RNS Number:3268E
INVU, Inc.
24 September 2007
24 September 2007
Invu, Inc.
Interim Results for the 6 months ended 31 July 2007
Invu, Inc., the document management software provider, announces its interim
results for the six month period ended 31 July 2007.
Financial Highlights
* Revenues up 19% on H1 2006
* Adjusted profit before tax* in line with expectation
* Raised #4m (before costs) to fund group reorganisation, marketing and
product development
* Deferred revenues and sales provisions up 66% to #2.07m (H1 2006:
#1.25m)
* Recurring revenues from INVUCare increased 8% to #0.67m (H1 2006:
#0.62m)
6 months ended 6 months ended
31 July 2007 31 July 2006
Turnover #2.46 m #2.07m
(Loss)/profit for the period #(0.19)m #0.01m
Adjusted (loss)/profit* #(0.02)m #0.01m
(Loss)/earnings per share (0.18) p 0.015p
Adjusted (loss)/earnings per share* (0.02) p 0.015p
*Adjusted for corporate reorganisation costs of #173,000
Operational Highlights
* 311 new customer sites, including Galliford Try, Marshalls
Amplification, JAC Strattons, Tag Worldwide, Bath Spa University and
ESD Ltd
* 104% increase in repeat sites up to 263 (H1 2006: 129) including Iron
Mountain, Diocese of Winchester, Kraft Foods, Thorntons PLC and London
South Bank University
* 8,128 new end users, up 24% compared to H1 2006
* 17 new accredited partners recruited
* Largest order backlog ever
Post period end
* Completed integration to SIMS, the prevalent software in the education
market
* Signed an agreement with a major software vendor, whereby the vendor
recommends combined Invu integration into it's accountancy and
professional services customer base
Daniel Goldman, Non Executive Chairman of Invu, commented:
"I am proud of the Company's performance during the first half. We have
continued to grow revenues in spite of the previously announced technical
difficulties. Crucially, management's response has allowed the Company to
overcome these challenges allowing us to grow both in terms of revenues and also
in terms of hugely increased demand for the Series 6 product line. As we enter
the second half of the year the entire Company is focused on converting this
pipeline and backlog. Invu continues to reinforce its market position with a
broadening range of channel and strategic partnerships underpinning our
leadership as a provider of document management solutions to the SME market. The
Company remains uniquely positioned to leverage this platform for further
significant and profitable growth."
David Morgan, Chief Executive, added:
"Activity levels in H1 have been at an all time high, with new product bedding
into the market and the commencement of the group reorganisation project. This
has presented a number of challenges which have been met and handled with hard
work, commitment and skill by Invu's management and staff. We continue to lead
the way in the document management market and remain the brand of choice in the
SME sector. Series 6 will go from strength to strength in H2 and beyond."
Enquiries:
Invu, Inc. 01604 859893
Daniel Goldman, Non Executive Chairman
David Morgan, CEO
John Agostini, CFO
Financial Dynamics 020 7831 3113
Juliet Clarke
Hannah Sloane
About Invu
Invu (LSE, AIM, Symbol; NVUK) develops, markets and sells software (under the
brand name of Invu) for the electronic management of all types of information
and documents, such as forms, correspondence, literature, faxes, e-mail,
technical drawings, electronic files and web pages. Invu targets the
small-to-medium size enterprise ('SME') market and individual departments of
larger organisations with a range of products which the Directors believe
strongly adhere to Invu's brand values of ease of use, high quality and price
performance. Founded in 1997 and based in Northampton, Invu has 61 employees and
operates in the UK, Ireland, The Netherlands, South East Asia, Australia, the
United States of America and Nigeria. Invu's products have been sold to nearly
3,300 customers, representing approximately 63,000 licensed users. Invu has a
proven reseller business model and has established a network of more than 130
Value Added Resellers, 10 of which are in Benelux.
Invu is a Microsoft Gold Certified Partner and a member of the Business
Application Software Developers Association (BASDA). Its version 5.4 and Series
6 software have been accredited by the Institute of Chartered Accountants in
England & Wales (ICAEW). In January 2006 Invu became the first EDM ISV to join
SAP's portfolio and is certified for integration with SAP Business One. In
September 2006, the Invu Series 6 product was selected by Sage to be marketed by
them into the Professional Adviser market in the UK.
