Audited Full Year results - replacement

The following replaces the "Audited Full Year Results" announcement released at 07:00 under RNS Number 1748B.

The first page of the Auditors' Report was previously omitted.

The full release appears below.

12 April 2012

Escher Group Holdings Public Limited Company

("Escher" or the "Company")

Audited results for the twelve months to 31 December 2011

Escher, the world-leading provider of outsourced, point-of-sale software to the postal industry, announces its audited results for the twelve months ended 31 December 2011.

Financial Highlights

·; Revenue for the year of US$13.9m (2010: US$14.0m)

·; Adjusted EBITDA* increased by 15% to US$5.0m (2010: US$4.3m)

·; Adjusted net earnings** increased by 54% to US$2.3m (2010:US$1.5m)

·; Basic EPS before exceptional items US$12.7c (2010: US$19.5c)

·; US$21.4m raised (net of expenses) via successful IPO on AIM

·; Net debt reduced to US$8.4m at 31 Dec 2011 from US$27.3m at 31 Dec 2010

Operational Highlights

·; RiposteEssential software went live at Botswana Post, delivering services to 2m people

·; Additional contract wins with Haypost in Armenia and Saudi Post

·; Establishment of Near Field Communications (NFC) business unit

·; Expansion of Group's sales and marketing capabilities and opening of office in South Africa

·; Since the year end, Escher has won its largest-ever contract, worth approximately $50m, with the United States Postal Service

Liam Church, CEO of Escher Group commented: "2011 was a pivotal year in the Group's history with new contract wins, the deployment of retail services in Botswana and our IPO on AIM in August. I'd like to thank our management and staff who have been unwavering in their endeavours.

"Since the year end we have announced a major contract win with the USPS, worth approximately US$50m with the real possibility of exceeding this amount. As I look at the pipeline of opportunities, I believe that 2012 will be another successful year for the Group."

Enquiries

*Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation exceptional and unusual items.

**Adjusted net earnings is profit for the year before exceptional and unusual items.

Escher Group Holdings plc

Directors' Report and Consolidated Financial Statements

Year Ended 31 December 2011

CHAIRMAN'S STATEMENT

Introduction

'2011 was a significant year for Escher Group Holdings across many levels. The investment Escher has made in the business will drive long-term growth and ensure that Escher delivers value across all the stakeholder groups.'

Bernard Somers, Chairman

Overview

2011 was undoubtedly a landmark and transformational year for Escher. In early 2011, it became increasingly clear that to develop and capture new commercial opportunities and embark on introducing new technological solutions, Escher should seek new investors with foresight and with understanding of the Escher vision.

On 8 August 2011, Escher became part of AIM which is considered one of the most successfully traded growth markets with over 1,000 international companies from across the globe. Through the diligent work of many stakeholders and advisers, US$25 million was raised via an institutional placing. The dedication of Escher executives and employees to deliver the Escher vision is matched by the commitment of investors and their belief in Escher's ability to deliver innovation and growth and augurs well for future development.

In April 2011, RiposteEssential software went live at Botswana Post, allowing the delivery of services to over 2 million people at its postal outlets. In Q4 2011, Escher's market momentum remained very encouraging, particularly as postal operators continued to face difficult market conditions. Market share increased with the addition of two new contracts with national postal operators and further organic growth from existing customers. Escher's commitment to research and innovation remains valued by customers and prospects, particularly with the development of Near Field Communication (NFC) products which complements the existing retail software.

With a dominant position in point of service in the postal sector, the Board believes Escher is ideally placed to enter into other related vertical industries and leverage its success in the postal sphere to these new markets.

Corporate Governance

Escher has assembled a prominent Board with experience across a wide range of industries. Paul Taylor joined the Board on IPO and brings a wealth of technology and public company experience to the Board.

The Board is committed to strong corporate governance and this is reflected in its principles, policies and practices. The Board believes that corporate strategy will continue to be fulfilled through effective corporate governance, thus enhancing shareholder value and the long-term safeguarding of shareholder's interests.

Dividend

Escher is in a continuing phase of development and will periodically review the payment of dividends. It is the Board's belief that currently the best use of proceeds is to reinvest in the business for capital growth and to continue building on Escher's solid financial platform.

Strategy and outlook

The vision and direction of the Board is supplemented by the drive and determination of executive managers and employees who are at the heart of making Escher a successful company. In 2012, Escher will relocate to new corporate headquarters in Dublin giving much needed additional space to develop and expand over the coming years.

As technology continues to evolve at a breathtaking pace, Escher's innovation and software will shape the future, delivering not just business value but also social value for its customers. Technology continues to underpin every aspect of our daily lives and Escher is constantly exploring opportunities that leverage its transformational technologies. For example, in tandem with developing customers' retail networks our software allows post offices to offer mobile money transactions that are particularly suited for emerging nations. RiposteTrEx helps customers deliver new products and applications that utilise new media to the benefit of both customers and consumers.

The Q1 2012 announcement that the United States Postal Service has awarded Escher a US$50m contract is wonderful news for all stakeholders. For one of the world's largest postal companies (in 2010, revenues stood at US$67bn and 560m mail pieces were processed daily across its network) to contract with Escher bears testament to Escher's capabilities in this space.

