TIDMCSC

RNS Number : 0554Y

cScape Group PLC

16 December 2010

16 December 2010

cScape Group plc

Preliminary results for the year ended 30 June 2010

cScape Group plc ('the Company' or 'the Group'), the digital communications business, today announces its preliminary audited results for the year ended 30 June 2010.

Enquiries, please contact:

Azhic Basirov / Siobhan Sergeant

Smith & Williamson Corporate Finance Limited

Tel: 020 7131 4000

CHAIRMAN'S STATEMENT

I have pleasure in announcing the results of the Group for the year ended 30 June 2010.

Financials

 
                                               2010      2009 
                                            GBP'000   GBP'000 
 Continuing Operations 
 Revenue                                      4,734     5,137 
                                           --------  -------- 
 
 Gross profit                                 4,348     4,676 
                                           --------  -------- 
 
 Operating profit before depreciation 
  and exceptional item                           59        15 
                                           --------  -------- 
 
 Operating loss on continuing operations      (166)     (144) 
                                           --------  -------- 
 
 Discontinued operations                        239     (151) 
                                           --------  -------- 
 
 Profit/(loss) attributable to orders 
  of the parent                                  13     (319) 
                                           --------  -------- 
 
 

During the year, the Group disposed the publishing and digital communication services segment, which will now allow the Group to concentrate on its core activities.

The Group's key financial performance indicator is turnover from continuing operations. Whilst turnover and gross profit fell slightly from the previous year, the operating profit before depreciation has increased due to significant reductions in the Group's administration expenses and the Group will continue to seek further cost savings in the future.

The operating loss on continued operations has increased from the previous year due to a significant one off exceptional cost incurred by the Group's internet services segment, of GBP70,000.

The Company announced on 1 December 2010 that it is seeking to restructure the Company's share capital which will allow the Company to raise additional finance in order to meet the Group's working capital requirements. This restructure will be put to the shareholders at a general meeting for their approval on 23 December 2010.

Business Review

cScape Strategic Internet Services Limited continued to develop its core SharePoint business within both existing clients and new corporate clients. cScape Strategic Internet Services Limited also acquired skills in SDL Tridion, a highly rated content management system.

While the recession continued to dampen demand, cScape Strategic Internet Services Limited did see activity begin to pick up towards the end of the year, both in existing clients and in new client acquisition, a process which has continued into the current period.

Profitability was affected adversely by the management strategy of holding on to key skills through periods when demand was relatively slack. This strategy has paid off in the current period as demand has picked up and cScape Strategic Internet Services Limited has been able to respond quickly. The Company also experienced losses due to a project which overran.

Blue Sky Hosting Limited was able to increase its profits over the previous year through focusing very hard on maintaining its existing clients as well as acquiring new ones. A key aspect of the company period is the spread of "Cloud Hosting", which involves both Blue Sky Hosting Limited and cScape Strategic Internet Services Limited working on the business case, jointly.

Financing Arrangements

The Group has continued to finance itself out of cash flow, with the aid of a GBP50,000 overdraft from the bank. We expect and plan to bring extra finance into the Company from investors in the year to 30 June 2011.

The outlook is for cash generation over the year to 30 June 2011.

Outlook

The Group has traded profitably since the year end and notes continued improvement from its core clients and new clients. The Group continues to reduce its liabilities and is actively seeking increased profitability.