For more information on Invu see http://www.invu.net
Chairman's Statement
During the first half of the year the Group has continued to grow its revenues
and customer base. We have added over 300 new customers and have been especially
successful in reinforcing our relationship with over 250 of our existing
clients. Series 6 presented some challenging technical issues during the first
half resulting in a considerable number of new installations being delayed. I am
pleased to announce that all issues have now been resolved without the loss of a
single reseller or end user site. In fact the Company now has the largest sales
pipeline in its history and is working hard with its resellers to meet the
current demand for new installations and upgrades.
The other major challenge has been the initiation of our corporate
restructuring. As expected this has been an arduous process and is of course
ongoing. Once completed, it will see the Company with a hugely simplified
corporate structure allowing the Board to drive shareholder value more directly
and transparently to all of our shareholders.
The Company successfully raised #4m in June of this year. Approximately half of
this has been allocated for the re-organisation, which will mainly be used to "
cash out" US resident shareholders. The remaining funds will be invested in
sales and marketing and product development, taking advantage of the extra
opportunity brought by the new Series 6 product range.
Both the technical and corporate sides of the business have demanded
considerable management attention during the first six months and it is a
testament to the Company that this, along with the careful communication of
these issues to our partners and customers have been conducted in a way that has
caused only a minimal effect on the frontline sales and marketing efforts.
Invu continues to extend and strengthen its standing within the SME market and,
on the back of the release of the Series 6 product suite, it has created several
new partnerships allowing the Company to attack a growing number of market
opportunities. We will continue to develop the business along these lines which
we firmly believe will translate into further long-term growth in both revenues
and profits and also an ever strengthening brand. I remain confident about the
business and look forward to a very strong performance in the second half.
I would like to thank all of the employees for their efforts during the first
half and congratulate them on their achievements, turning adversity into
opportunity. Thanks also to our partners, advisors and shareholders for their
continued support and understanding.
Daniel Goldman
Non Executive Chairman
Chief Executive's Statement
Introduction
Trading during the first half has been steady, continuing to demonstrate the
growing awareness of the Invu brand and recognition of its leading position in
the market. During the first half 8,128 (H1 2006: 6,551) seats were deployed at
574 customer sites, of which 263 were existing customers. As at 31 July 2007
Invu's customer base numbered 3,284 end user sites representing 62,702 end
users, as compared to 2,322 and 44,707 respectively, a year ago.
The Group now has 139 resellers (H1 2006: 132), who continue to consolidate our
position within the SME channel, selling into key vertical markets, both
established and emerging. Many of the partners accredited during 2006 have
started to mature into successful partners for Invu. This has resulted in a
larger number of more significant partners, with no single partner representing
more than 14% of turnover. This is part of our ongoing strategy to develop a
successful and sustainable channel for our products. As usual, the Group has
taken an objective stance regarding non-performing partners, resulting in the
termination of agreements so that our sales team can concentrate on those that
are more successful.
Demand for our products remains strong and on average the number of sites buying
software has grown 28% over H1 2006 to an average of 96 per month.
Financial Performance
This period is the first time that the Group is required to report under IFRS,
and we are pleased to announce that the impact of IFRS has had little effect on
the reported figures.
Turnover for the period was #2.46m (H1 2006: #2.07m), an increase of 19% on the
prior year. Recognised recurring revenues from InvuCare increased to #0.67m
during the first half, compared to #0.62m in the half-year ended 31 July 2006.
The lower growth rates in both the headline figure and InvuCare have been
significantly influenced by the delays in upgrading existing sites to Series 6
and installing Series 6 at certain new customer sites. We have already seen an
improvement following the resolution of the technical issues. We expect this to
gather pace all the way through the second half.
Gross profit margin during the first half was 96.3% (H1 2006: 92.5%). This is
higher than our internal benchmark (93%) and is due to the mix of revenues
arising from pure software sales with virtually no hardware or subcontracted
services. We would expect the gross margin to revert back to more normal levels
in the second half.