With the ongoing liberalisation of the European postal market, Escher remains primed to work with customers to assist them in adapting to this changing market landscape while broadening the reach of their retail infrastructure. Escher is committed to delivering innovation and dependability to its customers and is ideally placed to increase market share.

I would like to express gratitude to all Escher employees, customers and suppliers who have played a significant role in allowing Escher to become the leading postal software company that it is today.

________________________

Bernard Somers

Chairman, Escher Group Holdings plc

12 April 2012

CHIEF EXECUTIVE OFFICER'S REPORT

'Our aim is to build on the success that Escher has established as the world leader in the supply of digital point of service software. We are an innovative group that meets and exceeds the demands of our customers and the market'

Liam Church, Chief Executive Officer

Overview

I am delighted to present the inaugural full year results for Escher Group Holdings as a public company. We floated on AIM in August 2011 and since then we have continued to build on our position as the global market leader in digital point of service. The IPO on AIM, raising US$25m was a historic moment in the company's existence. The capital raised in difficult economic times shows strong investor support for the ongoing development of Escher as a successful company which possesses the potential to grow and succeed in other industry sectors.

The proceeds of this fundraising have been partially deployed to provide development capital in order to pursue the significant growth opportunities available to us. These include the expansion of our sales and marketing capabilities, new hires and the addition of Near Field Communication (NFC) business. All of these helped lead to new wins with Haypost and Saudi Post and, subsequent to the year end, our most significant contract win to date with the United States Postal Service.

Background to our business

We supply technology, expertise and professional services to 32 postal operators worldwide. On a daily basis, our Riposte family of products handles a range of diverse transactions at point of service that cross the boundaries of many industries, from postal to retail, to banking and e-Government.

Escher is ideally placed to consolidate its position as the number one supplier of counter automation technology in the postal sector, while diversifying further into digital mail, NFC service and vertical markets.

Our objectives

We are pursuing four main avenues to grow the business

·; Incremental sales to existing customers

·; Further penetration of the outsourced postal counter software market

·; The adoption of Escher's revolutionary message based communications software, RiposteTrEx

·; The application of Escher's existing technology to other vertical markets.

In 2012, these are now supplemented by opportunities offered to Escher with the creation of a dedicated unit to manage NFC service opportunities. Escher Interactive Services will provide complementary technology that connects into our Retail Software Division, offering managed services and identity management to retailers and mobile network operators alike.

We expect 2012 to be a strong year with the prospect of further substantial growth in 2013 as we benefit from contracts secured in 2011. We will continue to focus on core markets, existing customers and expanding our product offering while strengthening our geographical penetration.

Status of the market

Our win in Q1 2012, with the United States Postal Service confirms Escher's position as the pre-eminent supplier of software and services to the global postal market. The contract, which has a 54 month base period and renewal options, is expected to generate, over a fifteen-year term, approximately US$50m in revenue for the Group but with scope for substantial additional revenue. Even in current economic conditions the global market remains significant. There are over 650,000 permanent post offices across the globe employing 4 million personnel and handling US$327bn worth of business.

The world in which postal operators conduct their business continues to evolve and develop. The business of delivering mail is constantly redefined and as new challenges arise, postal operators are looking to their suppliers for innovation in this ever-changing market space.

The rise of digital technology is an important factor in this equation for all postal operators. With new opportunities offered by digital point of service, they are diversifying their businesses to find new revenue opportunities, particularly from financial services, mobile money, e-Government and the increase in digital mail. Escher sees opportunities for the branch network to diversify to device-to-device transactions, self-checkout and online services.

Overall, with our products, solutions, innovation and global position, Escher is strategically positioned to assist postal operators to deliver sustainability in this new commercial world.

Our Outlook

Since the year end, the announcement of our largest ever contract win, with the United States Postal Service coupled with the recent win of Pakistan Post and contracts for self-service with Jersey and Namibia validates the Board's belief that Escher's software will continue to play a significant role in enabling post offices across the globe to embrace digital point of service. Our pipeline of work is growing at a healthy rate and the opportunities for our technology continue to expand. Much planning has already taken place in the current financial year and further judicious investment will be made to take advantage of these opportunities. The Board believes that 2012 will be another exciting year for the company with further significant progress expected.

As CEO, the day-to-day management of our company is made that little bit easier when I look at the management and staff who continue to show dedication and commitment to Escher. It is their vision and hard work that makes this a fantastic company and it is through their endeavours that the company will grow into the future.

_____________________________

Liam Church

Chief Executive Officer, Escher Group Holdings plc

12 April 2012

FINANCIAL REVIEW

Revenue

Total revenue for the year ended 31 December 2011 was US$13.9m, a decrease of US$0.1m from the revenue of US$14m in the prior year. Within total revenue there was an increase of US$339,000 or 11% in software development and consulting services, a decrease of US$388,000 or 14% in licenses with maintenance and support being broadly in line with the prior year.

The main drivers behind the software development and consulting services revenue increase was the provisioning of services to a new customer, and increased service provisioning for existing customers.

US$136,000 of the decrease in license revenue from the year ended 31 December 2010 to the year ended 31 December 2011 was due to amortising time based licenses, the balance of the decrease was due to the structure of the contracts signed in 2011.

