
Trade receivables
Trade receivables do not carry any interest and are initially recognised at fair
value. Trade receivables are provided against when objective evidence is
received that the Group will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the write
down is determined as the difference between the assets carrying amount and the
present value of estimated future cash flows.
Bank borrowings
Interest bearing bank loans and overdrafts are initially recorded at fair value
net of transaction costs. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted for on an
accruals basis to the profit and loss account using the effective interest
method and are added to the carrying value of the instrument to the extent that
they are not settled in the period in which they arise.
All interest related charges are recognised as an expense in the income
statement.
Trade payables
Trade payables are not interest bearing and are stated at their fair value on
initial recognition.
Other provisions, contingent liabilities and contingent assets
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Group and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example legal disputes or onerous contracts.
Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including risks and uncertainties associated with the present
obligation. All provisions are reviewed at each balance sheet date and adjusted
to reflect the current best estimate.
Investments
The Company accounts for its marketable equity securities in accordance with IAS
39 "Financial Instruments: Recognition and Measurement". Management determines
the appropriate classification of its investments in debt and equity securities
at the time of purchase and re-evaluates such determination at each balance
sheet date. Debt securities for which the Company does not have the intent and
ability to hold to maturity are classified as available for sale, along with
certain of the Company's investments in equity securities. Available for sale
securities are carried at fair value with any unrealized holding gains and
losses, net of tax, reported in a separate component of shareholders' equity
until realized. Fair value is determined by reference to Stock Exchange quoted
market bid prices at the close of business on the balance sheet dated. Trading
securities are securities bought and held principally for the purpose of selling
them in the near term and are reported at fair value, with unrealized gains and
losses, computed based on market price at the balance sheet date are included in
the operations for the period. Held-to-maturity debt securities are reported at
amortized cost.
Equity instruments
Equity instruments issued by the Group are recorded at the value of the proceeds
received, net of direct costs.
Equity
Equity comprises the following:
Share capital - represents the nominal value of equity shares
Retained earnings - represents the accumulated retained profits
Other reserves - represents the adjustment on the reverse takeover to facilitate
the roll-up of Bartercard International Limited into Bartercard plc
Share premium - represents the excess over nominal value of the fair value of
consideration
Capital redemption reserve - represents statutory allocation of profits to
reserves for historic redemption of share capital
Foreign currency reserve - represents unrealised gains arising from foreign
currency transactions.
Merger reserve - under s131 of the Companies Act 1985, the reverse takeover of
Bartercard plc qualifies for merger relief. Therefore this reserve has been
created and the excess over nominal value of the fair value of consideration for
shares issued as part of the transaction has been taken to this reserve
Share option reserve - represents the fair value of share options issued.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and highly liquid investments
having an original maturity of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash management are
included as a component of cash. Cash and cash equivalents are subject to an
insignificant risk of change in value.
Foreign Currency Transactions
The reporting currency for these financial statements is Australian dollars as
this is the main currency the Group operates in. In the consolidated financial
statements, all separate financial statements of subsidiaries have been
translated to Australian dollars in accordance with IAS 21 "The effects of
Changes in Foreign Exchange Rates". Under that statement, for certain foreign
operations, all balance sheet accounts are translated at the current exchange
rate and income statement items are translated at the actual exchange rate on
the dates of the transactions, resulting translation adjustments are made
directly to the foreign exchange reserve in equity.
Foreign currency transactions are initially translated into Australian currency
at the rate of exchange at the date of the transaction. At the balance sheet
date monetary assets and liabilities denominated in foreign currencies are
translated to Australian currency at rates of exchange current at that date.
Resulting exchange differences are included in earnings.
Goodwill
All business combinations are accounted for under the purchase method and
goodwill on acquisition is initially measured at cost, being the excess of the
cost of the business combination over the acquirer's interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Amortisation of goodwill is no longer applied for
acquisitions made after 31 March 2004 and amortisation of goodwill ceases to be
applied from 1 January 2004 to goodwill already carried in the balance sheet at
that date. Goodwill is reviewed for impairment, annually or more frequently if
events or changes in circumstances indicate that the carrying value may be
impaired.
As at the acquisition date, any goodwill acquired is allocated to each of the
cash-generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the
cash-generating unit, to which the goodwill relates. Where recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is
recognised. Where goodwill forms part of a cash generating unit and part of the
operation within that unit are disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of
in this circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the cash-generating unit retained.
Impairment
Pursuant to guidance established in IAS 36 "Impairment of Assets", the Company
reviews its assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recovered, except for
indefinite life intangible assets, which are reviewed annually for impairment.
