24th Mar 2005 07:00
Press Release 24 March 2005 EasyScreen plc 3rd quarter results for the 9 months ended 31 December 2004 EasyScreen plc (`EasyScreen', `the group'), the multi-asset class and pre-traderisk management systems provider, announces its results for the nine months andquarter ended 31 December 2004.Contacts:Abchurch Chris Lane Tel: +44 (0) 20 7398 7700 [email protected] www.abchurch-group.com Chairman's statementCash offer for the Company from Refco Trading Services (UK) LimitedOn 16 March 2005, the Board of Refco Trading Services (UK) Limited ("Refco")announced the terms of a cash offer to be made by Dawnay Day Corporate FinanceLimited ("Dawnay Day") on behalf of Refco for the entire issued and to beissued share capital of EasyScreen plc not already owned by Refco. The Offerwill be 15.525p for each EasyScreen share and values the entire existing issuedshare capital of EasyScreen at ‚£14.8 million. As at 23 March 2005 the RefcoGroup holds 8,676,721 EasyScreen shares representing 9.09% of EasyScreen'sissued share capital.On 29 October 2001, EasyScreen issued a ‚£2 million secured convertible bond toeSpeed, Inc ("eSpeed"). A separate offer will be made by Dawnay Day on behalfof Refco for such convertible bond subject to the Offer being declaredunconditional.The EasyScreen Board is now in the process of seeking independent financialadvice on the terms of the Offer in compliance with Rule 3 of the TakeoverCode, with a view to then advising EasyScreen's shareholders regarding theOffer.ResultsTurnover for the quarter ended 31 December 2004 was marginally lower than theprevious quarter and the previous year. In the 9 months to 31 December 2004EasyTrade sales were down by 6% year on year. However, much of the shortfallhas been made up by new EasyXchange datacentre sales.EasyXchange sales now make up 15% of total turnover compared to just 2% a yearago. However, as indicated in our September 2004 quarterly announcement, growthin EasyXchange sales has been slower than anticipated due to delays inproduction and development.Operating expenses were higher than the previous year due to the investment inEasyXchange. Compared to the previous quarter and excluding non-cash foreignexchange losses, operating expenses were unchanged. Total recognised losseswere ‚£871,284, 5% higher than the previous quarter.Refco EasySolutions LLC, our joint venture ("the JV") with the Refco Group,continues to increase revenues and profit. Our 49% share of the JV's profit forthe 9 months to 31 December 2004 was ‚£54,374 compared to a loss of ‚£109,762 inthe previous year. The JV's results continue to improve steadily past theperiod end.Trading updateAs stated in the second quarter results, sales in Europe continue to be slowerthan expected due to the dependence on the release of Version 2.2 of oursoftware. The rollout was delayed until the end of November 2004. Since then,when in the production environment, a number of problems were highlighted. AService pack upgrade is currently being implemented, which will primarilyaddress performance, stability, scalability and support issues.Since the quarter end, other development projects to increase connectivitywhich were completed in January 2005 will now not be available in productionuntil the next calendar quarter. These products are intended to satisfy andgrow our existing and new client base.Additionally, the company has added connectivity to the International PetroleumMarket ("IPE") and to Credit Agricole Chevreux for connectivity to CFD's andequities across European, Asian, Australian and US markets. These will beimplemented into production shortly. In addition we now have datacentreconnectivity to Bourse de Montreal for which we have potential new usersThis period was also notable for deterioration in trading conditions caused byindustry uncertainty due to the escalation of the patent infringement claims byTrading Technologies International Inc ("TT"). More recently, in March 2005, TTannounced a claim for patent infringement against Refco Group and its USaffiliates, including our JV, Refco EasySolutions LLC. The uncertainty ishaving an impact in signing of new contracts and I expect this uncertainty tocontinue for some time to come. The EasyScreen Board believes this uncertaintyis affecting the industry as a whole.In September 2004, in the light of patent litigation in the US, EasyScreenevaluated