Profit before exceptional items and unusual costs

Included in operating profit are proof of concept costs and the costs in relation to the development of Near Field Communications ("NFC") of US$1.1m, which although not exceptional in nature, are unusual in that such large scale projects are not regularly undertaken by Escher and differ from exceptional costs, which are considered to be significant non-recurring costs. These unusual costs include

·; US$708,000 to create a proof of concept for a contract that was awarded to Escher in Q1 2012

·; US$158,000 to create a proof of concept for a large potential postal authority contract

·; US$125,000 to create a proof of concept for a message based communication software contract

·; US$133,000 for developing a new division towards NFC capabilities

For an accurate year-on-year comparison, these costs have been added back to operating profit below:

On a comparable basis operating profit increased by US$352,000 or 9% for the year ended 31 December 2011 compared to the prior year.

Exceptional costs

Exceptional costs of US$0.8m relate to professional fees and other related expenses on the fundraising activities which occurred in 2011. These are non-recurring once off expenses.

Net finance expense

Net finance expense decreased by US$0.5m from the year ended 31 December 2010 to the same period in 2011. Interest on debentures accounted for US$0.3m of this decrease due to a US$5.6m partial repayment made in August 2011 and a reduction in the interest rate from 16% to 5.1%. The balance of the decrease was mainly due to the decrease in the fair value of the derivatives during the year. As part of the refinancing which occurred on 5 January 2012 both the debenture and the derivatives were repaid.

Profit for the year

The profit for the year after exceptional items is US$0.6m. Excluding exceptional items and unusual costs, the profit for the year increased by US$0.8m or 54% as a result of the items mentioned above.

Earnings per share

Basic EPS before exceptional items was US$12.7c for 2011 for the year compared to US$19.5c in the prior year. Basic EPS for the year was US$5.3 cent.

Cash

Escher raised US$25m on admission to AIM prior to expenses, US$21.4m net of expenses. The net proceeds were used to partially repay the debenture and bank loans.

Development costs

During the year Escher capitalised US$2.2m (2010: US$1.0m) of internally generated intangible assets. US$1.4m related to RiposteTrEx and US$0.8m related for other products being developed which will form part of the Riposte suite of products.

Dividend

The Board does not propose paying a dividend.

CORPORATE GOVERNANCE REPORT

Escher Group Holdings plc and its subsidiaries is committed to high standards of corporate governance. The Directors recognise the importance of sound corporate governance and confirm that they aim to comply with best practice in Corporate Governance, appropriate for a company of its nature and size.

The Board

Following the appointment of Paul Taylor (non-executive) and Trevor McIntyre (CFO) during 2011, the Board now comprises the Chairman, who was independent at the time of appointment, three executive directors and three non-executive directors, two of whom are independent. The Board is collectively responsible for the success of the Company, and entrepreneurial leadership is balanced by the scrutiny and oversight provided by the independent non-executive directors. Independent professional advice is taken as required.

To this end, the Board is expected to meet at least six times a year to review the Group's strategy and oversee the Group's progress towards its goals. In addition, ad hoc meetings will be called to address specific issues requiring Board approval. The Board has established audit, remuneration and nomination committees.

The board considers the current balance of skills and experience appropriate for the business following its admission to the AIM. The role of the Chairman and Chief Executive are separate. The Chairman is responsible for the leadership and effectiveness of the Board.

The Directors comply with Rule 21 of the AIM Rules for Companies relating to directors' dealings as applicable to AIM companies, and will take all reasonable steps to ensure compliance by the Group's applicable employees. They also comply with the other AIM rules for companies as set out by the London Stock Exchange.

Board committees

The Board has formally established three committees during the year, with clearly defined terms which are set by the Board. The role, work and members of the committees is outlined below.

Audit committee

The audit committee, chaired by Paul Taylor, consists of two non-executive directors, Paul Taylor and John Quinn. The audit committee meets at least twice a year and is responsible for ensuring that the financial performance of the Group is properly reported on, controlled and monitored, including reviewing the annual and interim accounts, results announcements, internal control systems and procedures and accounting policies. It also meets the external auditors without executive Board members being present.

Remuneration committee

The remuneration committee is chaired by John Quinn and consists of three non-executive directors, John Quinn, Paul Taylor and Michael Smurfit, Jnr. It is expected to meet not less than two times a year. Executive directors may attend meetings at the committee's invitation. It has the responsibility for renewing and determining, within agreed terms of reference, the Group's policy on the remuneration of senior executives and specific remuneration packages for executive directors, including pension rights and compensation payments. It is also responsible for making recommendations for grants of options under the share option plan.

The remuneration of non-executive directors is a matter for the Board. No director may be involved in any discussions as to his or her own remuneration.

Nomination committee

The nomination committee is chaired by Bernard Somers and consists of three non-executive directors, Bernard Somers, John Quinn and Paul Taylor. It is expected to meet not less than two times a year. The committee has responsibility for reviewing the balance of the Board including its balance of skills and experience and the state of the business and its leadership needs, and gives full consideration to succession planning. It also has responsibility for recommending new appointments to the Board.

Internal control and risk management

The Group has established policies covering the key areas of internal financial control and the appropriate procedures, controls, authority levels and reporting requirements which must be applied throughout the Group. Executive directors have a close involvement with all day-to-day operations and also meet with staff on a regular basis to identify and review business risks, the controls needed to minimise those risks and the effectiveness of controls in place. Business risks are monitored and updated on a regular basis. Insurance is in place where appropriate.