Technical and support expenditure, which includes research and development,
technical support and professional services, was #0.39m in the first half (H1
2006: #0.40m). However, for comparative purposes the current half year's figure
before capitalisation of development costs is #0.54m. The overall increase
reflects the cost of additional developers hired during the first half as part
of the effort to resolve the teething problems of the new product range. This
also includes the cost of an external review of the entire department in
response to these problems, and the hiring of an interim CTO to implement its
findings, as well as an experienced Head of Product Delivery.
Sales and marketing expenditure increased by 28% to #0.96m (H1 2006: #0.75m), or
39% of turnover (H1 2006: 37%). Much of this increase related to the marketing
of Series 6, our investment in regional demonstration centres and the
recruitment of key sales managers to attack the further market opportunities
that Series 6 provides. This investment continues to reflect our determination
to invest in sales and marketing in order to build both turnover and brand
recognition in the UK and overseas.
General and administrative expenses, excluding reorganisation costs, were #1.02m
during the first half compared with #0.72m for the first half last year. This
now represents 41% of turnover (H1 2006: 35%). This increase is mainly
attributable to costs associated with our new premises, increased staff costs
and depreciation.
Operating profit before reorganisation costs for the 6 month period ended 31
July 2007 amounted to a breakeven position (H1 2006: breakeven). Loss before
reorganisation costs for the first half amounted to #0.02m (H1 2006: profit
#0.01m). The reported loss for the period is #0.19m (H1 2006: profit #0.01m) and
is in line with internal forecasts despite revenues being slightly lower than
expected. As usual, our second half performance will have a disproportionately
positive effect on profits.
The cashflow statement at 31 July 2007 includes #0.96m for the repayment of
erroneous Dutch tax refunds held in the balance sheet at 31 January 2007.
Similarly the comparative cashflow statement for 31 July 2006 includes an #0.86m
erroneous receipt from the Dutch tax authorities. By adjusting for these items,
cashflows used in operating activities in the six months to 31 July 2007
amounted to #0.77m compared to cash from operating activities of #0.29m for the
six months ended 31 July 2006. The issues associated with Series 6 have had a
consequent effect on both cash collections and debtors for both our partners and
Invu during the first half. In maintaining the goodwill and commitment of our
partners and their end users, payment terms were extended whilst the problems
were resolved. Although we now fully expect to collect most debts, we prudently
provided an extra #850,000 of provisions at 31 July 2007 and in so doing have
reduced both sales and profits by this same figure.
Creditors (excluding accruals, deferred revenue, and erroneous tax refunds) of
#0.95m (H1 2006: #0.87m) were covered 11 times by current assets (H1 2006: 5.7
times covered). The Group remains virtually debt free and therefore effectively
ungeared as at 31 July 2007.
Taking into account the ongoing investment in the business and accumulated
losses to date, the Board is not proposing the payment of an interim dividend.
Operations
Trading
During the first half we have focused on several areas of the business:
addressing the technical problems; continuing to grow the channel; building the
pipeline and adding further partnerships to our existing ones.
As previously announced, following the initial launch of the Series 6 product
several technical problems arose that impeded integration and installation of
the product with our larger partners and their customers. These issues arose
during the first half and as a result we took steps, not only to fix the
immediate problems, but also used the opportunity to review the whole
development team and processes. We engaged with outside consultants for the
review and then appointed an interim CTO to oversee the implementation of the
findings. We have identified a permanent CTO to take the development forward.
Naturally this delay on the product created some stresses across other parts of
the business, and in particular sales and technical support. In these situations
it is typical for those departments to take the frontline in managing the
communications and expectations of our partners and customers, and whilst it was
a challenging period, I am proud of the response of the team.
As a result, and in spite of the delays, the Company has successfully grown the
business in the first half and of particular note is the size of the current
pipeline, the largest in the Company's history. The focus now for everyone in
the business is to convert the backlog and pipeline during the second half.