The Company looks primarily to the undiscounted future cash flows in its
assessment of whether or not assets have been impaired. When any such impairment
exists, the related assets will be written down to fair value.
Intangible Assets
Acquired both separately and from a business combination
Intangible assets acquired separately are capitalised at cost and from a
business acquisition are capitalised at fair value as at the date of
acquisition. These include customer lists, franchise costs and purchased
internet software. The useful lives of these intangible assets are assessed to
be either finite or indefinite. Amortisation is charged on assets with finite
lives over their estimated useful economic life on a straight line basis and
this expense is taken to the income statement through the 'depreciation and
amortisation' line item. Intangible assets, excluding development costs,
created within the business are not capitalised and expenditure is charged
against profits in the period in which the expenditure is incurred. Intangible
assets are tested for impairment annually either individually or at the cash
generating unit level. Useful lives are also examined on an annual basis and
adjustments, where applicable are made on a prospective basis.
The Company amortises finite life intangible assets over their estimated useful
life using the straight-line method as follows:
- Customer lists, over the estimated life of 5 years.
- Franchise costs, over the estimated life of 20 years.
- Purchased internet software, over the estimated life of 5 years.
Research and development costs
Research costs are expensed as incurred. Development expenditure incurred on an
individual project is carried forward when its future recoverability can
reasonably be regarded as assured. Following the initial recognition of the
development expenditure the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Any expenditure carried forward
is amortised over the period of expected future sales from the related project.
The carrying value of development costs is reviewed for impairment annually when
the asset is not yet in use, or more frequently when an indicator of impairment
arises during the reporting period indicating that the carrying value may not be
recoverable. Development costs of computer software to be sold, leased or
otherwise marketed are subject to capitalization beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers pursuant to IAS38, "Intangible
Assets". In most instances, the Company's products are released soon after
technological feasibility has been established. Therefore, costs incurred
subsequent to achievement of technological feasibility are usually not
significant, and generally all software development costs have been expensed.
Gains or losses arising from derecognition of an intangible asset are measured
as the difference between the net disposal proceeds and the carrying amount of
the asset and are recognised in the income statement when the asset is
derecognised.
Internal use website development costs
Costs incurred in developing a website for internal use, which have measurable
economic viability, are capitalised when the software reaches the application
development stage and are amortised over the expected useful life of the
software in accordance with SIC 32 "Intangible Assets - Web site Costs. Costs
incurred in developing and enhancing the internal use website are capitalised as
incurred if the measurable economic viability of the expenditure can be
determined and are amortised over the expected useful life of the website.
Risk Management
The Group uses various financial instruments; these include loans, cash and cash
equivalents, equity investments and various items, such as trade receivables and
trade payables that arise directly from its operations. The main purpose of
these financial instruments is to raise finance for the group's operations.
The existence of these financial instruments exposes the group to a number of
financial risks, which are described in more detail below. The directors review
and agree policies for managing each of these risks.
Liquidity Risk
The consolidated entity manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities.
Interest Rate Risk
The consolidated entity is exposed to interest rate risk as it borrows funds at
both fixed and floating interest rates. The risk is managed by maintaining a
mix of fixed and floating interest rates.
Foreign Currency Risk
The group undertakes certain transactions denominated in foreign currencies,
hence exposures to exchange rate fluctuations arise. Exchange rate exposures
are managed by maintaining foreign currency bank accounts into which payments
and receipts in the relevant currencies are made.
Credit risk
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash, cash equivalents and accounts
receivable. The Company invests cash and cash equivalents, which are not
required for immediate operating needs, with various high credit quality
financial institutions located in the UK. The Company performs credit
evaluations of its customers' financial conditions and does not require
collateral for accounts receivable. The Company maintains a provision for
doubtful accounts which is based upon the expected collectibility of all
accounts receivable based on a review of the Company's history of collection.
The Company has no one customer whose sales exceed 10% of the Company's total
sales.
Fair values
The fair values of the group's financial instruments are considered not to be
materially different from the book value.
Company risk management
The company has minimal exposure to risk as it is a holding company.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any impairment in value. All fixed assets, excluding land and buildings and
leasehold improvements, are depreciated on a declining balance method over their
estimated useful lives, commencing from the time the asset is held ready for
use. Land and buildings are measured at fair value less depreciation.
Leasehold improvements are depreciated over the shorter of their estimated
useful lives or lease term.
Classes of property, plant and equipment and their related useful lives are as
follows.