K Young

Chairman

15 December 2010

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2010

 
                                                                    Year Ended 
                                                   Year Ended          30 June 
                                                      30 June             2009 
                                           Notes         2010    (as restated) 
 Continuing operations                                GBP'000          GBP'000 
 Revenue                                    1 &         4,734            5,137 
  Cost of sales                              2          (386)            (461) 
                                                  -----------  --------------- 
 Gross profit                                           4,348            4,676 
  Administrative expenses                             (4,305)          (4,700) 
  Other income                                             16               39 
                                                  -----------  --------------- 
 Operating profit before depreciation                      59               15 
  Depreciation                                          (155)            (159) 
                                                  -----------  --------------- 
 (Loss) from operations before 
  exceptional item                                       (96)            (144) 
 Exceptional item                                        (70)                - 
                                                  -----------  --------------- 
 (Loss) from operations after 
  exceptional item                                      (166)            (144) 
 Finance income                                             3                2 
 Finance cost 
 (Loss) before income tax                    2           (63)             (26) 
                                                  -----------  --------------- 
                                                        (226)            (168) 
 Income tax expense                                         -                - 
                                                  -----------  --------------- 
 (Loss) for the year from continuing 
  operations                                 2          (226)            (168) 
                                                  -----------  --------------- 
 Discontinued operations Profit/(loss) 
  for the year from discontinued 
  operations                                              239            (151) 
                                                  -----------  --------------- 
 Profit/(loss) for the year                                13            (319) 
                                                  ===========  =============== 
 
 Profit/(loss) attributable to: 
 Owners of the parent                                      13            (319) 
                                                  ===========  =============== 
 
 Earnings/(loss) per share - basic 
  and diluted                                3 
 From continuing operations                           (1.99)p          (1.50)p 
 From discontinued operations                           2.11p          (1.35)p 
                                                  -----------  --------------- 
                                                        0.12p          (2.85)p 
                                                  ===========  =============== 
 
 
 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2010

 
                                                               30 June 2009 
                             Notes       30 June 2010          (as restated) 
                                       GBP'000    GBP'000   GBP'000    GBP'000 
 Assets Non-current assets 
 Intangible assets 
 Property, plant and                                1,252                1,252 
 equipment Trade and other                            427                  516 
 receivables                   4                        -                    - 
                                                 --------             -------- 
 Total non-current assets 
  Current assets 
  Inventories 
 Trade and other receivables                  -                   73 
  Available-for-sale financial              985                1,248 
  asset                                      60                    - 
  Cash and cash equivalents                 188     1,679        633     1,768 
                                      ---------  --------  ---------  -------- 
 Total current assets                               1,233                1,954 
                                                 --------             -------- 
 Total assets                                       2,912                3,722 
                                                 ========             ======== 
 Equity and liabilities 
 Capital and reserves - 
 equity Share capital                     1,131                1,131 
 Share premium account                      499                  499 
 Capital redemption                           6                    6 
 reserve Other reserves                      60                    - 
 Retained earnings                      (1,174)              (1,187) 
                                     ----------  --------  ---------  -------- 
 Equity attributable to 
  equity owners of the parent                         522                  449 
                                                 --------             -------- 
 Non-current liabilities 
 Trade and other payables 
 Financial liabilities                      100                    - 
 Provision for other                         65                   30 
 liabilities and charges                      -                  300 
                                     ----------  --------  ---------  -------- 
 Total non-current liabilities                        165                  330 
                                                 --------             -------- 
 Current liabilities 
  Trade and other payables                  638                  826 
  Financial liabilities                      62                  621 
  Current tax liabilities                 1,525                1,496 
                                     ----------  --------  ---------  -------- 
 Total current liabilities                          2,225                2,943 
                                                 --------             -------- 
 Total equity and liabilities                       2,912                3,722 
                                                 ========             ======== 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2010