Sales & Marketing
The main effort during the first half was the continued introduction of the full
Series 6 product range, including the integration tool and workflow whilst
maintaining maximum energy within the channel during the period of delay. The
sales team have successfully grown revenues during the first half and we fully
expect that this growth will accelerate throughout the second half of the year.
During the first half we opened several Invu Demo Centres located around the UK
as a further support for our channel partners. Since they opened, we have
already seen an uplift in the quality of the lead generation and our ability to
project the value of Invu's products to SME customers. The key benefit of the
demo suite is the ability for potential customers to take part in an interactive
live demonstration of the product. This is in a networked environment which
much more closely mimics a working office, as opposed to a stand-alone demo,
typically from a lap top. It is our intention to continue investing in
innovative ways to support all our channel partners, reinforcing our position as
the document management vendor with the strongest and best supported channel in
the UK.
It has been our stated strategy to grow existing vertical niches at the same
time as adding new verticals based on market demand. Our traditional markets
continue to perform well for us, and other verticals continue to grow. Of
particular note is the accountancy vertical which has experienced rapid growth
since our announcement in September 2006 of the OEM deal with The Sage Group
plc. Further confirmation of this growing market acceptance, is the recent
agreement signed with the market leading vendor of specialist software for
accountants. We have also integrated Invu with SIMS, the dominant student
information system in over 18,000 schools in the UK. This is being sold through
a major partner working in that sector.
Overseas Markets
Our main overseas market is still the Netherlands where we have added Sharp as a
partner during the first half. Alongside Panasonic this now gives us a very
strong platform for further growth in the Netherlands and I am very happy with
trading there. Sharp have also demonstrated their desire to work with Invu in
Australia and USA, and we have facilitated this requirement by introducing them
to accredited partners in those regions.
Although we have seen some initial sales from the Far East and the US they still
represent a very small part of the Group's revenues. We continue to invest
cautiously in these and other overseas market opportunities and expect them to
become long-term drivers for growth.
Product Development
As discussed above the main challenges for the development group were the follow
on releases of additional elements of the Series 6 product range. These gave
rise to several teething problems which created the need for intervention. The
resulting review made several recommendations and of course accelerated the
urgent fixes required by our channel partners.
As a result of the external review several changes have been made within the
development department including some personnel changes, and the addition of a
CTO for the first time. Initially this has been achieved through the appointment
of an interim CTO, who has implemented many of the recommendations. In addition
we have appointed a Head of Product Delivery with particular responsibility for
quality assurance and testing prior to any new releases.
We are currently in the process of appointing a permanent CTO, which will be
announced once successfully completed, and have also added some extra resource
to the development team. The CTO will combine direct management responsibility
for the development team, and also strategic planning of our technology roadmap,
including for example, any buy or build technology decisions that he might
recommend to the board. We have appointed a Chief Architect, who is responsible
and accountable for design and architecture.
I am now confident that we are moving back towards a position of reliability of
performance, not just from all of our software products, but also the timing and
expectations of further new releases.
The key focus for the development group is now to have a period of consolidation
so that all of our partners and customers can have confidence in this core part
of our business. Notwithstanding, given that the software market is continually
changing, we are currently considering concepts for broader market applications
in the future.
Group Reorganisation
As previously announced we have commenced the long awaited group reorganisation
process. There is a crucial difference between the initial and later stages of
the process. The timetable for the completion of the second and final stage is
broadly under our control, whereas the first few months have been subject to the
relative uncertainties of U.S. legal and financial processes. Of the #4m raised
through a placing in May 2007, approximately half the proceeds will be used to
finance the reorganization, of which the majority is allocated to "cash out" US
resident shareholders.
The initial tasks of research, feasibility and planning have been somewhat
arduous as we and our advisors, both UK and US, endeavoured to prepare the
Company for the critical implementation phase. We are delighted to announce that
all potential impediments have been favourably resolved and we have embarked on
the implementation of the reorganisation plan.
Our UK lawyers have commenced the due diligence and drafting process required
for the admission of a new UK "top company"; the US lawyers are drafting merger
agreements and shareholder proxy materials; our financial advisors are preparing
the necessary short form and long form elements of their report; our UK and US
tax advisors are reviewing all documents to ensure strict adherence to the plan
as required by their respective tax jurisdictions; specialist US valuation
consultants have also drafted their opinion as to the fair value of Invu's US
share price in relation to the shares that will be "cashed out" as part of the
reorganisation.