its own software and has concluded that its software is not atmaterial risk in respect of the patents in question. Nonetheless, the companyis continuing to monitor the situation.I mentioned in my last report that the project with Man Financial Inc was onhold and we believe that this will continue to be the case until the currentindustry issue with patents is finally resolved. Although we believe there aresome limited opportunities available, the substantial deal anticipated by theheads of agreement is no longer available for the foreseeable future.Capital resourcesAs a result of the company's current uncertain trading outlook due to patentissues affecting the industry, and due to the company's current software issuesand trading losses, the directors have instituted a review of its business.Following this review, the Board of EasyScreen has come to the conclusion thatit needs a successful strategic partner with a strong financial balance sheetto fully develop its potential and has been actively exploring its options inthis regard.The Board of EasyScreen welcomed the approach by Refco, a company which is partof a group with whom it has had a beneficial long term joint venture. We arepleased that Refco has recognised EasyScreen's potential.OutlookThe current trading outlook is uncertain due to patent problems and currentsoftware issues. The directors do not expect the final quarter's turnover toshow any improvement over the third quarter. However, efforts continue toresolve the recent software problems and upgrades are currently beingimplemented. This, along with further extensions to our connectivity areintended to satisfy and grow our existing and new client base.The EasyScreen Board continues to have confidence in the company's products andthe sales team is actively pursuing opportunities in the marketplace.Philip DockerChairman24 March 2005Operating and financial reviewOverviewEasyScreen's unaudited results for the quarter ended 31 December 2004 showtotal recognised losses of ‚£871,284 (2003 - ‚£670,870).TurnoverTurnover for the quarter ended 31 December 2004 was ‚£577,621 (2003 - ‚£584,709).EasyTrade sales were 13% lower than the same quarter in the previous year and3% lower than the previous quarter to 30 September 2004. Cumulative EasyTradelicences sold at 31 December 2004 were 227 to 52 customers (2003 - 280 licencesto 63 customers).Datacentre sales made up most of the EasyTrade losses and are growing month onmonth. Datacentre sales were up 230% on last year and were roughly the same asthe previous quarter.For the 9 months ended 31 December 2004 Turnover was ‚£1,764,000 (2003 - ‚£1,659,710) 6% higher than the previous year. EasyTrade sales were 6% lower butdatacentre sales were much higher replacing the lower EasyTrade sales.Operating expensesTotal operating expenses amounted to ‚£1,617,128 for the quarter ended 31December 2004 (2003 - ‚£1,372,416). The increase in costs year on year arisesfrom higher datacentre costs and related staff costs. Compared to the previousquarter costs were higher by 18%, but this was entirely due to foreign exchangetranslation differences. The translation difference results from theretranslation of inter-company balances which is charged/credited to the profitand loss account. The retranslation of opening net assets is shown as a credit/debit directly to reserves. Both accounting treatments are in accordance withSSAP 20, foreign currency translation. Excluding translation losses costs werethe same as the previous quarter.Staff costs of ‚£761,969 (2003 - ‚£592,941) were ‚£34,617 or 5% higher than theprevious quarter. Staff numbers at 31 December 2004 were 51 (2003 - 38).Other operating charges were ‚£685,108 (2003 - ‚£625,492).Payments in the quarter for outsourced development were ‚£170,051 (2003 - ‚£153,983). This compares to a cost of ‚£215,927 in the previous quarter. Totalsystem support and development costs including costs of full time employeesamounted to ‚£513,928 (2003 - ‚£400,404) compared to ‚£519,989 in the previousquarter.Interest receivable / payableInterest receivable during the quarter was ‚£9,058 (2003 - ‚£1,631). Interestpayable of ‚£46,373 (2003 - ‚£46,084) includes ‚£45,000 accrued in respect of thesecured convertible bond and ‚£1,373 paid in respect of the finance leases.Liquidity and capital resourcesAs at 31 December 2004 the group had cash reserves of ‚£899,745. On 