There is in place a comprehensive system of financial reporting based on the annual budget which the board approves. The results for the Group as a whole are reported monthly, along with an analysis of key variances. Year-end forecasts are updated on a regular basis.

No system can provide absolute assurance against material misstatement or loss but the Group's systems are designed to provide reasonable assurance as to the reliability of financial information, ensuring proper control over income and expenditure, assets and liabilities.

There is currently no internal audit function as this is not considered necessary at this stage of the company's development but this will be reviewed on an annual basis as the Group evolves.

Investor Relations

Meetings with analysts and institutional shareholders are held following the interim and full year announcements and on an ad hoc basis. These are usually attended by the Chief Executive and Chief Financial Officer. Feedback from these meetings and regular market updates prepared by the Group's broker are presented to the Board. The Chairman and the other non-executive directors are available to shareholders to discuss strategy and governance issues. In accordance with AIM Rule 26, there is an investors section on the company's website, investors.eschergroup.com, which is kept up to date.

DIRECTORS REPORT

The directors present their annual report and the audited financial statements for the year ended 31 December 2011.

Directors' responsibilities for financial statements

The directors are responsible for preparing the annual report and the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act, 1963 to 2009 applicable to companies reporting under IFRS.

Irish company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the Group for that year. In preparing these financial statements, the directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; ensure that the financial statements comply with IFRS, as adopted by the European Union; and

·; prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the company will continue in business.

The directors confirm that they have complied with the above requirements in preparing the financial statements.

The directors are responsible for keeping proper books of account, that disclose with reasonable accuracy at any time the financial position of the company and the Group and enable them to ensure that the financial statements are prepared in accordance with IFRS, as adopted by the European Union, and with those parts of the Companies Act, 1963 to 2009 applicable to companies reporting under IFRS.

The directors are also responsible for safeguarding the assets of the company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Books of account

The measures taken by the directors to secure compliance with the company's obligation to keep proper books of account are the use of appropriate systems and procedures and employment of competent persons. The books of account are kept at 12 Camden Row, Dublin 8, Ireland.

Going concern

The directors have a reasonable expectation that the group has and will have adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements. The financial statements do not include any adjustments that would be required if the group were unable to continue as a going concern.

Principal activity

Escher Group Holdings plc and its wholly-owned subsidiaries (collectively the "Group") is a leading provider of distributed messaging and data management solutions and services. The Group develops markets and sells enterprise wide software applications for post office counter automation and distributed network communication. The Group's principal customers are international postal services. The Group services these customers from their offices in Ireland, the United States, Singapore, South Africa and the United Kingdom.

On 25 July 2011, the Group filed for an Initial Public Offering on London's AIM. Admission to AIM occurred on 8 August 2011. This raised US$25m in funding (US$21.4m net of expenses). These funds were used to reduce existing debt and to provide ongoing working capital funding.

Review of the business and future developments

The review of the business and future developments in outlined in the Chief Executive Officer's Report on pages 5-6 and the Financial Review on pages 7-8.

Results and dividends

The results for the year are set out in the consolidated income statement on page 16. The directors do not recommend the payment of a dividend.

Principal risks and uncertainties

Management and the board regularly review the risks facing the Group. The directors consider that the following are the principal risk factors that could materially and adversely affect the Group's future operating profits or financial position:

·; Technological risk;

·; Intellectual property protection;

·; Reliance on key systems;

·; Data security;

·; Dependence on key management personnel;

·; Ability to recruit and retain skilled personnel;

·; Growth management (including the new US contract);

·; Reputation risk;

·; Potential requirement for further investment;

·; Economic conditions and current economic weakness; and

·; Financial risk (see below).

Financial risk management

The Group's operations expose it to a variety of financial risks that include market rate risk, foreign exchange risk, credit risk, liquidity risk and interest rate risk. Please see note 3 to the financial statements for further details.

Directors

The names of the persons who were directors at any time during the year ended 31 December 2011 and up to the date of approval of these financial statements, are as listed on page 2, and unless otherwise indicated, have served throughout the entire year.

Directors' and secretary's interests

The beneficial interests, including the interests of spouses and minor children, of the directors and secretary in office at 31 December 2011 in the share capital of the company were as follows:

(1) Representative of Bacchantes which is a shareholder of the company.

The directors and secretary and their families had no other interests in the shares of the company or any other group company at 31 December 2011.

Transactions involving directors

There were no contracts of any significance in relation to the business of the company in which the directors had any interest, as defined in the Companies Act, 1990 at any time during the year ended 31 December 2011.

Research and development

The Group performed research and development of I.T. solutions for the postal industry during the year. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets in accordance with our Group policy.

In current year US$1.4m (2010: US$1.0m) of development expenditure in relation to RiposteTrEx has been capitalised in accordance with the criteria set out in IAS 38 Intangible Assets. In addition, there has been US$0.8m capitalised in relation to other products being developed which will form part of the Riposte suite of products. In the current year US$1.9m (2010: US$1.8m) of research and development costs were expensed in the Income Statement as the state of completion was not viewed as being sufficiently developed to warrant capitalisation.

Subsidiary companies

The information required by the Companies (Amendment) Act, 1986, in relation to subsidiary undertakings is given in note 13 to the financial statements.