Notwithstanding the time taken over the initial work, we still expect the
transaction to be successfully completed over the next few months. As stated
previously the completion of this process will dramatically enhance our
corporate structure allowing all of our investors to enjoy the value the
business is creating in a more transparent and immediate fashion.
I would like to give thanks on behalf of all the shareholders to John Agostini,
the Group's CFO who is working tirelessly to make this process successful, at
the same time as carrying out his "day job".
Outlook
With the challenges of the first half behind us we can now concentrate fully on
fulfilling the demand for our software. At the same time we will complete the
restructuring in order to create a more transparent and simple corporate
structure.
We continue to build a strong position both in brand and market share, alongside
the dual tasks of continued revenues and profits growth, at the same time as
building future growth engines for the Company.
I would like to personally thank all of the employees for their effort during
the first half which has been particularly challenging. Thanks also to our
partners and shareholders for their continued support.
The Company is in a strong position, with an order pipeline at record levels. I
am very excited about the prospects of the Group and look forward to rapid
growth in the second half of the year. We remain confident that our year end
results will reflect market expectations.
David Morgan
Chief Executive Officer
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 31 JULY 2007
For the six months ended
July 31, July 31,
Notes 2007 2006
#'000 #'000
(unaudited) (unaudited)
Sales 3 2,464 2,065
Cost of sales (90) (155)
Gross profit 2,374 1,910
Sales and marketing costs (956) (747)
Administrative expenses (1,545) (1,117)
Share option expense (39) (64)
Operating loss (166) (18)
Finance costs (8) -
Finance income 37 15
Loss before income tax 3 (137) (3)
Income tax expense (54) 18
(Loss) / profit for the period 3 (191) 15
Attributable to:
Equity holders of the Company (191) 15
(Loss) / earnings per share
Basic 7 (0.183)p 0.015p
Diluted 7 (0.183)p 0.015p
CONSOLIDATED BALANCE SHEET AT 31 JULY 2007
July 31, January 31, July 31,
Notes 2007 2007 2006
#'000 #'000 #'000
(unaudited) (unaudited) (unaudited)
Non-current assets
Property, plant and equipment 4 385 229 225
Other intangible assets 5 519 311 55
Deferred income tax assets 98 59 44
1,002 599 324
Current assets
Inventories 298 220 95
Trade and other receivables 6,664 6,141 4,063
Cash and cash equivalents 3,648 2,168 1,863
10,610 8,529 6,021
Total assets 11,612 9,128 6,345
Equity
Capital and reserves attributable to the Company's equity shareholders
Share capital 6 - - -
Share premium 9,903 6,289 6,275
Share option reserve 236 197 150
Retained earnings (1,083) (919) (2,840)
Foreign currency translation reserve 263 (6) (5)
Total equity 9,319 5,561 3,580
Non-current liabilities
Borrowings 53 28 25
Deferred income tax liability 146 80 -
199 108 25
Current liabilities
Trade and other payables 2,058 3,439 2,727
Obligations under finance leases 36 20 13
2,094 3,459 2,740
Total liabilities 2,293 3,567 2,765
Total equity and liabilities 11,612 9,128 6,345
CONSOLIDATED CASHFLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 JULY 2007
For the six months ended
July 31, July 31,
Notes 2007 2006
#'000 #'000
(unaudited) (unaudited)
Cash flows (used in) / from operating activities 8 (1,733) 1,145
Cash flows used in investing activities
Interest received 30 15
Purchases of property, plant and equipment (290) (123)
Purchase of intangible assets (146) -
Net cash used in investing activities (406) (108)
Cash flows from / (used in) financing activities
Proceeds from issue of shares 3,614 -
Repayment of obligations under finance leases (2) (4)
Net cash from / (used in) financing activities 3,612 (4)
Effects of exchange rate changes on cash and cash equivalents 7 -
Net increase in cash and cash equivalents 1,480 1,033
Cash and bank overdrafts at the beginning of the period 2,168 830
Cash and bank overdrafts at the end of the period 3,648 1,863
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JULY 2007
1. GENERAL INFORMATION
INVU Inc is a Company incorporated in the United States. The group is
principally engaged in the design and sale of computer software for the
electronic management of information and documents.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the group operates.
