RNS Number:3411X
Financial Payment Systems Limited
29 May 2007
FINANCIAL PAYMENT SYSTEMS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE
YEAR ENDED 31 DECEMBER 2006
CHAIRMAN'S STATEMENT
The year to 31 December 2006 has been one of considerable progress for the
Company. Much of the first part of the year was of course taken up with the
preparations for our successful floatation on AIM in June 2006, and I am pleased
to note that we attracted a range of well respected institutions amongst our
initial subscribers. This was gratifying and is a testament to the potential
opportunity that awaits the Company in its chosen sphere of operations. It also
represents a tribute to the hard work and professionalism of the Executive Board
and employees, as well as our professional advisors, in securing a successful
listing in what was, in the weeks prior to admission, a difficult and testing
time in the AIM market.
In development terms, much effort this year has been focused on our system,
particularly in the light of the Jiangsu Government's expanding user
requirements, and matters raised by the participating banks. As a result, the
system now represents a high quality product developed specifically for the
Chinese market, and has the attributes we believe to be a benchmark system in
the field of financial transaction software in China.
Key to our potential to succeed in this market has always been, and remains, our
relationships with the Jiangsu Government and Chinese banks. Your Chief
Executive Officer, Lay Ann Ong, works tirelessly to cement and develop
relationships with the senior personnel in both sets of institutions, and his
experience and the respect he has in this market place are valuable assets
indeed to the Company. As a further indication of the importance of the project
to the Provincial Government, our joint venture vehicle has received a grant
from them towards its development efforts, covered in more detail in the CEO's
report.
As a Board we held our first meeting following admission in Nanjing, the capital
of Jiangsu, and had the opportunity further to build upon those ties with the
Government and Jiangsu Electronic Business Co., Ltd, our joint venture partner,
in a series of meetings. Such is the importance of these relationships that the
Board is scheduled to return to Nanjing later in 2007.
The Board has been strengthened during the year by the appointment of Richard
Last as non-executive director. Richard's background with successful Software
and IT services companies and his qualification as a Chartered Accountant makes
him a strong and independent member of the Board, as well as an effective
chairman of the Audit Committee.
The Board recognises that achieving live deployment and therefore the ability to
generate revenues has taken longer than we envisaged at the time of our listing.
Evolving user requirements and technical considerations, as well as a change of
Chief Technology Officer have together been the principal cause of project
slippage. However, we are confident that we can deploy and go live with our
system so as to generate revenues during the first quarter of 2008.
I thank you for your continuing support for Financial Payment Systems Limited
and trust that as 2007 plays out we will be able to take the Company forward to
the next rewarding phase of its development.
Malcolm Williams
Chairman
CHIEF EXECUTIVE OFFICER'S REPORT
INTRODUCTION
For Financial Payment Systems Limited (FPS), the year to 31 December 2006, and
the period to date, has seen the culmination of much of the pre-IPO effort
undertaken by the team in conjunction with our joint venture partner Jiangsu
Electronic Business Co., Ltd. The strengthening of the development, business
development and operational teams in China, the broadening of the product
offering in response to feedback from potential users, and the work currently
underway to connect the system to China's largest bank, means FPS is now well
positioned to make good the potential of the Jiangsu electronic payment project.
One pleasing trend over the period in review has been the acceleration of
interest from within the B2G and B2B sectors for a product allowing secure and
efficient payment and supply-chain services, in particular amongst aggregations
of enterprises into associations seeking to benefit from operating common
services, such as electronic payments, through a business portal. Some of these
associations are themselves established and backed by the Provincial Government,
whilst some are purely commercial in origin. FPS' "trusted deposit" function,
dealt with in more detail later, is of particular interest to these bodies as an
enabler of B2B and B2G transactions, the more so as we believe it to be unique.
STRATEGY
The FPS strategy is based upon a twin track approach, that of deploying our
system into the intra-Governmental payment approval and instruction sector
(G2G), whilst at the same time seeking to exploit the potential that such a
system offers into the wider business enterprise sector (B2B and B2G).
Within this broader strategy our focus has been on ensuring that our product
offering is of relevance in the Chinese context, and therefore we have spent and
continue to spend time and effort in developing functionality of commercial
relevance to users. For this reason, our most recent development has been the
"trusted deposit" module, well received commercially and championed by our
partnering banks.
