RNS Number:8216I
eServGlobal Limited
21 February 2005
Appendix 4D
eServGlobal Limited
ABN 59 052 947 743
Financial Report and Appendix 4D
For the half-year ended 31 December 2004
The half-year financial report does not include notes of the type normally
included in an annual financial report and should be read in conjunction with
the 2004 annual financial report.
Results for announcement to the market
Results A$ '000
Revenues from ordinary activities Up 54% to 17,669
Profit from ordinary activities after tax
attributable to members Up - to 31
Net profit for the period attributable to members Up - to 31
Dividends (distributions) Amount per security Franked amount per security
Current period
Interim dividend declared Nilc -%
Final dividend paid N/A c -%
Previous corresponding period
Interim dividend declared Nil c -%
Final dividend paid Nil c -%
Record date for determining entitlements to the N/A
dividend.
Brief explanation of revenue, net profit and dividends (distributions).
The consolidated entity achieved sales revenue for the period of $17,446,000 (2003 $11,263,000) - an increase of 55%.
The gross profit realised was $7,826,000 (45%) (2003 $3,661,000 (32%)) - an increase of 114%. EBITDA for the period
was $1,300,000. (2003 EBITDA loss $1,703,000)
The net result of the consolidated entity for the half year ended 31 December 2004 was a profit before tax of $114,000
(2003 loss $5,055,000). Income tax expense was $83,000 (2003 $1,479,000) resulting in a profit after tax for the period
of $31,000 (2003 loss $6,534,000).
Operating cash flow was an outflow of $4,271,000 for the period. This unusual result was caused by a combination of
large expenditures early in the half and major revenue milestones late in the half. Costs incurred early included the
London AIM listing ($587,000) and setup costs for outsourcing in India ($294,000). The timing of contracted payment
milestones, for a number of projects, was such that $4,850,000 was invoiced in December and will be receipted in the
second half. Net cash at 31 December 2004 was $10,719,000.
Directors' Report
The directors of eServGlobal Limited submit herewith the financial report for
the half-year ended 31 December 2004. In order to comply with the provisions of
the Corporations Act 2001, the directors report as follows:
The names of the directors of the company during or since the end of the half
year period are:
Ian Buddery, Executive Chairman
Patrick McGrory, Chief Executive Officer
Francois Barrault, Non Executive Director
Graham Libbesson, Non Executive Director
Jim Pratt, Non Executive Director
David Smart, Non Executive Director
Roger Allen, Non Executive Director (resigned 8 September 2004)
Review of Operations
This report is to be read in conjunction with other reports issued
contemporaneously.
eServGlobal Limited is a public company listed on the Australian and London
(AIM) Stock Exchanges. Headquartered in Sydney, Australia, the eServGlobal group
has operations throughout the world with offices in Wellington (NZ), Hong Kong,
Ipswich (UK), Brussels (Belgium), the Netherlands, Denmark and Poland.
eServGlobal develops and deploys telephony network software and services for
telecommunications carriers worldwide. We specialise in large scale IN
(Intelligent Networking) environments, supporting voice and data services for
fixed line and wireless carriers. Our IN systems are in use in the public
networks of leading operators in Europe and Asia Pacific.
The consolidated entity achieved sales revenue for the period of $17,446,000
(2003 $11,263,000) - an increase of 55%. The gross profit realised was
$7,826,000 (45%) (2003 $3,661,000 (32%)) - an increase of 114%. EBITDA for the
period was $1,300,000. (2003 EBITDA loss $1,703,000)
The net result of the consolidated entity for the half year ended 31 December
2004 was a profit before tax of $114,000 (2003 loss $5,055,000). Income tax
expense was $83,000 (2003 $1,479,000) resulting in a profit after tax for the
period of $31,000 (2003 loss $6,534,000).
The operating cash flow for the period was a net outflow of $4,271,000. This
unusual result was caused by a combination of large expenditures early in the
half and major revenue milestones late in the half. Costs incurred early
included the London AIM listing ($587,000) and setup costs for outsourcing in
India ($294,000). The timing of contracted payment milestones, for a number of
projects, was such that $4,850,000 was invoiced in December and will be
receipted in the second half. Net cash at 31 December 2004 was $10,719,000.