Foreign operations are included in accordance with the policies set out in note
2.
These unaudited interim financial statements do not constitute statutory
accounts within the meaning of s240 of the Companies Act 1985. The statutory
accounts for the year ended 31 January 2007, on which the auditors have an
unqualified audit report, have been filed with the registrar of Companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These interim condensed consolidated financial statements are for the six months
ended 31 July 2007. They have been prepared in accordance with IAS 34 "Interim
Financial Reporting" and the requirements of IFRS 1 "First-time Adoption of
International Financial Reporting Standards" relevant to interim reports,
because they are part of the period covered by the Group's first IFRS financial
statements for the year ended 31 January 2008. They do not include all of the
information required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group for the year
ended 31 January 2007.
These financial statements have been prepared under the historical cost
convention.
These condensed consolidated interim financial statements (the interim financial
statements) have been prepared in accordance with the accounting policies set
out below which are based on the recognition and measurement principles of IFRS
in issue as adopted by the European Union (EU) and are effective at 31 January
2008 or are expected to be adopted and effective at 31 January 2008, our first
annual reporting date at which we are required to use IFRS accounting standards
adopted by the EU.
Invu Inc.'s consolidated financial statements were prepared in accordance with
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) until 31 January 2007. The date of transition to IFRS was
1 February 2006. The comparative figures in respect of 2006 have been restated
to reflect changes in accounting policies as a result of adoption of IFRS. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS
are given in the reconciliation schedules, presented and explained the appendix
to these financial statements.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these condensed consolidated interim financial
statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable in accordance with the Group's
principal activities, net of VAT and trade discounts.
Where software is sold as part of a package containing software support, the fee
is allocated to the two separate components by reference to the price for
software support where this is provided to customers on a stand- alone basis,
the residual being allocated to software. Revenues from the sale of software to
resellers are recognised upon product shipment when fees are fixed,
collectability is probable and the group has no significant obligations
remaining under the sale agreement. In instances where a significant vendor
obligation exists, revenue recognition is delayed until such obligation has been
satisfied.
For those sale agreements to resellers which provide the resellers the right to
multiple copies in exchange for guaranteed amounts, software revenues are
recognised at delivery of the product master of the first copy as the reseller
has not recourse to the Group after this point. Per copy royalties on sales
which exceed the guarantee are recognised as earned.
Resellers are charged an accreditation fee each year for training and consulting
to be provided by the Group to the resellers and this fee is recognised evenly
over each accreditation period.
The Group's resellers provide primary maintenance and ongoing support to the end
users. The Group provides secondary support to the end users via the resellers
and charges the reseller an annual fee for this support. The fees charged by
the Group to the resellers are recognised over a twelve month period. Where the
end user no longer has an accredited reseller, support fees are charged by the
Group to the end user and recognised over a twelve month period.
Interest income is accrued on a time basis, by reference to the principle
outstanding and at the effective interest rate applicable.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary recognised at
the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses on an annual basis. Any
impairment is recognised immediately in profit or loss and is not subsequently
reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date transition to IFRSs has been
retained at the previous UK GAAP amounts, subject to being tested for impairment
at that date.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over their
estimated useful lives, using the straight-line method. Estimated useful lives
of all assets is four years.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sale proceeds and the carrying amount of the asset
and is recognised in income.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in
which it incurred.
An internally generated intangible asset arising from the Group's software
development is recognised only if all of the following conditions are met:
- an asset is created that can be identified (such as software and new
processes);
- it is probable that the asset created will generate future economic
benefits; and
- the development cost of the asset can be measured reliably
Internally-generated intangible assets are amortised on a straight line basis
over their useful lives, which is expected to be four years. Where no
internally-generated intangible asset can be recognised, development expenditure
is recognised as an expense in the period in which it is incurred.