In business development terms, our relationship with the Provincial Government
continues to open doors for us and initiates opportunities to demonstrate our
system to a broad and expanding range of potential customers. Ultimately, as set
out at the time of our listing, it is FPS' goal to become the payment services
provider of choice within Jiangsu, and the wider potential of the broader
Chinese market remains an enticing and possible target.
Relationships are all in China; partnering in our joint venture with a partially
Government owned entity has been a great enabler for FPS, another unique factor
in our favour which we continue to exploit toward the achievement of our
commercial goals.
THE FPS SYSTEM
Current status
Over the period in review, our system has seen enhancement and continuing
development both to its functionality (essentially a process of adding new
functional components to the core payment and approval handling processes) and
also to its critical security and interfacing elements - this is the ability of
the system to communicate and operate as a secure and efficient portal between
banks and customers.
We have presented live, web-based demonstrations of the system to our key
partnering banks, Government Departments and enterprises, and these have been
well received and have in themselves generated further interest from, in
particular, the wider business community. As noted in the introduction, we have
had particular interest from B2B portals, aggregations of enterprises in a
particular field of commerce trading together and with other enterprises and the
Government, with a need for a payment platform to allow simplified payment
services within their supply-chain processes.
As a result of our dialogue with banks and potential users, we are adding a
"trusted deposit" function to our system. This will allow funds to be held as a
de facto guarantee of payment. Banks in the Chinese system currently have no
means of freezing part of the funds within the account of a paying party, hence
our ringfenced deposit system is of particular value in China, and indeed the
banks with whom we are talking are championing our use of this innovative
approach. Considerable interest has been expressed within the B2B and G2B areas
at this product offering, the more so as we are able, as a result of our
Governmental relationships, to offer a unique deposit feature whereby funds are
held jointly by FPS and a trusted Governmental body. This unique selling
proposition will, we believe, prove to be important in the commercial uptake of
the FPS system.
Interfacing of the system with Chinese banks
The ability of our system efficiently and securely to interface with Chinese
banks, adopting the appropriate security protocols and encryption technology for
such interfacing, remains key to its deployment and adoption commercially. Our
development team is currently writing the Application Protocol Interface (API)
software to link our system to the back-end systems of the Industrial and
Commercial Bank of China (ICBC), the largest commercial bank in China. This will
be our first bank connection, and represents a very important step forward for
the project.
In parallel, we are working on the interface specifications with Guangdong
Development Bank and Rural Credit China Bank and on the requirements that each
bank has for connection in a secure manner to their internal settlement systems.
Whilst every bank has a different set of protocols for interfacing, much of the
core development work can be replicated as we add banks to the network. In time
we will look to add Bank of China, the Agricultural Bank of China and China
Merchant Bank, with all of whom we are in discussions, to the network.
Operational deployment and back up
Data integrity and system security are essential elements of our system. As
such, we will be deploying the operational servers on which we run the payment
applications into a secure, state of the art hosting environment, expected to be
the China Telecom site in Nanjing. In parallel we will operate disaster recovery
systems, comprising live-link data backup and switchable system service
replication, from a second physically separate secured site.
USER BASE
Provincial Government Departments
It has always been, and remains, our core focus to deliver a payment approval
and instruction service to the Provincial Government in Jiangsu. The
relationships we have established, and the participation of arms of the
Government in our joint venture partner, ensure that we are best placed to
deliver on this. We have been encouraged by the continuing support demonstrated
by the Provincial Government. We are pleased to report that our Chinese joint
venture vehicle has received a 300,000 Chinese Renminbi (RMB) development grant
from a fund jointly administered by the Jiangsu Finance Department and the
Jiangsu Administration of Small and Medium Enterprises, under a scheme designed
to encourage the economic growth of Jiangsu Province. This is a reflection of
the importance of the project to the economic development of Jiangsu in the eyes
of the Provincial Government.
The first Department to whom we expect to deploy is the Highways & Tolls
Department, responsible principally for highway construction and maintenance
within Jiangsu. We are involved in advanced consideration of departmental
workflows, processes and requirements, and connectivity specifications.