 
                                                         Year             Year 
                                              Notes     Ended            Ended 
                                                      30 June     30 June 2009 
                                                         2010    (as restated) 
 Operating activities 
  (Loss) from operations                              GBP'000          GBP'000 
  Depreciation - continuing operations                   (96)            (144) 
  Exceptional item                                        155              159 
  Other payments                                         (70)                - 
  (Increase)/Decrease in trade and other                (100)            (100) 
  receivables                                            (35)              252 
  Increase in trade and other payables                    422              267 
  Decrease in stock                                         -                4 
                                                     --------  --------------- 
 Cash inflow from operating activities 
  Interest paid                                           276              438 
  Interest received                                      (51)             (11) 
  Interest element of finance leases                        3                2 
  Net inflow on operating activities                     (12)             (15) 
  from discontinued operations                             96             (78) 
                                                     --------  --------------- 
 Net cash generated from operating 
  activities                                              312              336 
                                                     --------  --------------- 
 Cash flow from investing activities 
 Purchase of property, plant and equipment 
  Sale of property, plant and equipment 
  Disposal of subsidiary, net of cash                   (106)             (90) 
  disposed                                                 13                - 
  Net outflow on investing activities                    (28)                - 
  from discontinued operations                            (4)             (27) 
                                                     --------  --------------- 
 Net cash used in investing activities                  (125)            (117) 
                                                     --------  --------------- 
 Cash flow from financing activities 
 Capital element of finance lease 
 agreements Proceeds from share issue                   (106)            (113) 
 Expenses in connection with share issue                    -               25 
 Repayment of bank loans Net outflow on                     -             (15) 
 financing activities from discontinued         5           5             (41) 
 operations                                     5       (182)                - 
                                                     --------  --------------- 
 Net cash used in financing activities                  (283)            (144) 
                                                     --------  --------------- 
 Net (decrease)/increase in cash, cash 
  equivalents and bank overdrafts               5        (96)               75 
 Cash and cash equivalents at the beginning 
  of the year                                   5         284              209 
                                                     --------  --------------- 
 Cash and cash equivalents at the end 
  of the year                                   5         188              284 
                                                     ========  =============== 
 

Notes:

1 FINANCIAL INFORMATION

The Group financial statements have been prepared and approved by the directors on the going concern basis and in accordance with applicable accounting standards.

The consolidated financial statements have been prepared under International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB), as adopted by the European Union and with those parts of the Companies Act 2006 applicable to the companies preparing their accounts under IFRS.

2 SEGMENTAL INFORMATION

For management purposes the Group is currently organised into 4 operating divisions - internet services, specialist hosting, media and interactive technology and head office and all of the Group's operations are carried out within the United Kingdom.

a. Continuing operations

 
 
                     Head   Internet   Specialist       Media &          Group 
                   Office   Services      Hosting   Interactive   Eliminations 
                                                                                   Total 
 2009 BUSINESS 
 SEGMENTS         GBP'000    GBP'000      GBP'000       GBP'000        GBP'000   GBP'000 
 INCOME 
 STATEMENT 
 Turnover               -      3,949          899           414          (125)     5,137 
                 --------  ---------  -----------  ------------  -------------  -------- 
 Operating 
  Profit/(Loss)     (528)        248          120            34           (18)     (144) 
 Finance Income         -         10            -             -            (8)         2 
 Finance 
  Expense            (11)       (17)          (2)           (3)              7      (26) 
                 --------  ---------  -----------  ------------  -------------  -------- 
 Profit/(loss) 
  before tax        (539)        241          118            31           (19)     (168) 
 Income tax             -          -            -             -              -         - 
 Profit/(Loss) 
  for the year      (539)        241          118            31           (19)     (168) 
                 ========  =========  ===========  ============  =============  ======== 
 
                     Head   Internet   Specialist       Media &          Group 
                   Office   Services      Hosting   Interactive   Eliminations     Total 
 2010 BUSINESS 
 SEGMENTS         GBP'000    GBP'000      GBP'000       GBP'000        GBP'000   GBP'000 
 INCOME 
 STATEMENT 
 Turnover              36      3,870        1,040            18          (230)     4,734 
                 --------  ---------  -----------  ------------  -------------  -------- 
 Inter-Group 
  dividends         2,025          -            -             -        (2,025)         - 
                 --------  ---------  -----------  ------------  -------------  -------- 
 Operating 
  Profit/(Loss)     1,768       (45)          205          (19)        (2,075)     (166) 
 Finance Income         -          2            -             1              -         3 
 Finance 
  Expense            (20)       (18)          (8)          (17)              -      (63) 
                 --------  ---------  -----------  ------------  -------------  -------- 
 Profit/(loss) 
  before tax        1,748       (61)          197          (35)        (2,075)     (226) 
 Income tax             -          -            -             -              -         - 
 Profit/(Loss) 
  for the year      1,748       (61)          197          (35)        (2,075)     (226) 
                 ========  =========  ===========  ============  =============  ======== 
 

b. Discontinued operations

The publishing and digital communication services segment is shown under discontinued operations below as the Group disposed its holding in the relevant subsidiaries during the year.