Political and charitable contribution

There are no political contributions to report. There was a charitable contribution of US$1,400 made to the Irish Youth Foundation during 2011.

Environmental matters

There are no environmental matters to report.

Re-registration as a public limited company

The company was re-registered as a public limited company on 14 July 2011.

Subsequent events

Details of subsequent events are set out in Note 25.

Auditors

The auditors, PricewaterhouseCoopers, will be re-appointed in accordance with Section 160(2) of the Companies Act, 1963.

On behalf of the board

Liam Church

Trevor McIntyre

Independent auditors' report to the members of Escher Group Holdings plc

We have audited the group and parent company financial statements (the "financial statements") of Escher Group Holdings plc for the year ended 31 December 2011 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statement of Changes in Equity, the Consolidated and Parent Company Statement of Cash Flows and the related notes. These financial statements have been prepared under the accounting policies set out therein.

Respective responsibilities of directors and auditors

The directors' responsibilities for preparing the Annual Report and the financial statements, in accordance with applicable Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the company's members as a body in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union. We report to you our opinion as to whether the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Acts, 1963 to 2009. We also report to you whether the financial statements have been properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2009. We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit, and whether the parent company statement of financial position is in agreement with the books of account. We also report to you our opinion as to:

·; whether the parent company has kept proper books of account;

·; whether the directors' report is consistent with the financial statements; and

·; whether at the date of the Statement of Financial Position there existed a financial situation which may require the parent company to convene an extraordinary general meeting of the parent company; such a financial situation may exist if the net assets of the parent company, as stated in the parent company statement of financial position, are not more than half of its called-up share capital.

We also report to you if, in our opinion, any information specified by law regarding directors' remuneration and directors' transactions is not disclosed and, where practicable, include such information in our report.

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Chairman's Statement, the Chief Executive Officer's Report, the Financial Review, the Corporate Governance Statement and the Directors' Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and parent company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

·; the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 31 December 2011 and of its profit and cash flows for the year then ended;

·; the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Acts 1963 to 2009, of the state of the parent company's affairs as at 31 December 2011 and cash flows for the year then ended;

·; the financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2009.

We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the parent company. The parent company statement of financial position is in agreement with the books of account.

In our opinion, the information given in the directors' report on pages 11 to 13 is consistent with the financial statements.

The net assets of the parent company, as stated in the parent company statement of financial position on page 18 are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 December 2011 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the parent company.

Damian Byrne

for and on behalf of PricewaterhouseCoopers

Chartered Accountants and Statutory Audit Firm

Dublin

12 April 2012

CONSOLIDATED INCOME STATEMENT

For the Year Ended 31 December 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended 31 December 2011

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

COMPANY STATEMENT OF FINANCIAL POSITION

At 31 December 2011

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Year Ended 31 December 2011

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

COMPANY STATEMENT OF CHANGES IN EQUITY

For the Year Ended 31 December 2011

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended 31 December 2011

On behalf of the board

Liam Church

Trevor McIntyre

COMPANY STATEMENT OF CASH FLOWS

For the Year Ended 31 December 2011

The accompanying notes are an integral part of these financial statements.

On behalf of the board

Liam Church

Trevor McIntyre

ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES

For the Year Ended 31 December 2011

The significant accounting policies adopted by the company are as follows:

1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations endorsed by the European Union (EU) and with those parts of the Companies Act 1963 to 2009 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention, as modified by the measurement of the fair value of share options and financial assets and financial liabilities (including derivatives) at fair value through profit on loss. A summary of the more important Group accounting policies is set out below.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

2 Consolidation

The consolidated financial statements include the accounts of Escher Group Holdings plc, and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group has availed of the exemption under IFRS1 in relation to business combinations and has not applied IFRS3 retrospectively to business combinations prior to the date of transition to IFRS (1 January 2008).

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

3 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Goodwill is tested annually for impairment and whenever there is an indicator of impairment by comparing the carrying value to the recoverable amount and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. The Group has two main operating entities. The combination of the two CGUs represent the lowest level at which goodwill is monitored by the group and the lowest level at which management captures information for internal management reporting purposes about the benefits of the goodwill. The combined CGUs are not larger than an operating segment.

4 Revenue recognition

The group's revenue consists primarily of revenues from the sale of technology products and services. Revenue comprises the fair value of the consideration received or receivable for the sale of products and services in the ordinary course of the Group's activities. Revenue is shown net of value-added-tax and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.

Revenue from professional services contracts and time and material training is recognised as the services are provided. The Group charges a service fee to customise software. If the service is on a contracted time and material basis, then the revenue is recognised as and when the services are performed. If it is a fixed fee, then the services revenue is recognised under the percentage of completion contract accounting method. The Group measures percentage of completion based on labour hours incurred to date as a proportion of total hours allocated to the contract. If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in the period in which the circumstances that give rise to the revision become known by management. Unbilled revenues are recognised as revenue during the month the service is provided.

Maintenance revenue is recognised over the contractual periods. Related support services are recognised as the services are performed.

License revenue for time based licenses is deferred by the Group, and recognised evenly over the term of the license. Revenues for perpetually licensed software is recognised on customer acceptance, provided the company has objective evidence of fair value of any undelivered elements. Revenue is deferred for undelivered elements.

For customers where the collectability is not assured, revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group.