A number of industry-specific trading associations have been established by the
Provincial Government. Of these, we are at a similarly advanced stage with the
Nanjing Hi-Tech Software Park, the Jiangsu Chemical Trading Park, and the
Jiangsu Telecom trading platform, Jiangsu Telecom being a subsidiary of the
majority state-owned China Telecom.
Commercial enterprises
The incorporation of the "trusted deposit" functionality into our product
offering has, as noted above, greatly enhanced the attractiveness of our system
in the eyes of the wider business community in Jiangsu. Thus we are in advanced
stage discussions on the payment infrastructure requirements of a number of
commercial enterprises, both stand-alone entities and other non state-sponsored
trading associations. In particular, the Suguo Supermarket Chain, Nanjing Julong
Engineering Plastics Co., and the Jiangsu Jin Jian Construction Group are
significant stand-alone organizations, whilst the Jiangsu Agricultural Trading
Centre, Jiangsu Chemical Trading Centre and the Jiangsu Five Star Appliance
Enterprise Group are umbrella trading organizations.
In general, our deployment to the commercial sector is gaining momentum faster
than we anticipated, reflecting the current opportunity to deploy a previously
unavailable "trusted deposit" model into the market.
BUILDING THE TEAM
The completion of the listing has allowed us greatly to strengthen our team by
hiring a range of skilled and experienced personnel necessary to drive the
project forward. We have brought in a number of important members to our
development team, under the leadership of our new Chief Technology Officer Tim
Zhu, a fluent Mandarin speaker who brings with him experience of working with
Chinese banks. We continue to add experienced developers to our team,
particularly in Jiangsu itself, and also in our development office in Singapore.
In addition we have built a strong team in China to handle the operational
aspects of our system, which will be critical to the successful deployment and
rollout within Jiangsu, as well as an active and enthusiastic business
development team, ensuring that FPS is able to make the most of the excellent
relationships it has developed itself, as well as those it enjoys through its
joint venture partner.
The ability to hire locally in China is also an important tool for maintaining
budget controls, since personnel costs within China are considerably below those
elsewhere in the region. The pool of experienced talent upon which FPS is able
to draw is large.
OUTLOOK FOR THE PROJECT
Current status
The single most important step in the life of the project to date will be the
successful integration of the FPS system to ICBC, and we are well advanced in
our development work with the bank to achieve this in the near future. At the
same time we are developing, internally within the core FPS system, the "trusted
deposit" function. Upon completion of these two features we will have
essentially completed the first deployment version of the complete system.
Once we achieve this milestone, the system will be capable of integration into
the workflow and processes of users, to allow testing in a live environment and
subsequent commercial operational launch. In the meantime, we continue to work
with the future users of the system to assimilate as much information on their
internal workflows, internal sign-off processes and likely loads, so that we can
shorten the user deployment timescales still further and achieve the earliest
possible go-live dates.
Anticipated timescales
Managing and rolling out a complex, multi-partner project in an environment as
intricate and structured as China is challenging, however we believe we have
assembled a highly competent and experienced team to do just that. As such, we
have revised our milestone targets for the project as follows:
1 Completed, tested and verified integration of FPS system
to ICBC bank - Quarter 3, 2007.
2 Initial deployments and rollout - Quarter 4, 2007.
3 Revenue generation from initial deployments - during
Quarter 1, 2008.
CONCLUSION
We recognise that the project has taken longer to deploy commercially than had
been expected at the outset, however, having devoted considerable efforts to
driving the project forward and to addressing the changing requirements of users
and banks, we now believe that the prospect of live, revenue-generating
deployment into both the Government and commercial sectors in Jiangsu is within
reach. To this end, the Board wishes to extend its appreciation and thanks to
the management and staff of FPS both in Singapore and in China, and to Jiangsu
Electronic Business Co., Ltd., our joint venture partner, for their tireless
efforts to drive the project forward.
We take this opportunity to thank you for your continuing support and patience,
and believe that the full potential of the FPS system and the Jiangsu project
can and will be realised for the benefit of you as shareholders, and indeed for
the benefit of the Jiangsu economy.
Ong Lay Ann
Chief Executive Officer
FINANCIAL REVIEW
Fundraising and listing on AIM
The Company was listed on AIM in June 2006 following a placement of 41,666,667
shares at 12p each in its initial public offering, raising a gross amount of
#5,000,000. A net amount of #4,079,137 was realised after #920,863 in IPO
expenses which comprised fees paid to the nominated advisor, legal advisor,
reporting accountants and other professional advisors.