Asset Estimated useful life
Buildings 40 years
Plant and equipment, including assets held under finance leases 3-5 years
Leasehold improvements 10 years
Computer software 3 years
The carrying values of plant and equipment are reviewed for impairment when
events or changes in circumstances indicate the carrying value may not be
recoverable, and at least annually.
Inventory
Inventories comprise goods purchased for resale. At the balance sheet date,
inventories are carried at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of
business less any applicable selling expenses.
Revenue Recognition
The Group recognises revenue to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. The
Group derives revenue from Franchisees for the provision of trading services
such as training, management support and other services including third party
record keeping, as well as the use of the Bartercard trademark, intellectual
property and computer information systems. The following specific recognition
criteria apply to the various types of income:
Transaction fees - Revenue relating to transaction fees is recognised, where
collectibility is assured, on an 'as earned' basis, based on a percentage of
trading volume.
Ongoing subscription fees - Are recognised rateably over the period in which the
service has been performed.
Franchise fees -The Group recognises the revenue allocatable to the Bartercard
trademark and software license upon delivery of the franchise/product where
there is evidence of an arrangement in place unless the fee is not fixed or
determinable or collectibility is not probable. The Group considers all
arrangements with payment terms extending beyond twelve months and other
arrangements with payment terms longer than normal not to be fixed or
determinable. If the fee is not fixed or determinable, revenue is recognised as
payments become due from the customer. If collectibility is not considered
probable, revenue is recognised when the fee is collected. Franchise fees
comprise sales of country franchises and sales of national franchises.
Arrangements that include software services, where there is evidence of an
arrangement in place and collectibility is assured, are evaluated to determine
whether those services include the significant modification or customisation of
software. When software services include the significant modification or
customisation of software, revenue under the arrangements is recognised using
contract accounting (see below). When software does not include the
modification or customisation of software, the revenue allocable to the software
services is recognised as the services are performed. Software services are
generally limited to training or nominal installation and are included in 'Other
Revenue'.
Contract Accounting - For arrangements that include customisation or
modification of the software, or where software services are otherwise
considered essential, revenue is recognised using contract accounting. Revenue
from these software arrangements is recognised on a percentage of completion
method with progress to completion measured based upon labour costs incurred.
Where the percentage of completion method is not able to be measured, revenue is
recognised on a completed contract basis.
Publication fees - Publication Fees are fees received from Members for their
initial listing in the Trade Directory. The Trade Directory is a quarterly
publication. The Publication Fees are recognised on their receipt from Members,
following a 7 day cooling off period. These fees are otherwise not refundable
in cash.
Other operating revenue - Other miscellaneous income such as penalty, late and
overdrawn fees, and real estate commissions are recognised as incurred and when
collectibility is assured.
Leased Assets
In accordance with IAS 17, the economic ownership of a leased asset is
transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the asset. The related asset is recognised
at the time of the inception of the lease at the fair value of the leased asset
or, if lower, the present value of the minimum lease payments plus incidental
payments, if any, to be borne by the lessee. A corresponding amount is
recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the
capital balance outstanding and is charged to the income statement over the
period of the lease.
All other leases are regarded as operating leases and the payments made under
these are charged to the income statement on a straight-line basis over the
period of the lease.
Income Taxes
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
periods, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable profit for the year.
Deferred tax is recognised on all temporary differences. This involves
comparison of the carrying amount of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, deferred tax is
not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit.
Deferred tax liabilities are provided for in full. Deferred tax assets and
liabilities are calculated without discounting, at tax rates that are expected
to apply to the period when the asset is realised or the liability is settled,
based on tax rates (tax laws) that have been enacted or substantially enacted by
the balance sheet date. All changes in deferred tax assets or liabilities are
recognised as a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to equity (such as
hedging and translation reserve) in which case the related deferred tax is also
charged or credited directly to equity.
Tax losses available to be carried forward as well as other income tax credits
to the group are assessed for recognition as deferred tax assets. Deferred tax
assets are only recognised to the extent that it is probable that future taxable
profits will be available against which the asset can be recognised and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Borrowing Costs
All borrowing costs are expensed as incurred.
Pensions
The Group makes contributions to certain employees' defined contribution pension
plans and the pension costs charged against profits represent the amount of the
contributions payable to the schemes in respect of the accounting period.
Company Financial Results
The Company financial results disclosed are for Bartercard plc. The comparative
Company financial results have been translated from British pounds, in which
they were reported in the previous year's financial statements, to Australian
dollars at the actual exchange rate at 31 March 2005.