Intangible assets
Where computer software does not form an integral part of the machinery or
computer hardware to which it relates, it is presented as an intangible asset.
Computer software costs are included at cost and amortized on a straight line
basis over their expected useful economic life, which are expected to be four
years.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If such an indication of
impairment is identified, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where the asset
does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount (higher of fair value less costs to sell and value in
use of an asset) is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lease. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Company at
their fair value or, if lower, at the present value of minimum lease payments,
each determined at the inception of the lease. The corresponding liability is
included in the balance sheet as a finance lease obligation.
Leasing (continued)
Lease payments are apportioned between finance charges and reduction of the
lease obligations so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged to the income statement.
Rentals payable under operating leases are charged to the income statement on a
straight-line basis over the term of the relevant lease.
Inventories
Inventories and work in progress are stated at the lower of cost and net
realisable value, cost being determined on a first in first out (FIFO) basis.
The cost of inventories comprises all costs of purchase and other costs incurred
in bringing the inventories to their location and condition at the balance sheet
date. Provision for write-downs to net realisable value and losses of
inventories are recognised as an expense in the period in which the write-down
or loss occurs. Reversals are recognised as a reduction in the amount previously
recognised as an expense in the period in which the reversal occurs.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and cash in
hand and short-term deposits with an original maturity of three months or less.
At present all notice periods are one day.
Financial instruments
Financial assets and financial liabilities are recognised on the Company's
balance sheet when the Company becomes a party to the contractual provisions of
the instrument.
- Trade Receivables
Trade receivables do not carry any interest and are stated at fair value or
initial recognition net of transaction costs and subsequently at amortised cast
using the effective interest method, less provision for impairment.
- Trade Payables
Trade payables are not interest bearing and are stated at fair value on initial
recognition and subsequently at amortised cost using the effective interest
method
- Bank Borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums
payable on settlement or redemption and direct issue costs are accounted for on
an accrual basis to the income statement using the effective interest method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
Share-based payments
The Group has applied the requirements of IFRS2 Share-based payments. In
accordance with the transitional provisions, IFRS2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
February 2006.
The Group issues equity settled share based payments to certain employees.
Equity settled share based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity settled share
based payments is expensed on a straight line basis over the vesting period,
based on the Group best estimate of shares that will eventually vest.
Fair value is measured by use of a binomial model. The expected life used in
the model has been adjusted based on management's best estimate, for the effect
of non-transferability, exercise restrictions, and behavioural considerations.
Retirement benefit costs
The Group operates a contracted in money purchase pension scheme. Contributions
are charged to the income statement as they become payable in accordance with
the rules of the schemes. At 31 July 2006 there were no outstanding
contributions (2006: #nil).
The Company provided no post-retirement benefits to its employees.
Taxation
The taxation ('tax') expense represents the sum of the tax currently payable and
deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction
that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the assets to be
recovered.
Deferred tax is calculated at the tax rates that are enacted or substantively
enacted at the balance sheet date which are expected to apply in the period when
the liability is settled or the asset is realised. Deferred tax is charged or
credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with
in equity.
Foreign currencies
The financial information is presented in pound sterling which is the
presentational currency of the group.
Monetary assets and liabilities denominated in foreign currencies in each
company are translated at the rates of exchange prevailing at the accounting
date. Transactions in foreign currencies are translated at the rate prevailing
at the date of transaction.
On consolidation, revenues, costs and cash flows of subsidiaries with a
functional currency other that sterling are included in the group income
statement at average rates of exchange for the year. The assets and liabilities
denominated in foreign currencies are translated into sterling using rates of
exchange ruling at the balance sheet date.
Exchange differences on the re-translation of opening net assets and results for
the year of foreign subsidiary undertakings with a functional currency other
than sterling are dealt with through reserves net of differences on related
foreign currency borrowings. Other gains and losses arising from foreign
currency transactions, including trading, are included in the consolidated
income statement.
Standards, interpretations and amendments to published standards that are not
yet effective new standards, amendments and interpretations to existing have
been issued by the IASB that are not yet effective. The Group has not adopted
any of these standards, amendments or interpretations early.