In accordance with IAS 32 currently adopted in the UK, #554,938 of those
expenses has been taken against the capital reserve account pertaining to new
IPO shares whilst #365,925 pertaining to existing shares has been charged to the
income statement as exceptional IPO expenses.
Group operational results
In the year ended 31 December 2006, the Group recorded a net loss before
minority interest of #1,090,341 (2005: #108,042). There was no revenue generated
by the Group for the year and finance income amounting to #56,078 was recorded.
Other administrative expenses for the year were #800,974 (2005: #108,798). The
bulk is made up of employment costs of #494,914 (2005: #36,596) which
constitutes approximately 62% of total other administrative expenses for the
year.
Legal and professional fees amounting to #41,665 (2005: #nil) were incurred for
legal and tax advice received. Various other administrative expenses make up the
remainder.
Balance sheet and cash balances
The balance sheet as at 31 December 2006 shows net assets of #3,793,043 which
includes goodwill of #195,531. Group cash balance at that date was #3,220,759 of
which #2,132,980 was in the Company. In fulfillment of our commitment to
capitalise the project company, Jiangsu Electronic Payment Services Co., Ltd.
("JSEPS"), a further injection of RMB17,000,000 (#1,178,550) was made, bringing
the capital in JSEPS to the agreed level of RMB20,000,000 (#1,370,677). As at 31
December 2006, the cash balance in JSEPS stood at #955,660. This cash will be
used in financing the working capital and fixed capital purchases as the rollout
of the project progresses.
Freddie Heng
Finance Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2006
Note 2006 2005
------------------ ----- -------- -------
Revenue 3 - -
------------------ ----- -------- -------
Other income 3 20,480 -
------------------ ----- -------- -------
------------------ ----- -------- -------
Exceptional IPO
expenses 4 (365,925) -
Other
administrative
expenses (800,974) (108,798)
------------------ ----- -------- -------
Total
administrative
expenses (1,166,899) (108,798)
------------------ ----- -------- -------
Operating loss 4 (1,146,419) (108,798)
Finance income 5 56,078 756
------------------ ----- -------- -------
Loss before tax (1,090,341) (108,042)
Taxation 6 - -
------------------ ----- -------- -------
Net Loss for
the year (1,090,341) (108,042)
------------------ ----- -------- -------
Loss attributable to:
Equity holders
of Parent (1,047,295) (87,792)
Minority
interests (43,046) (20,250)
------------------ ----- -------- -------
(1,090,341) (108,042)
------------------ ----- -------- -------
------------------ ----- -------- -------
Basic and
diluted loss
per share 10 (0.020) -
------------------ ----- -------- -------
GROUP BALANCE SHEET
As at 31 December 2006
GROUP
---------------
Note 2006 2005
------------------ ----- ------- ------- --- -------- --- -------
ASSETS
Non-current assets
Intangible assets 360,519 -
Property, plant and equipment 59,364 7,815
Goodwill 195,531 32,485
------------------ ----- ------- ------- --- -------- --- -------
615,414 40,300
------------------ ----- ------- ------- --- -------- --- -------
Current assets
Other debtors, deposits & 222,698 51,218
prepayment
Cash and cash equivalents 3,220,759 156,348
------------------ ----- ------- ------- --- -------- --- -------
3,443,457 207,566
------------------ ----- ------- ------- --- -------- --- -------
------------------ ----- ------- ------- --- -------- --- -------
Total assets 4,058,871 247,866
------------------ ----- ------- ------- --- -------- --- -------
LIABILITIES
Current liabilities
Other creditors & accruals 265,828 27,582
Due to a related party - 98,826
------------------ ----- ------- ------- --- -------- --- -------
Total liabilities 265,828 126,408
------------------ ----- ------- ------- --- -------- --- -------
------------------ ----- ------- ------- --- -------- --- -------
Net assets 3,793,043 121,458
------------------ ----- ------- ------- --- -------- --- -------
EQUITY
Capital and reserves
attributable to equity
holders of the Company
Share capital 7 4,583,333 2,500,000
Capital reserve 7 2,361,729 -