 
           Publishing and                                            Operating 
           digital                                               (loss) before 
           communication                Operating  Net finance         & after 
           services            Revenue     (loss)      expense             tax 
                               GBP'000    GBP'000      GBP'000         GBP'000 
 
2009 Publishing & digital 
 communication services          1,911      (138)         (20)           (158) 
                               -------  ---------  -----------  -------------- 
 
2010 Publishing & digital 
 communication services            557        (8)          (4)            (12) 
                               -------  ---------  -----------  -------------- 
 c. Net assets/(liabilities) analysis 
 
 
                            Head   Internet   Specialist       Media &                       Group 
                          Office   Services      Hosting   Interactive   Publishing   Eliminations     Total 
 2009 BUSINESS 
  SEGMENTS               GBP'000    GBP'000      GBP'000       GBP'000      GBP'000        GBP'000   GBP'000 
 
 Assets                    1,353      2,419        1,459           211          757        (2,477)     3,722 
 Liabilities             (2,772)      (813)        (463)         (324)        (843)          2,476   (2,739) 
 Borrowings                (349)          -          (7)             -        (178)              -     (534) 
 Net 
  Assets/(Liabilities)   (1,768)      1,606          989         (113)        (264)            (1)       449 
                        ========  =========  ===========  ============  ===========  =============  ======== 
 
 
 
                            Head   Internet   Specialist       Media &                       Group 
                          Office   Services      Hosting   Interactive   Publishing   Eliminations     Total 
 2010 BUSINESS 
  SEGMENTS               GBP'000    GBP'000      GBP'000       GBP'000      GBP'000        GBP'000   GBP'000 
 
 Assets                    1,341      1,883          682           153            -        (1,147)     2,912 
 Liabilities             (1,362)    (1,186)        (660)         (241)            -          1,059   (2,390) 
 Net 
  Assets/(Liabilities)      (21)        697           22          (88)            -           (88)       522 
                        ========  =========  ===========  ============  ===========  =============  ======== 
 

3 EARNINGS PER SHARE

Earnings per share statistics disclosed are calculated by dividing the earnings attributable to ordinary holders by the weighed average number of shares in issue during the year.

 
                                                   Year Ended   Year Ended 
                                                      30 June      30 June 
 Basic - continuing operations                           2010         2009 
 Basic earning attributable to ordinary shares: 
  GBP'000                                               (226)        (168) 
                                                  -----------  ----------- 
 Weighted average number of shares                 11,311,558   11,190,736 
                                                  -----------  ----------- 
 Loss per share                                       (1.99)p      (1.50)p 
                                                  ===========  =========== 
 
 
 Basic - discontinued operations 
  Basic earning attributable to ordinary shares: 
  GBP'000                                                  239        (151) 
                                                   -----------  ----------- 
 Weighted average number of shares                  11,311,558   11,190,736 
                                                   -----------  ----------- 
 Earnings per share                                      2.11p      (1.35)p 
                                                   -----------  ----------- 
 Total earnings per share                                0.12p      (2.85)p 
                                                   ===========  =========== 
 

4 INTANGIBLE ASSETS - GOODWILL

 
                                Goodwill 
 Year ended 30 June 2009         GBP'000 
 Cost 
  At 1 July 2008                   9,693 
  Additions                            - 
                               --------- 
 At 30 June 2009                   9,693 
                               --------- 
 Amortisation and impairment 
  At 1 July 2008                   8,441 
  Impairment provision                 - 
                               --------- 
 At 30 June 2009                   8,441 
                               --------- 
 Net book value 
  At 30 June 2009                  1,252 
                               ========= 
 At 30 June 2008                   1,252 
                               ========= 
 
 
                                Goodwill 
 Year ended 30 June 2010         GBP'000 
 Cost 
  At 1 July 2009                   9,693 
  Disposals of subsidiary        (1,220) 
                               --------- 
 At 30 June 2010                   8,473 
                               --------- 
 Amortisation and impairment 
  At 1 July 2009                   8,441 
  Disposal of subsidiary         (1,220) 
                               --------- 
 At 30 June 2010                   7,221 
                               --------- 
 Net book value 
  At 30 June 2010                  1,252 
                               ========= 
 At 30 June 2009                   1,252 
                               ========= 
 

The directors calculated the impairment of GBPnil in 2010 and 2009 between the carrying value and the net present value of cash flows anticipated to be generated from each of the Group's cash generating units, being each of its subsidiaries, on a value in use basis.