Auditors Independence Declaration
Our auditors have provided the Board of Directors with a signed Independence
Declaration in accordance with s307C of the Corporations Act 2001. This
declaration is included at the end of this report.
Directors' Report (cont.)
Rounding Off of Amounts
The Company is a company of the kind referred to in ASIC Class Order 98/0100,
dated 10 July 1998, and in accordance with that Class Order amounts in the
directors' report and the financial report are rounded off to the nearest
thousand dollars.
Signed in accordance with a resolution of directors.
On behalf of the directors:
Ian Buddery
Director
London, 21 February 2005
INDEPENDENT REVIEW REPORT TO THE MEMBERS
OF ESERVGLOBAL LIMITED
Scope
We have reviewed the financial report of eServGlobal Limited for the half-year
ended 31 December 2004 as set out on pages 5 to 13. The financial report
includes the consolidated financial statements of the consolidated entity
comprising the disclosing entity and the entities it controlled at the end of
the half-year or from time to time during the half-year. The disclosing
entity's directors are responsible for the financial report. We have performed
an independent review of the financial report in order to state whether, on the
basis of the procedures described, anything has come to our attention that would
indicate that the financial report is not presented fairly in accordance with
Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory
professional reporting requirements in Australia and statutory requirements, so
as to present a view which is consistent with our understanding of the
consolidated entity's financial position, and performance as represented by the
results of its operations and its cash flows, and in order for the disclosing
entity to lodge the financial report with the Australian Securities and
Investments Commission.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. A review is limited primarily to inquiries of
the entity's personnel and analytical procedures applied to the financial data.
These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance provided is less than given in an audit. We
have not performed an audit and, accordingly, we do not express an audit
opinion.
Auditor's Independence Declaration
The independence declaration provided to the Directors of eServGlobal Limited on
18 February 2005 would be in the same terms if it was given to the Directors on
the date this review report is made out.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of eServGlobal
Limited is not in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity's
financial position as at 31 December 2004 and of its performance for the
half-year ended on that date; and
(ii) complying with Accounting Standard AASB 1029 "Interim
Financial Reporting" and the Corporations Regulations 2001; and
(b) other mandatory professional reporting requirements in Australia.
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Sydney, 21 February 2005
The liability of Deloitte Touche Tohmatsu is limited by, and to the extent of,
the Accountants' Scheme under the Professional Standards Act 1994 (NSW).
Directors' Declaration
The directors declare that:
(a) the attached financial statements and notes thereto comply with
Accounting Standards;
(b) the attached financial statements and notes thereto give a true and fair
view of the financial position and performance of the consolidated entity;
(c) in the directors' opinion, the attached financial statements and notes
thereto are in accordance with the Corporations Act 2001; and
(d) in the directors' opinion, there are reasonable grounds to believe that
the disclosing entity will be able to pay its debts as and when they become due
and payable.
Signed in accordance with a resolution of the directors made pursuant to s. 303
(5) of the Corporations Act 2001.