Where the Group receives payment from customers in advance of the performance of its contractual obligations, a liability equal to the amount received is recognised as deferred revenue. That liability is reduced and the amount of the reduction is recognised as revenue, when and as the Group obtains the right to consideration in exchange for the service it provides.

Deferred revenue includes license, software configuration and consulting service fees and maintenance and support contracts billed in advance.

5 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for making strategic decisions, allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

6 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). These consolidated financial statements are presented in US dollar, which is the company's functional and the Group's presentation currency and is denoted by the symbol "US$".

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Group entities

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·; assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

·; all resulting exchange differences are recognised in equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings are taken to shareholders' equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The Group has availed of the exemption in IFRS1, whereby the cumulative translation differences for all foreign operations were deemed to be reset to zero at the date of transition to IFRS (1 January 2008).

7 Property, plant and equipment

All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life, as follows:

Maintenance and repairs are charged to the income statement as incurred. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the financial statements and any resulting gain or loss is included in the determination of net income or loss.

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (see accounting policy note 11 - Impairment of non-financial assets).

8 Investments in subsidiaries

Investments in subsidiaries included in the company balance sheet are shown at cost, plus share based payments expense less provision for impairment. Investments in subsidiaries are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the subsidiaries carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the subsidiaries fair value less costs to sell and value in use.

9 Pension obligations

The Group operates defined contribution plans. A defined contribution is a pension plan under which the group pays fixed contributions into an independently administrated pension fund.

The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

10 Research and development and software development costs

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Research expenditure is recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

·; it is technically feasible to complete the software so that it will be available for use;

·; management intends to complete the software and use or sell it;

·; there is an ability to use or sell the software;

·; it can be demonstrated how the software will generate probable future economic benefits;

·; adequate technical, financial and other resources to complete the development and to use or sell the software are available; and

·; the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include the software development employee costs and an appropriate portion of relevant overheads.

The estimated useful lives currently range up to 5 years and are reviewed at each statement of financial position date.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

11 Impairment of non-financial assets

Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use - are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

12 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

13 Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, net of outstanding bank overdrafts.

14 Trade receivables

Trade receivables are recognised initially at fair value, which is normally the original invoiced amount and subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or a financial re-organisation, default or delinquency in payments and general economic conditions are considered indicators that the trade receivable is impaired.

15 Taxation

The company is managed and controlled in the Republic of Ireland and, consequently, is tax resident in Ireland.

Current tax is calculated on the profits of the period. Current tax is determined using tax rates (and laws) that have been enacted by the balance sheet date.

Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

However, if the deferred tax arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled.

Deferred tax is recognised in other comprehensive income or directly in equity, if the tax relates to items that are credited or charged, in the same or a different period, in other comprehensive income or directly in equity.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities, unless the group has an unconditional right to defer settlement for the liability for at least 12 months after the balance sheet date.

17 Financial assets and liabilities

Financial assets and liabilities carried on the statement of financial position include receivables, cash and bank balances, borrowings and trade and other payables.

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are offset when the Group has a legally enforceable right to offset and it intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

18 Share capital and other reserves

Ordinary shares and Convertible Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

19 Finance Income

Interest income is recognised on a time-proportion basis using the effective interest method.

20 Derivative financial instruments

Interest rate swaps are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Any gain or loss arising from the re-measurement of the fair value of derivatives are reported in the Income Statement within "Finance Income/(Costs)".

Derivatives are presented as current if realisation or settlement is expected within one year or the group does not have an unconditional right to defer payment; otherwise they are classified as non-current.

21 Share-based compensation

The group operated a share-based compensation plan, under which the entity received services from certain employees as consideration for shares of the group. The fair value of the employee services received in exchange for the grant of the shares is recognised as an expense. The total amount to be expensed is determined on the measurement date, based on market prices if available, taking into account the terms and conditions upon which the shares were granted.

For transactions with parties other than employees, who receive shares for goods or services received, the fair value of the goods or services received and the corresponding increase in equity, are measured at the date the entity obtains the goods or the counterparty renders service.

22 Debt for equity swaps

Where the entity issues equity instruments to a creditor of the entity to extinguish all or part of a financial liability, the entity measures the fair value of the equity instruments issued, by reference to the listed share price, and the creditor is reduced by that amount, with the corresponding entry to equity.

23 Exceptional items

The group has adopted an income statement format which seeks to highlight significant items within group results for the year. The group believe that this presentation provides additional analysis as it highlights one-off items. Such items may include costs of refinancing, restructuring, impairment of assets, litigation settlements, legislative changes and other significant non - recurring costs. Judgement is used by the group in assessing the particular items, which by virtue of their scale and nature, are disclosed in the group income statement and related notes as exceptional items.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 General Information

Escher Group Holdings plc and its wholly-owned subsidiaries (collectively the "Group") are a leading provider of distributed messaging and data management solutions and services. They develop, market, sell and support enterprise wide software applications for post office counter automation and distributed network communication. The Group's principal customers are international postal services. The Group services these customers from their offices in Ireland, the United States, Singapore, South Africa and the United Kingdom.

The company was incorporated in the Republic of Ireland on 7 June 2007 as NG Postal Limited, a private company limited by shares. On 14 September 2007, the company acquired the main operating subsidiaries (see note 13) giving rise to the goodwill asset (see note 12). The company was renamed Escher Group Holdings Limited on 2 September 2008.