Information relating to the impairment review in 2010:

 
                                       No of years      Carrying      Carrying 
                 Growth   Discount       of period    value 2010    value 2009 
                   rate     factor    of forecasts       GBP'000       GBP'000 
 
 Internet 
  services           4%         5%               4           583           583 
 
 Specialist 
  hosting            4%         5%               4           649           649 
 
 Other                                           -            20            20 
                                                           1,252         1,252 
 

Growth rates anticipated in the next twelve months for the internet services segment are based on recent business levels and reflect an appropriate level of new contracts, combined with cost control. Thereafter a steady growth rate on profit of 4% is estimated. For the specialist hosting segment the turnover has increased over the last two years and a steady growth rate of 4% is anticipated on turnover combined with cost control, which leads to a 4% profit growth rate.

The management have projected the cash flows forming the basis of the projected turnover and profitability for a four year periods of these two segments and these cash flows have been approved by the Group board of directors.

A discount of 5% has been applied to internet services segment, representing the relatively stable nature of the business model, its past performance and anticipated wins and its weighted average cost of capital. A discount rate of 5% has been applied to the specialist hosting segment, again representing the stable nature of the business and it weighted average cost of capital.

The net present value of the value in use cash flows that are forecast to be generated for the internet services segment and the specialist hosting segment exceed the carrying value of goodwill, by GBP629,000 and GBP176,000 respectively.

The discount factors are based on a risk weighted cost of capital, considering each segment's risks. Factors that have been considered in calculating the risk include trading record, experience of management, customer profiles, and credit risk, such as debtor payment terms and how they are complied with.

If the discount rates were increased to 10% for both segments, it is estimated that the recoverable amount of goodwill would still exceed carrying value by GBP498,000 for the internet services segment and GBP88 000 for the specialist hosting segment.

There were no reasonable possible changes in the key assumptions which would cause the carrying amount of goodwill to exceed its recoverable amount.

5 ANALYSIS OF CHANGES IN NET CASH/(DEBT)

 
                              At 1 July                    Other        At 30 
                                   2009   Cash flow    Movements    June 2010 
                                GBP'000     GBP'000      GBP'000      GBP'000 
 
 Cash and cash equivalents          633       (445)            -          188 
 Bank overdraft                   (349)         349            -            - 
                             ----------  ----------  -----------  ----------- 
                                    284        (96)            -          188 
 
 Bank loan                        (185)         177          (4)         (12) 
 Obligations under finance 
  leases                          (117)         106        (104)        (115) 
                                                     ----------- 
                                   (18)         187        (108)           61 
                             ==========  ==========  ===========  =========== 
 

6 RECONCILIATION OF NET CASH FLOW MOVEMENTS TO MOVEMENT IN NET CASH/(DEBT)

 
                                         30 June    30 June 
                                            2010       2009 
                                         GBP'000    GBP'000 
 (Decrease)/Increase in cash in year        (96)         75 
 Repayment of loans                          177         41 
 New loans                                   (4)          - 
 Repayment of finance leases                 106        113 
 New finance leases                        (104)          - 
                                       ---------  --------- 
 Movement of net funds in the year            79        229 
 Net funds at start of year                 (18)      (247) 
                                       ---------  --------- 
 Net funds at end of year                     61       (18) 
                                       =========  ========= 
 

7 COPIES OF PRELIMINARY STATEMENT

Copies of this announcement are available on the Company's website www.cscapegroup.com or from the company secretary at 4 Pear Tree Court, Clerkenwell, London, EC1R 0DS. Copies of the Annual Report and Accounts of the Company for the year ended 30 June 2010 will be sent to shareholders in due course.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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