On behalf of the directors:
Ian Buddery Patrick McGrory
Executive Chairman Chief Executive Officer/Director
London, 21 February 2005 London, 21 February 2005
Consolidated Statement of Financial Performance
for the half-year ended 31 December 2004
Consolidated
Note Half-Year Ended Half-Year Ended
31 December 2004 31 December 2003
$'000 $'000
Sales revenue 17,446 11,263
Cost of sales (9,620) (7,602)
Gross profit 7,826 3,661
Other revenue from ordinary activities 223 209
Sales and marketing expenses (3,213) (2,537)
Administration expenses (3,935) (5,599)
Corporate expenses (786) (785)
Borrowing costs (1) (4)
Profit / (Loss) from ordinary activities before 2 114 (5,055)
income tax expense
Income tax expense relating to ordinary activities (83) (1,479)
Net Profit / (Loss) 31 (6,534)
Total changes in equity other than those resulting 31 (6,534)
from transactions with owners as owners
Earnings per share:
Basic (cents per share) 0.0 (6.3)
Diluted (cents per share) 0.0 (6.3)
Notes to the Financial Statements are included on pages 9 to 13
Consolidated Statement of Financial Position
as at 31 December 2004
Consolidated
Note 31 December 30 June
2004 2004
$'000 $'000
Current Assets
Cash assets 10,719 14,658
Receivables 12,133 7,716
Total Current Assets 22,852 22,374
Non-Current Assets
Other financial assets -
Property, plant and equipment 1,528 1,496
Intangibles 24,076 24,861
Other 3 402 598
Total Non-Current Assets 26,006 26,955
Total Assets 48,858 49,329
Current Liabilities
Payables 4,466 4,398
Current tax liabilities 171 142
Provisions 389 412
Other 4 1,355 2,230
Total Current Liabilities 6,381 7,722
Total Liabilities 6,381 7,722
Net Assets 42,477 41,607
Equity
Contributed equity 53,055 52,216
Retained profits (10,578) (10,609)
Total Equity 42,477 41,607
Notes to the Financial Statements are included on pages 9 to 13
Consolidated Statement of Cash Flows
for the half-year ended 31 December 2004
Consolidated
Inflows/(Outflows)
Note Half-Year Ended Half-Year Ended
31 December 2004 31 December 2003
$'000 $'000
Cash Flows from Operating Activities
Receipts from customers 12,919 17,192
Payments to suppliers and employees (17,373) (16,359)
Interest received 223 200
Interest and other costs of finance paid (1) (4)
Income tax paid (39) (36)
Net cash (used in)/provided by operating activities (4,271) 993
Cash Flows From Investing Activities
Payment for property, plant and equipment (462) (179)
Proceeds from sale of property, plant and equipment - 9
Research and Development - (416)
Net cash provided by/ (used in) investing activities (462) (586)
Cash Flows From Financing Activities
Proceeds from issues of equity securities 839 -
Net cash provided by financing activities 839 -
Net (Decrease)/Increase In Cash Held (3,894) 407
Cash At The Beginning Of The Half-Year 14,658 10,878
Effects of exchange rate changes on the balance of (45) (114)
cash held in foreign currencies
Cash At The End Of The Half-Year 10,719 11,171
Notes to the Financial Statements are included on pages 9 to 13
Notes to the Financial Statements
for the half-year ended 31 December 2004
1. BASIS OF PREPARATION
The half-year financial report is a general purpose financial report prepared in
accordance with the Corporations Act 2001 and AASB 1029 "Interim Financial
Reporting". The half-year financial report does not include notes of the type
normally included in an annual financial report and should be read in
conjunction with the 2004 annual financial report.
Significant Accounting Policies
The accounting policies adopted in the preparation of the half-year financial
report are consistent with those adopted and disclosed in the 2004 annual
financial report.
2. SIGNIFICANT TRANSACTIONS
There are no significant transactions in the period other than as described in
the Review of Operations in the Directors' Report.
Profit/(loss) from ordinary activities includes the following items of expense:
Consolidated
Half Year ended 31 Half-Year Ended 31
December 2004 December 2003
$'000 $'000
Costs incurred for listing on London Stock Exchange AIM 587 -
market.
Deferred Research & Development written down to - 862
recoverable amount.
Closure of business division and restructure - 1,263
Deferred tax assets written off - 1,479
Notes to the Financial Statements (Cont.)
Consolidated
Half-Year Ended Year Ended
31 December 2004 30 June 2004
$'000 $'000
3. OTHER NON-CURRENT ASSETS
Deferred research and development costs 3,965 3,965
Accumulated amortisation (3,563) (3,367)
Net amount deferred 402 598
Research and development costs incurred during the half - 715
year / year and deferred to future years.
Research and development costs amortised during the half (196) (563)
year / year.