The company re-registered as a public limited company on 14 July 2011 and changed its name to Escher Group Holdings plc on 14 July 2011. On 25 July 2011, the Group filed for an Initial Public Offering on London's AIM. Admission to AIM occurred on 8 August 2011.

The company's registered office is 25-28 North Wall Quay, Dublin 1, Ireland.

2 Going concern

The financial statements have been prepared on a going concern basis which assumes the group will continue in operational existence for the foreseeable future. The group recorded a profit after tax of US$0.6m in the year and its net current liabilities were US$8.8m at 31 December 2011, due mainly to the classification of US$11.8m of borrowings as current at 31 December 2011. This loan was repayable in September 2012. The loan contains a debt covenant and in late 2009, the Group experienced an increase in leverage due in part due to a delay in certain debtors due prior to year end, the end of a large contract and additional Research and Development costs in the furtherance of a new product. As such the Group exceeded its maximum leverage threshold in the fourth quarter of 2009 and has been in breach of its leverage covenant since that date.

On 8 August 2011, the company raised US$25m (gross before US$3.5m directly attributable costs) in new equity from institutional investors from its initial public offering on the AIM of the London Stock Exchange. These funds were used to pay down US$5.6m of the debenture and renegotiate the balance at a significantly lower interest rate. The funds were also used to partially repay US$10.8m off the Irish Bank Resolution Corporation facility thereby reducing the bank debt significantly at 31 December 2011.

On 5 January 2012, the Group undertook a refinancing with Bank of Ireland where existing bank loans and debentures were repaid and new debt was raised with Bank of Ireland. This new financing put in place a US$9.7m term loan facility and a revolving 12 month facility for US$1.8m. The term loan is amortising being fully repayable by 2015.

The combination of both fund raising activities has given sufficient working capital to enable the Group to execute its business plan. In addition to this fundraising, the Group has also signed a new US customer contract which has a 54 month base period and renewal options. The contract is expected to generate, over a fifteen-year term, approximately US$50m in revenue for the Group, but with scope for substantial additional revenue.

Taking the above factors into account along with reviewing the company's budgets and forecasts, the Directors have a reasonable expectation that the company and the group have and will have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

3 Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including cash flow risk, interest rate risk, currency risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Board is responsible for setting risk management policies and management are responsible for implementing these policies.

(a) Market rate risk

Market rate risk refers to the exposure of the Group's financial position to movements in interest rates, currency rates and general price risk.

The principal aim of managing the interest rate risk is to limit the adverse impact on cash flows and shareholder value of movements in interest rates.

Cash flow and fair value interest rate risk

The Group's interest rate risk arises from bank borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Cash and cash equivalents and borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain in excess of its 50% of its borrowings in fixed rate instruments. During 2011 and 2010, the Group's borrowings at variable rate were denominated in US Dollars.

The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts.

Cash and cash equivalents and borrowings at variable rates expose the Group to cash flow interest rate risk.

As at reporting date, the Group had the following cash and cash equivalents (Note 15), borrowing (Note 18), and interest rate swap contracts outstanding (Note 19):

Interest rate sensitivity analysis

Based on the financial instruments held at the balance sheet date, if interest rates had been 100 basis points ("bps") higher/lower and all other variables were held constant, the group profit/(loss) after tax for the year would have been higher or lower by the amounts set out in the table below:

A sensitivity of 100 bps has been selected as this is considered reasonable given the current level of both short-term and long-term interest rates.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and Euro. Foreign exchange transaction risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency.

The Group has investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The effects of currency fluctuations on the translation of net assets values into US dollars are reflected in the Group's consolidated equity position.

At 31 December 2011, if the US dollar had weakened/strengthened by 10% against the Euro with all other variables held constant, post-tax profit for the year would have been US$11,000 (2010: US$35,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Euro denominated income and expenses.

The Group does not utilise foreign exchange hedging over these forecast exposures. The Group attempts where possible to avail of natural hedging. New contracts are either quoted in euro or USD depending on the currency cost funding requirement.

Interest on borrowings is denominated in the currency of the borrowing entity. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, being USD. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group's policy is to ensure that its net exposure is kept to an acceptable level by reviewing foreign currencies on a regular basis

The Group's investments in foreign denominated subsidiaries are not hedged.

Price risk

The Group is not significantly exposed to commodity price risk as a result of its operations. The Group has no exposure to equity securities price risk as it holds no listed or other equity investments.

(b) Credit risk

Credit risk is managed on Group basis. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made.

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to trade receivables. The group banks with Irish Bank Resolution Corporation Limited, Bank of Ireland and Allied Irish Bank. Deposits held in Irish Bank Resolution Corporation Limited, Bank of Ireland and AIB are guaranteed by the Irish Government. The utilisation of credit limits is regularly monitored. As both the Irish Bank Resolution Corporation Limited and AIB are owned by the Irish State, the sovereign Irish Ratings are also regularly monitored.

With respect to the credit quality of trade receivables that are neither past due not impaired, there are no indicators at the date of the statement of financial position, that the customers will not meet their payment obligations.

(c) Liquidity risk

The Group actively maintains a mix of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions.

The Board monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Group's debt financing plans, covenant compliance, and compliance with internal balance sheet ratio targets.