Capital contribution reserve 8 204,125 -
Merger reserve 9 (2,591,768) (2,348,167)
Foreign currency translation
reserve (14,323) 6,310
Accumulated losses (1,137,839) (90,544)
------------------ ----- ------- ------- --- -------- --- -------
3,405,257 67,599
------------------ ----- ------- ------- --- -------- --- -------
------------------ ----- ------- ------- --- -------- --- -------
Minority interests 387,786 53,859
------------------ ----- ------- ------- --- -------- --- -------
------------------ ----- ------- ------- --- -------- --- -------
Total equity 3,793,043 121,458
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2006
Attributable to Equity Holders of the Parent
Foreign Total
Share Capital Capital Merger Currency amount
Capital Reserve Contribution Reserve Translation Accumulated attributable Minority Total
Reserve Reserve Losses to equity Interests Equity
holders
2006 # # # # # # # # #
Group
Balance
at
01.01.2006 2,500,000 - - (2,348,167) 6,310 (90,544) 67,599 53,859 121,458
Shares
issued
in AIM
listing 2,083,333 2,916,667 - - - - 5,000,000 - 5,000,000
IPO expenses
transferred
from income
statement - (554,938) - - - - (554,938) - (554,938)
Accumulated
loss from
acquired
subsidiaries - - - - - - - 376,973 376,973
Loss for the
year - - - - - (1,047,295) (1,047,295) (43,046) (1,090,341)
Capital
contribution
during the
year - - 204,125 - - - 204,125 - 204,125
Exchange
difference
arising on
consolidation - - - - (20,633) - (20,633) - (20,633)
Merger arising
from
acquisition of
subsidiaries - - - (243,601) - - (243,601) - (243,601)
Balance
at
31.12.2006 4,583,333 2,361,729 204,125 (2,591,768) (14,323) (1,137,839) 3,405,257 387,786 3,793,043
2005
Group
Balance
at
01.01.2005 - - - - - (2,752) (2,752) (826) (3,578)
Shares
issued
during
the
year 2,500,000 - - - - 2,500,000 - 2,500,000
Accumulated
loss from
acquired
subsidiaries - - - - - - 54,685 54,685
Loss for the
year - - - - - (87,792) (87,792) - (87,792)
Exchange
difference - - - - 6,310 - 6,310 - 6,310
Merger arising
from
acquisition of
subsidiaries - - (2,348,167) - - (2,348,167) - (2,348,167)
Balance
at
31.12.2005 2,500,000 - - (2,348,167) 6,310 (90,544) 67,599 53,859 121,458
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2006
2006 2005
-------------------------------- -------- -------
CASH FLOW FROM OPERATING ACTIVITIES
Loss before taxation (1,090,341) (108,042)
Adjustment for :
Depreciation of property, plant and equipment 7,183 276
Finance income (56,078) (756)
-------------------------------- -------- -------
Operating loss before movement in working capital
activities (1,139,236) (108,522)
Debtors (171,480) (51,218)
Creditors (33,285) 317,113
-------------------------------- -------- -------
Cash (used in) / generated from operating activities (1,344,001) 157,373
Interest received 56,078 756
-------------------------------- -------- -------
Net cash outflow (used in) / generated from operating
activities (1,287,923) 158,129
-------------------------------- -------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (59,201) (8,091)
Research and development expenditure (29,517) -
-------------------------------- -------- -------
Net cash outflow from investing activities (88,718) (8,091)
-------------------------------- -------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issue of shares, representing net of
expenses 4,445,062 -
-------------------------------- -------- -------
Net cash outflow from financing activities 4,445,062 -
-------------------------------- -------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS
DURING THE FINANCIAL YEAR 3,068,421 150,038
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE FINANCIAL YEAR 156,348 -
Exchange difference (4,010) 6,310
-------------------------------- -------- -------
CASH AND CASH EQUIVALENTS AT THE END
OF THE FINANCIAL YEAR 3,220,759 156,348
-------------------------------- -------- -------
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
1. CORPORATE INFORMATION
Financial Payment Systems Limited ("the Company") (registration No. 91540) was
incorporated in Jersey on 27 October 2005 with its registered office at 2 Bond
Street, St Helier, Jersey, JE2 3NP.