Research and development costs written off during the half - (863)
year / year
4. OTHER CURRENT LIABILITIES
Deferred income 1,355 2,230
Consolidated
31 December 2004 31 December 2003
Cents per Total Cents per Total
Share $'000 Share $'000
5. DIVIDENDS
Fully paid ordinary shares
Recognised amounts
Interim dividend provided for - - - -
Special dividend paid in respect of prior financial year - - - -
Final dividend paid in respect of prior financial year - - - -
Fully paid ordinary shares
Unrecognised amounts
Interim dividend provided for - - - -
- - - -
Notes to the Financial Statements (Cont.)
6. SEGMENT INFORMATION
The consolidated entity operates in one industry, the IT industry, and in the
following geographical segments:
Information on Geographical Segments (primary reporting format)
Segment Revenues
EXTERNAL SALES INTER-SEGMENT TOTAL
GEOGRAPHICAL 2004 2003 2004 2003 2004 2003
$'000 $'000 $'000 $'000 $'000 $'000
Asia Pacific 4,712 3,727 4,712 3,727
Europe 12,734 7,545 12,734 7,545
Total of all geographies 17,446 11,272 17,446 11,272
Eliminations -
Unallocated 223 200
Consolidated 17,669 11,472
Segment Results
2004 2003
$'000 $'000
Asia Pacific (i) (see below) 991 (2,880)
Europe 657 (319)
-
Total of all geographies 1,648 (3,199)
Unallocated (ii) (1,534) (1,856)
Profit / (loss) from ordinary activities before income tax expense 114 (5,055)
Income tax expense relating to ordinary activities 83 1,479
Net Loss 31 (6,534)
(i) 2003 Asia Pac results include Research & Development costs of $1,098,000 written off or
amortised during the half year and restructuring costs of $967,000, associated with the closure of
a business segment in July 2003.
(ii) 2004 unallocated includes costs associated with the AIM listing of $587,000.
Notes to the Financial Statements (Cont.)
7. IMPACTS OF ADOPTING THE AUSTRALIAN EQUIVALENTS TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS
The consolidated entity will be required to prepare financial reports using
Australian accounting standards that are equivalent to International Financial
Reporting Standards (A-IFRS) and their related pronouncements for all periods
beginning on or after 1 January 2005. Accordingly the consolidated entity's
first half year report prepared under A-IFRS will be for the half year reporting
period ended 31 December 2005. A-IFRS also requires the consolidated entity to
restate comparative period balances. As a result, the opening statement of
financial position of the consolidated entity as at 1 July 2004 will be restated
so that all transactions and balances are recognised and measured in accordance
with A-IFRS. Transitional adjustments will be reflected either as a
reclassification of items in the statement of financial position, or an
adjustment of opening retained earnings.
Various voluntary and mandatory exemptions are available to the consolidated
entity on first-time adoption, which will not be available on an ongoing basis.
The exemptions provide relief from retrospectively accounting for certain
balances, instruments and transactions in accordance with A-IFRS.
At the date of this report, the directors of eServGlobal Limited have completed
a full impact study of the likely effect of the transition to A-IFRS on the
consolidated entity, and have developed a detailed plan for the management of
the transition. Whilst a plan has been developed, the directors are yet to
finalise the financial impact of the transition to A-IFRS and also to decide on
some of the options that are available on initial adoption. These matters will
be finalised prior to 30 June 2005.
Whilst the financial impact of the transition is still not finalised and
accordingly not disclosed in this financial report, the directors of eServGlobal
Limited have identified the following as being the key accounting policy
differences expected to arise on transitioning to A-IFRS. This does not
represent an exhaustive list of the differences that will arise, and further
analysis may change the consolidated entity's assessment of the importance or
otherwise of the various differences.
Key accounting policy differences
Share-based payments
Share-based compensation forms part of the remuneration of employees of the
consolidated entity (including executives). The consolidated entity does not
recognise an expense for any share-based compensation granted. Under A-IFRS, the
consolidated entity will be required to recognise an expense for such
share-based compensation. Share-based compensation is measured at the fair value
of the share options determined at grant date and recognised over the expected
vesting period of the options. A reversal of the expense will be permitted to
the extent non-market based vesting conditions (e.g. service conditions) are not
met. The entity will not retrospectively recognise share-based payments vested
before 1 January 2005 as permitted under A-IFRS first time adoption.