4 January2005 the group received approximately ‚£1.3 million relating to the Placingannounced on 24 December 2004, this amount being included in debtors at 31December 2004.At 31 March 2005 the group estimates it will have cash balances ofapproximately ‚£1.6 million. Cash burn in the final quarter of the financialyear to 31 March 2005 is estimated at ‚£200k per month. The directors estimatethat the cash resources will provide working capital for at least 6 months atthe current forward budgeted cash burn rate (ie. until at least the end ofSeptember 2005).As detailed in the Chairman's statement the company has received a cash offerfor its entire share capital at 15.525p per share. A separate offer will bemade for the eSpeed bond subject to the Offer being declared unconditional.If the Refco bid is not successful the directors would implement a costreduction plan to preserve cash resources and this would enable the company tocontinue to support its current contracts. The directors would also seek toraise further capital in due course.In addition the directors would need to raise funds to repay the eSpeed bondwhich matures in October 2006 - capital plus interest would amount to ‚£2.9million at the maturity of the bond.This matter is discussed further in note 1 to the quarterly financial report.Consolidated profit and loss account Note 3 months 3 months 9 months 9 months ended ended ended ended 31 December 31 December 31 December 31 December 2004 2003 2004 2003 (unaudited) (unaudited) (unaudited) (unaudited) ‚£ ‚£ ‚£ ‚£ Turnover 2 577,621 584,709 1,764,000 1,659,710 Operating expenses 3 (1,617,128) (1,372,416) (4,378,743) (3,839,227) ----------- ------------ ----------- -------------- Group operating loss (1,039,507) (787,707) (2,614,743) (2,179,517) Share of operating 9 20,871 (28,448) 54,374 (109,762)profit/(loss) of associate ---------- ----------- ----------- ------------ Total operating loss (1,018,636) (816,155) (2,560,369) (2,289,279)before interest: group and share of associate ---------- ---------- ---------- ------------ Interest receivable 9,058 1,631 15,575 5,471 Interest payable (46,373) (46,084) (140,027) (138,681) ---------- ----------- ---------- ------------ Loss on ordinary (1,055,951) (860,608) (2,684,821) (2,422,489)activities before taxation Taxation 4 - - - - ---------- ----------- ---------- ------------ Loss on ordinary (1,055,951) (860,608) (2,684,821) (2,422,489)activities after taxation Minority interest - 7 40,419 21,507 109,502 50,967equity ---------- ----------- ---------- ------------- Loss for the period 5 (1,015,532) (839,101) (2,575,319) (2,371,522) ---------- ----------- ---------- ------------- Basic and diluted 5 (1.20)p (1.27)p (3.39)p (3.96)ploss per ordinary share All of the group's results above were derived from continuing operations.Consolidated statement of total recognised gains and lossesLoss for the period (1,015,532) (839,101) (2,575,319) (2,371,522) Exchange translation 144,248 168,231 149,405 218,783differences ---------- ---------- ---------- ------------ Total recognised (871,284) (670,870) (2,425,914) (2,152,739)losses in the period ---------- ---------- ---------- ------------Consolidated balance sheet Note 31 December 31 December 31 March 2004 2003 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Fixed assets Tangible assets 161,350 40,375 89,843 ---------- ---------- --------- Current assets Debtors 1,772,052 193,579 188,132 Cash at bank and in hand 899,745 816,664 1,141,181 ---------- ---------- --------- 2,671,797 1,010,243 1,329,313 Creditors: amounts falling due (966,366) (808,391) (943,167)within one year ---------- ---------- --------- Net current assets 1,705,431 201,852 386,146 ---------- ---------- --------- Total assets less current 1,866,781 242,227 475,989liabilities Creditors: amounts falling due (2,509,186) (2,293,241) (2,359,951)after one year Provisions for liabilities and 9 (109,674) (143,746) (164,048)charges ----------- ---------- --------- (752,079) (2,194,760) (2,048,010) ----------- ---------- --------- Capital and reserves 6 Called up share capital 4,772,197 3,404,178 3,548,566 Share premium account 18,533,694 15,198,623 15,925,978 Profit and loss account (23,367,220) (20,247,388) (20,941,306) ----------- ----------- --------- Equity shareholders' deficit (61,329) (1,644,587) (1,466,762) ----------- ----------- --------- Minority interest - equity 7 (690,750) (550,173) (581,248) ----------- ----------- --------- (752,079) (2,194,760) (2,048,010) ----------- ----------- ---------Consolidated cash flow statement 9 months 9 months Note ended ended Year ended 31 December 31 December 31 March 2004 2003 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Net cash outflow from operating 8 (3,942,815) (2,002,349) (2,537,931)activities ----------- ----------- -------------- Returns on investments and servicing of finance Bank interest received 15,575 5,471 10,907 Interest element on finance (5,027) (3,681) (4,627)lease rental payments ---------- ----------- ------------- 10,548 1,790 6,280 ---------- ----------- ------------- Net cash outflow from capital expenditure Payments to acquire fixed assets (127,190) (46,556) (52,401) ---------- ----------- ------------- Net cash outflow before (4,059,457) (2,047,115) (2,584,052)financing ---------- ----------- -------------- Financing Issues of ordinary share capital 4,348,085 2,118,451 3,041,257 Share issue costs (516,738) (93,489) (144,552) Capital element of finance lease (11,650) (9,865) (19,351)rental payments --------- ---------- ------------- 3,819,697 2,015,097 2,877,354 --------- ---------- ------------- (Decrease)/increase in cash in (239,760) (32,018) 293,302the period --------- ---------- -------------Notes to the quarterly financial report 1. Basis of preparation The quarterly financial report has been prepared using accounting policiesconsistent with those set out in the financial statements for the year ended 31March 2004.Going concernThe quarterly financial report has been prepared on a going concern basis,which the directors believe to be appropriate for the following reasons.As at 31 December 2004 the group had cash reserves of ‚£899,745. On 4 January2005 the group received approximately ‚£1.3 million relating to the Placingannounced on 24 December 2004, this amount being included in debtors at 31December 2004.At 31 March 2005 the group estimates it will have cash balances ofapproximately ‚£1.6 million. Cash burn in the final quarter of the financialyear to 31 March 2005 is estimated at ‚£200k per month. The directors estimatethat the cash resources will provide working capital for at least 6 months atthe current forward budgeted cash burn rate (ie. until at least the end ofSeptember 2005).As detailed in the Chairman's statement the company has received a cash offerfor its entire share capital at 15.525p per share. A separate offer will bemade for the eSpeed bond subject to the Offer being declared unconditional.If the Refco bid is successful the directors assume that Refco would providesufficient funding for the company on an ongoing basis.If the Refco bid is not successful the directors would implement a costreduction plan to preserve cash resources and this would enable the company tocontinue to support its current contracts. The directors have prepared cashflow projections for the period ended 31 March 2006. This assumes theimplementation of the cost reduction plan which the directors believe to beachievable. The directors would also seek to raise further capital in duecourse.In addition the directors would need to raise funds to repay the eSpeed bondwhich matures in October 2006 - capital plus interest would amount to ‚£2.9million at the maturity of the bond.However, there is no certainty that the cost reduction plan would be able tomaintain the current contracts at the current sales levels and there is nocertainty that the company would be able to raise further finance, but on thebasis of this cash flow information, at the date of approval of this quarterlyfinancial report the directors believe it is appropriate for the quarterlyfinancial report to be prepared on the going concern basis as it indicates thegroup will continue in operational existence for the foreseeable future.The quarterly financial report does not include any adjustments that wouldresult should this basis not be appropriate.Other mattersThe results of operations for any quarter or interim period are not necessarilyindicative of the results of operations for any other future quarter or interimperiod or for a full financial year.The comparative figures for the financial year ended 31 March 2004 have beenextracted from the accounts for that financial year.The quarterly financial report for the 3 months ended 31 December 2004 