The principal activity of the Company is investment holding. The Company was
formed to serve as the entity which would apply for a listing on the Alternative
Investment Market ("AIM") of the London Stock Exchange. It was established as a
holding company above two subsidiary entities by way of a swap of shares in the
Company issued to the shareholders of the subsidiary entities as consideration
for the acquisition by the Company of the shares in those entities. To
accomplish this, on 28 April 2006, the Company acquired 100 percent of FPS
Technologies Pte. Ltd. ("FPST")* for 1,000,000 and 70 percent of Sino China
Investments Limited ("SCI") for 5,000,000 by issuing 25,000,000 shares of 10p
per share at a consideration of 24p per share for a total consideration of
6,000,000. This is equivalent to 12p per share following the subsequent
sub-division of the Company's share capital. During the financial year, the
Company injected the sum of #1.2 million in cash into SCI for new shares.
SCI was incorporated on 19 March 2004 and is domiciled in Hong Kong. The
principal activity of SCI is investment holding and it has an 85 percent
shareholding in Jiangsu Electronic Payment Services Co., Ltd. ("JSEPS"). The
remaining 15 percent shareholding in JSEPS is held by Jiangsu Electronic
Business Co., Ltd. ("JSEB"), SCI's project partner. JSEB was granted the rights
by the Government of the Province of Jiangsu, China to develop and operate an
automated inter-departmental electronic payment approval system within the
Province of Jiangsu ("the Jiangsu Payment System"). SCI has signed a contract
with JSEB to implement the Jiangsu Payment System. JSEPS, which was incorporated
on 27 May 2005 in The People's Republic of China, was established as the vehicle
that will develop, manage and operate the Jiangsu Payment System and has a
statutory operational period of 15 years (capable of extension). During the
financial year, SCI injected the sum of #1,178,550 in cash into JSEPS for new
shares.
FPST was incorporated on 2 July 2005 in Singapore. FPST is the research and
development arm of the Group. FPST has full intellectual property ownership
rights to certain software technology which was developed for the installation,
implementation and operation of internet financial payment gateway systems. FPST
has licensed this technology to JSEPS for its use on the Jiangsu Payment System
project.
On 16 June 2006, the Company was admitted to AIM.
* FPS Technologies Pte. Ltd. was formally known as FCH Technologies Pte. Ltd.
until 22 March 2007 when the name changed to its present name.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial information set out above in this preliminary announcement does
not constitute the company's statutory accounts for the year ended 31 December
2006 (the Company's first accounts). Statutory accounts for 2006 will be
delivered to the Companies Registry in Jersey following the Company's
Extraordinary General Meeting. The auditors have reported on the 2006 accounts;
their report was unqualified, did not include reference to any matters to which
the auditors drew attention by way of emphasis without qualifying their audit
report and did not contain a statement under Article 111 of Companies (Jersey)
Law 1991.
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
BASIS OF PREPARATION (Continued)
The financial information is prepared in accordance with the historical cost
convention, except as disclosed in the accounting policies below and the
financial information is expressed in pounds sterling, which is the functional
currency of the Company. The financial information has been prepared in
accordance with International Financial Reporting Standards and Interpretations
in force ("IFRSs"), as endorsed by the European Union and implemented in the UK.
The financial information of the Group for the year ended 31 December 2005 is
included to show what the historical information might have been had the Group
existed as at 1 January 2005 and had the structure been in existence since then.
The accounting policies which cover areas that the Directors consider require
estimates and judgements, which have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next
financial year, are goodwill, assessment of useful economic lives of property,
plant and equipment and intangibles fixed assets, research and development and
impairment of assets. There are no new standards in issue but not yet effective
that would have a material effect on the accounts.
BASIS OF CONSOLIDATION
a. Merger Method
The circumstances under which the Company became a holding company are set out
in Note 1. Under these circumstances, the transaction falls outside the scope of
IFRS 3. As such, the Directors are of the opinion that the Group accounts will
present a more fair view of the results of the Group if the merger method of
consolidation is adopted. Where merger accounting is used, the investment is
recorded in the Company's balance sheet at the nominal value of the shares
issued.