International Financial Reporting Standards:
IFRS 8 Operating segments (effective 1 January 2007)
IAS 1 Presentation of financial statement (revised 2007) (effective 1 January 2009)
IAS 23 Borrowing costs (revised 2007) (effective 1 January 2009)
IFRIC interpretations:
IFRIC 11 Group and treasury share transactions (effective 1 March
2007)
IFRIC 12 Service concession arrangements (effective 1 January 2008)
IFRIC 13 Customer loyalty programmes (effective 1 July 2008)
The other standards, amendments and interpretations are not expected to have a
significant effect on the Group results or its financial position.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make
judgments, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis of making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Material estimates and assumptions are made in particular with regard to share
based payments, the amortisation period for intangible assets and impairment
reviews.
3 SEGMENT INFORMATION
Primary reporting format- geographical segments
The segment results for the 6 months ended 31 July 2007 are as follows:
United Europe Total
Kingdom
#'000 #'000 #'000
Sales 2,190 274 2,464
(Loss) / profit before income tax (274) 137 (137)
(Loss) / profit for the period (328) 137 (191)
The segment results for the 6 months ended 31 July 2006 are as follows:
United Europe Total
Kingdom
#'000 #'000 #'000
Sales 1,838 227 2,065
(Loss) / profit before income tax (135) 132 (3)
(Loss) / profit for the period (117) 132 15
4 PROPERTY, PLANT AND EQUIPMENT
Fixtures,
Computer Motor fittings &
equipment vehicles equipment Total
#'000 #'000 #'000 #'000
Cost
At 1 February 2007 327 50 179 556
Additions 105 25 74 204
432 75 253 760
Depreciation
At 1 February 2007 202 36 89 327
Charge for the period 28 3 17 48
230 39 106 375
Carrying amount
At 31 July 2007 202 36 147 385
At 31 January 2007 125 14 90 229
5 INTANGIBLE ASSETS
Research and
development Computer
costs software Total
#'000 #'000 #'000
Cost
At 1 February 2007 281 127 408
Additions 272 2 274
553 129 682
Depreciation
At 1 February 2007 15 82 97
Charge for the period 53 13 66
68 95 163
Carrying amount
At 31 July 2007 485 34 519
At 31 January 2007 266 45 311
6 SHARE CAPITAL
The total authorised preference shares and common shares are 20,000,000 and
250,000,000 respectively with no par value and have been unchanged from 1
February 2006.
All issued shares are common shares and have no par value.
Number of
shares
(thousands)
At February 1, 2006 and July 31, 2006 100,055
Exercise of options 132
At January 31, 2007 100,187
Issue of share 13,333
Exercise of options 142
At July 31, 2007 113,662
7 (LOSS) / EARNINGS PER SHARE
For the six months ended
July 31, July 31,
2007 2006
#'000 #'000
(Loss) / profit for the period (191) 15
Basic (loss) / earnings per share (0.183)p 0.015p
Diluted (loss) / earnings per share (0.183)p 0.015p
Weighted average number of common share outstanding 104,297,826 100,009,123
Diluted weighted average number of common share outstanding 104,596,365 101,337,900
The diluted weighted average number of common shares outstanding results from
share options. The effect of the share options has not been included in the
calculation of the diluted earnings per share because of their antidilutive
effect.
8 CASH GENERATED FROM OPERATIONS
For the six months ended
July 31, July 31,
2007 2006
#'000 #'000
(Loss) / profit for the period (191) 15
Adjustments for:
Tax 93 (18)
Depreciation 48 29
Amortisation 66 10
Foreign currency translation 262 64
Interest income (30) (15)
Interest expense 2 -
Changes in working capital:
Inventories (78) 43
Trade and other receivables (523) 322
Trade and other payables (1,382) 695
Net cash (used in) / from operating activities (1,733) 1,145
9 SHARE-BASED PAYMENTS
During the six months ended 31 July 2007, 141,837 share options with a weighted
average exercise price of #0.104 were exercised. The share options were granted
as part of the Enterprise Management Share Option Scheme (Group A).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KXLFLDKBLBBB
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