Notes to the Financial Statements (Cont.)
Share-based payment (cont.)
The recognition of the expense will decrease the consolidated entity's opening
retained earnings on initial adoption of A-IFRS and increase share capital by
the same amount for share-based payments issued after 7 November 2002 but not
vested before 1 January 2005. Similar impacts will also occur in future periods,
however, quantification of the impact on equity
and in the income statement of the existing share options granted as
remuneration has not been completed at the reporting date.
Income tax
The consolidated entity currently calculates deferred taxes by accounting for
the differences between accounting profits and taxable income, which give rise
to 'permanent' and 'timing' differences. Under A-IFRS, deferred taxes are
measured by reference to the 'temporary differences' determined as the
difference between the carrying amount and the tax base of assets and
liabilities recognised in the balance sheet.
Because A-IFRS has a wider scope than the entity's current accounting policies,
it is likely that the amount of deferred taxes recognised in the balance sheet
will increase.
Adjustments to the recognised amounts of deferred taxes will also result as a
consequence of adjustments to the carrying amounts of assets and liabilities
resulting from the adoption of other A-IFRS. The likely impact of these changes
on deferred tax balances has not currently been determined.
Goodwill
Goodwill is currently amortised over a 20 year period. A-IFRS does not permit
goodwill to be amortised, but instead requires the carrying amount to be tested
for impairment at least annually. This change in policy may result in increased
volatility in the profit and loss, where impairment losses are likely to occur.
Business Combinations
Historically, the acquisition of an entity or operation is accounted for under
the purchase method of accounting by the legal acquirer. Where consolidated
accounts are prepared, the assets and liabilities purchased are initially
recognised at their fair values in the consolidated accounts.
With the adoption of A-IFRS there are a number of recognition and measurement
differences that result in relation to assets and liabilities acquired in a
business combination, particularly in relation to intangible assets and
restructuring provisions. Acquired contingent liabilities must also be
recognised at their fair values where acquired in a business combination.
The impact of these changes in accounting policy on first-time adoption will
depend on whether the consolidated entity will elect to adopt the exemption
available to it to not reopen past acquisitions and retrospectively account for
them appropriately. The directors are yet to decided on whether to adopt the
exemption. On an ongoing basis, this change in policy may significantly affect
the profit and loss and balance sheet, as the accounting going forward
significantly differs from the manner in which such transactions are treated
under current Australian GAAP.
Other information required to be given to ASX under listing rule 4.2A.3
Net tangible assets per security Current period Previous corresponding
period
Net tangible assets per security 16.4 cents 15.8 cents
Details of entities over which control has been gained or lost during the period
Name of entity Date of gain or loss of Contribution to reporting
control entity's profit
N/A N/A N/A
Dividends
Amount Amount per Franked amount Amount per Date paid/
security per security at security of payable
30% tax foreign source
dividend
Interim dividend: Current year Nil N/A N/A N/A N/A
Previous year Nil N/A N/A N/A N/A
Final dividend paid in respect of
previous financial year:
Current period: Nil N/A N/A N/A N/A
Final dividend
Previous corresponding period:
Special dividend
Final dividend Nil N/A N/A N/A N/A
The dividend or distribution plans shown below are in operation.
N/A.
The last date(s) for receipt of election notices for the
+dividend or distribution plans N/A
Details of associates and joint venture entities
Name of entity Percentage of ownership interest Aggregate share of net profit
held at end of period (loss) contributed to the
reporting entity
Current Previous Current period Previous
corresponding corresponding
period period $A'000 period $A'000
Total N/A N/A N/A N/A
Please click on the following link to view the presentation to analysts
regarding half year results
http://www.rns-pdf.londonstockexchange.com/rns/8258i_-2005-2-21.pdf
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The company news service from the London Stock Exchange
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