In the Group financial information, merged subsidiary undertakings are treated
as if they had always been a member of the Group. The results of each subsidiary
are included for the whole of the period in the year in which it joins the
Group. The corresponding figures for the previous year include its results for
that period, the assets and liabilities at the previous balance sheet date and
the shares issued by the Company as consideration as if they had always been in
issue. Any difference between the nominal value of the shares acquired by the
Company and those issued by the Company to acquire them is taken to the merger
reserve.
b. Acquisition Method
Acquisitions made by existing companies have been accounted for using the
acquisition method of accounting. Any excess of the purchase consideration over
the net fair value of identifiable assets, liabilities and contingent
liabilities of the subsidiary at the date of acquisition is included in goodwill
on consolidation. Goodwill is recognized as an asset and reviewed for impairment
at least annually. Any impairment is recognized immediately in the income
statement. On disposal of the subsidiary, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal. Intra-group
transactions are eliminated.
The consolidated financial information are prepared using uniform accounting
policies for similar transactions and other events in similar circumstances. The
results of any subsidiary acquired or disposed during the financial year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal.
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
3. REVENUE AND OTHER INCOME
No revenue was generated by the Group.
Other income comprises of Government Grants received during the year.
2006 2005
-------- -------
Government grant 20,480 -
-------- -------
20,480 -
======== =======
4. EXCEPTIONAL IPO EXPENSES & OPERATING LOSS
Exceptional IPO expenses
2006 2005
-------- -------
IPO expenses 365,925 -
======== =======
These amounts comprise fees paid to the nominated advisor, legal advisor and
reporting accountants and other professional advisors pertaining to existing
shares. These are charged to the income statement in accordance with IAS 32. The
portion of fees pertaining to IPO shares has been taken to the capital reserve
account (see Note 7 (iv)).
Operating loss
Included in the operating loss for the year are the following expenses:
2006 2005
-------- -------
Auditors' remuneration 29,720 551
Depreciation of property, plant and equipment 7,183 276
Legal & professional fees 41,665 -
Net foreign exchange differences 36,595 5,088
Office rental 62,160 466
Staff costs 494,914 36,596
======== =======
5. FINANCE INCOME
2006 2005
-------- -------
Finance income 56,078 756
======== =======
Finance income represents interest arising from deposits placed with banks.
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
6. TAXATION
No provision for taxation has been made as the Group incurred losses during the
year.
2006 2005
-------- -------
Reconciliation of effective tax rates
Loss before taxation (1,090,341) (108,042)
======== =======
Tax credit on loss at the prevailing rate applicable (79,411) (21,608)
Effect of different tax rates (15,687) -
Tax losses carried forward 94,068 -
Expenses not deductible for tax 1,030 21,608
-------- -------
Tax expense for the year - -
-------- -------
The Company and the significant subsidiary undertakings are subject to taxation
on the following bases and at the following rates:
Financial Payment Systems Limited
The Company is tax exempt.
FPS Technologies Pte. Ltd.
Singapore tax rate is calculated at 20% of the estimated assessable profit for
the year.
Sino China Investments Limited
Hong Kong profits tax is calculated at the domestic rate of 17.5%.
Jiangsu Electronic Payment Services Co., Limited
The applicable taxation rate arising in the People's Republic of China is 33%.
Unrecognised deferred tax assets
2006 2005
--- -------- -------
Unutilised tax losses 94,068 -
-------- -------
94,068 -
======== =======
As at the balance sheet date, the Group has unutilized tax losses for which no
deferred tax asset is recognized due to uncertainty of the recoverability. The
use of these balances is subject to the agreement of the tax authorities and
compliance with certain provisions of the tax legislation of the respective
countries in which the companies in the Group operate.
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
7. SHARE CAPITAL AND CAPITAL RESERVE
Share capital 2006
------------------
--- ---------
--- --- ---
No. of shares Company
--------------- ---------
Authorised
Ordinary shares of 5p per share (2005: 10p per
share) 1,000,000,000 50,000,000
---------- ---------
Issued and fully paid
Balance as at beginning of the year
-------------------------------------
Shares issued on incorporation -** -*
---
Issued during the year
------------------------
- For acquisition of subsidiary entities 50,000,000 2,500,000
- Placement pursuant to IPO on AIM 41,666,667 2,083,333
---------- ---------
Balance as at the end of the year 91,666,667 4,583,333
========== =========
* Issued share is less than 1.
** There were two shares of 10p per share issued at incorporation. As
explained below, these were split into four shares of 5p per share on 6
June 2006.