Comparative Information
The comparative information for the Group is the consolidated results of
Bartercard International Limited, a company incorporated in Bermuda, for the
year ended 31 March 2005 as this company was the acquirer in the reverse
takeover transaction during the year
LOSS FROM OPERATIONS
Loss from operations has been arrived at after charging:
12 months 9 months
2006 2005
$A $A
Depreciation of property, plant and equipment 569,358 325,697
Amortisation of intangibles 804,791 2,393,185
Property lease charges 1,813,615 762,018
Car lease rentals 12,827 20,196
Hire of plant and machinery 431,837 164,571
(Profit)/loss on disposal of property, plant and (173,949) 76,349
equipment
Research and development costs 2,000 73,015
Write down of inventory 59,139 -
Auditor's remuneration:
- audit 229,034 233,913
services
- non audit services 87,167 88,828
Auditor's remuneration for non audit services is analysed as follows:
2006 2005
$A $A
Taxation advice 70,117 64,395
Advice re legal - 7,845
issues
Advice re group 17,050 16,588
reorganisation
87,167 88,828
LOSS PER SHARE
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the year.
The calculation of diluted loss per share is based on the basic loss per share,
adjusted to allow for the issue of shares, on the assumed conversion of all
dilutive options, warrants and deferred shares.
Reconciliations of losses and weighted average number of shares used in the
calculations are set out below.
2006 2005
Weighted Per share Loss Weighted Per share
average amount average amount
number of number of
shares shares
Loss
$A Number Cents $A Number Cents
Basic Loss per
share
Loss attributable to ordinary (3,686,039) 215,273,458 (1.71) - - -
shareholders pre non-recurring
items
Total loss attributable to (8,097,491) 215,273,458 (3.76) (4,335,541) 38,596,680 (11.23)
ordinary shareholders
Dilutive effect of securities
Options
Diluted loss per share pre (3,686,039) 215,273,458 (1.71) - - -
non-recurring items
Total diluted loss per share (8,097,491) 215,273,458 (3.76) (4,335,541) 38,596,680 (11.23)
The warrants and share options are not dilutive due to the loss for the year,
therefore the diluted loss per share is equal to the basic loss per share.
The 2005 loss per share is calculated using information relating to Bartercard
International Limited as this is the company that the comparative information
relates to.
NON CASH FINANCING ACTIVITIES
Bartercard Trade Dollar Activities
The Group receives trade dollars for monthly services provided to its Bartercard
Exchange members and as transaction fees for exchanges made by its members. The
Group also expends trade dollars in the acquisition of goods or services used in
its operations. The Group has historically spent more trade dollars than it has
earned, which is in line with international standards on Trade Exchange fiscal
management.
Accounting for Publication and Transaction Fees Received in Bartercard Trade
Dollars
In addition to receiving cash publication and transaction fees, the Group also
receives Bartercard trade dollars from members of the trade exchange in
connection with its services in operating the exchange. These trade dollars are
utilized by the Group for either the acquisition of goods and services that are
then made available for purchase by members of the exchange (enabling the Group
to earn cash transaction fees) or for use by the Group in its operations.
Due to the uncertainty as to when trade dollars/pounds received will be spent,
the Group does not record revenue at the time of receipt of these trade dollars/
pounds.
Accordingly, the Group has not recorded transactions denominated in Bartercard
trade dollars in these financial statements.
During the year the Group earned Trade Dollars of $15,962,698 (20005:
$12,233,579) and paid for expenses in trade dollars amounting to $20,251,247
(2005: $15,667,151). At 31 March 2006 the Group had a Bartertrade creditor
balance in trade dollars of, $58,668,227 (2005: $55,121,210). Assets acquired
during the year by the Group using trade dollars amounted to $498,229 (2005:
$15,059) excluding acquisitions of exchange companies and franchises.
The Bartertrade creditor balance is across all accounts in company owned offices
and franchises, in multiple locations and exchanges and forms part of the
overall fiscal management of the exchange as maintaining money supply in
conjunction with extension of credit to members. Assets acquired using trade
dollars/pounds are not recognised including companies, franchises or membership
bases acquired.
AUDITORS NOTE
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 31 March 2006 and the summarised profit and loss
account, summarised cash flow statement and associated notes for the year then
ended have been extracted from the Group's 2006 statutory financial statements.
Those financial statements have not yet been delivered to the Registrar, but the
auditors have reported on them.
The report and accounts will be sent to shareholders on 30 September 2006 and
are available from the company's registered office and via the company website
at: www.bartercard.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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