wasapproved by the directors on 24 March 2005.2. Turnover and segmental analysisTurnover is attributable to the continuing activity of granting licences onsoftware products, shown net of VAT. In the 9 months ended 31 December 2004recurring revenue was ‚£1,764,000 (2003 - ‚£1,659,710). Turnover for recurringrevenue is generally receivable quarterly in advance. Only income relating tothe period is recognised in the profit and loss account. Income relating tofuture periods is deferred in the balance sheet.Geographical analysis: Turnover Loss before interest and taxation 9 months 9 months 9 months 9 months ended ended ended ended 31 December 31 December 31 December 31 December 2004 2003 2004 2003 (unaudited) (unaudited) (unaudited) (unaudited) ‚£ ‚£ ‚£ ‚£ UK 1,734,674 1,619,624 (1,906,754) (1,880,549) USA 29,326 40,086 (654,136) (304,465) Far East - - 521 (104,265) --------- ---------- ----------- ---------- Total 1,764,000 1,659,710 (2,560,369) (2,289,279) --------- ---------- ----------- ---------- Net (liabilities) / assets As at As at 31 December 31 December 2004 2003 (unaudited) (unaudited) ‚£ ‚£ UK (784,355) (2,179,822) USA 40,346 (4,563) Far East (8,070) (10,375) ---------- ----------- Total (752,079) (2,194,760) ---------- ------------The comparative figures for net (liabilities)/assets have been amended toexclude inter-company balances as recommended by SSAP25.3. Operating expenses 3 months 9 months ended 9 months 3 months ended ended ended 31 December 31 December 31 December 31 December 2004 2003 2004 2003 (unaudited) (unaudited) (unaudited) (unaudited) ‚£ ‚£ ‚£ ‚£ Wages and salaries 761,969 592,941 2,157,689 1,719,861 Other operating 685,108 625,492 1,663,469 1,618,700charges Outsourced development 170,051 153,983 557,585 500,666 -------- -------- -------- --------- Operating expenses 1,617,128 1,372,416 4,378,743 3,839,227 -------- -------- -------- ---------Total system support and development costs amounted to ‚£513,928 in the 3 monthsended 31 December 2004 (2003 - ‚£400,404).4. TaxationThere is no provision for taxation in the quarter due to losses in the currentand prior periods.5. Loss per ordinary share 3 months 9 months 3 months ended ended 9 months ended ended 31 December 31 December 31 December 31 December 2004 2003 2004 2003 (unaudited) (unaudited) (unaudited) (unaudited) ‚£ ‚£ ‚£ ‚£Loss for the period (1,015,532) (839,101) (2,575,319) (2,371,522) -------- -------- -------- --------- number number number number Basic and diluted 84,351,430 65,832,007 76,051,731 59,831,966weighted average number of shares in the period pence pence pence pence Basic and diluted loss (1.20) (1.27) (3.39) (3.96)per ordinary share -------- -------- -------- ---------Basic loss per ordinary share has been calculated by dividing the loss for theperiod retained for equity shareholders by the weighted average number ofshares in issue during the period.6. Share capital and reserves Ordinary Share premium Profit and share capital account loss account Total ‚£ ‚£ ‚£ ‚£ At 1 April 2004 3,548,566 15,925,978 (20,941,306) (1,466,762) Share issues 1,223,631 2,607,716 - 3,831,347 Retained loss for the - - (2,575,319) (2,575,319)period Foreign exchange - - 149,405 149,405difference -------- -------- -------- -------- At 31 December 2004 4,772,197 18,533,694 (23,367,220) (61,329) -------- -------- -------- -------- 7. Minority interest ‚£ At 1 April 2004 (581,248) Share of loss for the period (109,502) -------- At 31 December 2004 (690,750) --------Minority interest represents the minority shareholders' interests in the netliabilities of EasyScreen Inc.8. Reconciliation of operating loss to net cash outflow from operatingactivities 9 months 9 months Year ended ended ended 31 March 31 December 31 December 2004 2004 2003 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Operating loss (2,614,743) (2,179,517) (2,932,644) Depreciation 55,639 78,585 58,017 Increase in debtors (1,584,890) (11,554) (7,644) Increase in creditors 201,179 110,137 344,340 ---------- --------- -------- Net cash outflow from operating (3,942,815) (2,002,349) (2,537,931)activities ---------- --------- --------9. Provisions for liabilities and chargesInvestment in associate ‚£ At 1 April 2004 (164,048) Share of associate profits 54,374 -------- At 31 December 2004 (109,674) --------ENDEASYSCREEN PLCRelated Shares:
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