Capital reserve GROUP COMPANY
--------------- ----------------
2006 2005 2006 2005
-------- ------- -------- --------
---
Capital reserve - notes (i) and (iii) 2,916,667 - 2,916,667 -
IPO expenses - note (iv) (554,938) - (554,938) -
-------- ------- -------- --------
Total 2,361,729 - 2,361,729 -
======== ======= ======== ========
The following changes in the Company's authorised and issued share capital took
place during the financial year:
(i) On 28 April 2006, a total of 25,000,000 ordinary shares of 10p per
share were issued for the acquisition of 70% of the equity in Sino China
Investments Limited and 100% of the equity in FPS Technologies Pte. Ltd. for a
consideration of 24p per share resulting in a premium of 14p per share, or
3,500,000 in total, which was credited to the capital reserve account. As this
acquisition was funded by an exchange of shares, the premium was offset against
the merger reserve.
(ii) On 6 June 2006, the Company undertook a share split whereby each
ordinary share of 10p per share was split into two shares of 5p per share. As a
result the authorised share capital of the Company was increased from
500,000,000 ordinary shares of 10p each to 1,000,000,000 ordinary shares of 5p
per share. The existing 25,000,000 ordinary shares of 10p per share issued on 28
April 2006 were split into 50,000,000 ordinary shares of 5p per share.
(iii) On 16 June 2006, 41,666,667 ordinary shares of 5p each were issued at a
consideration of 12p per share in a placement pursuant to the listing of the
Company on AIM. The resultant premium of 7p per share, or 2,916,667 in total,
was credited to the capital reserve account.
NOTES TO THE PRELIMINARY ANNOUNCEMENT REPORT
For the year ended 31 December 2006
7. SHARE CAPITAL AND CAPITAL RESERVE (Continued)
(iv) The Company incurred a total of 554,938 in direct expenses which are
appropriately allocated to its initial public offering. These were paid to the
nominated advisor, legal advisor, reporting accountants, and other professional
advisor. These have been taken against the capital reserve account.
8. CAPITAL CONTRIBUTION RESERVE
The balance classified as capital contribution reserve comprises part of the
cost of the intellectual property rights contributed to the Group by Weststar
Ventures Inc. ("Weststar"), the Company's largest shareholder. Weststar has
undertaken not to seek recovery or make any claim from the Group in respect
thereof.
9. MERGER RESERVE
As explained in Note 2 under Basis of Consolidation, the consolidated financial
information of the Group have been prepared using the merger method. The value
of the shares issued by the Company in exchange for the shares acquired in Sino
China Investments Limited and FPS Technologies Pte. Ltd. amounted to 5,000,000
and 1,000,000 respectively. The premium amounting to #3,500,000 as explained in
Note 7(i) derived from acquisition of SCI and FPST has been offset against the
merger reserve. The difference between the value of shares issued and the
nominal value of the shares acquired in the respective subsidiary is recorded in
the merger reserve account, as follows:
GROUP COMPANY
--------------- ----------------
2006 2005 2006 2005
-------- -------- -------- --------
---
In respect of:-
Sino China Investments
Limited (2,320,978) (1,931,500) 2,916,667 -
FPS Technologies Pte. Ltd. (270,790) (416,667) 583,333 -
-------- -------- -------- --------
Total (2,591,768) (2,348,167) 3,500,000 -
======== ======== ======== ========
10. LOSS PER SHARE
2006 2005
-------- --------
Basic and diluted loss per share
Loss for the financial year (1,090,341) (108,042)
-------- --------
Number Number
Weighted average number of ordinary share issued
during the year 54,018,266 -
-------- --------
Basic and diluted loss per share (0.020) -
======== ========
Extraordinary General Meeting
An Extraordinary General Meeting of the Company will be held on 25 June 2007 at
11.00am at the Company's registered office in Jersey. The audited statutory
accounts will be issued to shareholders with Notice of the Extraordinary General
Meeting and filed in due course with the Jersey Registrar of Companies.
Daniel Stewart & Co plc Tel: +44 (0) 20 7776 6550
Lindsay Mair
Financial Payment Systems Limited Tel: +65 6415 3333 (please note office hours
for this number are 7 hours ahead of UK time)
Lay Ann Ong, Chief Executive Officer
This information is provided by RNS
The company news service from the London Stock Exchange
END
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