The table below analyses the Group's non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

On 5 January 2012, the Group undertook a refinancing with Bank of Ireland where existing bank loans and debentures were repaid and new debt was raised with Bank of Ireland. This new financing put in place a US$9.7m term loan facility and a revolving 12 month facility for US$1.8m. The term loan is amortising being fully repayable by 2015. On 31 January 2012, the first capital repayment of US$1.4m was paid. The interest rate applying to this new term loan is 4.31%.

(d) Fair value hierarchy

IFRS 7 requires disclosure of fair value measurements by level based on the following fair value measurement hierarchy:

·; Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

·; Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

·; Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The table below shows, for the Group's financial assets and liabilities that are recognised and subsequently measured at fair value, their classification within a three-level fair value hierarchy.

Level 1 comprises financial assets and liabilities valued using quoted market prices in active markets at the balance sheet date. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.

Level 2 comprises financial assets and liabilities valued using techniques based significantly on observable market data. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.

Level 3 comprises financial assets and liabilities valued using techniques where the impact of the non-observable market data is significant in determining the fair value of the instrument. Non-observable market data is not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on observable inputs of a similar nature, historic observations on the level of the input or analytical techniques.

(e) Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total capital.

To achieve the aim of an optimal capital structure, on 8 August 2011, the company raised US$25m in new equity from institutional investors from its initial public offering on the AIM of the London Stock Exchange. These funds were used to pay down US$5.6m of the debenture and renegotiate the balance at a significantly lower interest rate. The funds were also used to partially repay US$10.8m off the Irish Bank Resolution Corporation facility thereby reducing the bank debt significantly at 31 December 2011.

Additionally, on 5 January 2012, the Group undertook a refinancing with Bank of Ireland where existing bank loans and debentures were repaid and new debt was raised with Bank of Ireland. This new financing put in place a US$9.7m term loan facility and a revolving 12 month facility for US$1.8m. The term loan is amortising being fully repayable by 2015. On 31 January 2012, the first capital repayment of US$1.4m was paid.

The capital structure of the Group consists of borrowings as set out above, and equity comprising issued capital, reserves and retained earnings. Borrowings comprise bank loans and a debenture from a shareholder (see note 24). The capital structure includes a significant level of borrowings. The borrowing arrangements include certain financial covenants customary for debt of this magnitude.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Estimated impairment of goodwill and intangible assets

The Group tests annually whether goodwill has suffered any impairment. Factors which the Group consider could trigger an impairment include, but are not limited to significant negative industry or economic trends or changes in key assumptions underpinning the value in use calculation. No impairment charge arose in the course of the year. The Group has conducted a sensitivity analysis on the impairment test of the carrying value, the results of which can be found in Note 12 to these financial statements.

The estimated useful lives currently range up to 5 years and are reviewed at each statement of financial position date. Intangibles are tested for impairment if impairment indicators are identified. In 2011, the amortisation charge was US$358,000 (2010: US$34,000). If the amortisation period was shortened by 1 year for all categories of intangible, other than goodwill, in 2011 it would have resulted in an additional amortisation charge of US$90,000. The recoverable amount of the cash generating units has been determined based on value-in-use calculations. These calculations require the use of estimates. Please see Note 12 for further details of these estimates.

(b) Capitalisation of development costs

Costs incurred on development projects are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technical feasibility and its costs can be measured reliably. These calculations require the use of estimates, primarily around the level of directly attributable developer time and an appropriate portion of relevant overheads. Capitalisation ceases and amortisation commences once a product is available for deployment.

(c) IPO cost allocation

Costs incurred in issuing our own equity instruments include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisers, printing costs and stamp duties. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. Such costs incurred fell into three categories

(i) Costs clearly attributable to issuing new shares

(ii) Costs attributable to listing

(iii) Shared costs which apply to (i) and (ii) together

The shared costs in (iii) above have been allocated on a systematic basis between the share issue and the listing and then recorded in part as an equity deduction and in part as an expense.

(d) Revenue recognition

The group uses the percentage-of-completion method in accounting for its fixed-price contracts to deliver customisation services. Use of the percentage-of-completion method requires the group to estimate the services performed to date as a proportion of the total services to be performed. Were the proportion of services performed to total services to be performed to differ by 10% from management's estimates, the amount of revenue recognised in the year would increase by US$0.4m if the proportion performed were increased, or would decrease by US$0.4m if the proportion performed were decreased.

(e) Income tax

The group is subject to income taxes in various jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(f) Determination of functional currency

The group is headquartered in Ireland and has significant operations in both the US and the UK and accordingly principally operates in three main currencies. Reflecting its economic operating environment, the group has determined that the US$ is the company's functional currency.

 (g) Trade receivables

Provision is made against trade receivables when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. This is a matter of management judgement, based on their best estimate of the likelihood of recovery on a specific, customer by customer basis.

5 Segment Information

In line with the requirements of IFRS 8, "Operating Segments", the Group has identified its Chief Operating Decision Maker (CODM). The Group has identified the Board of the company as its CODM. The Board reviews the Group's internal reporting in order to assess the performance of the Group and allocates resources. The operating segment has been identified based on these reports.

The Board assesses the performance of the segments based primarily on measures of revenues and net profit. The Board reviews working capital and overall statement of financial position performance on a Group wide basis.

The Board considers the business from a product perspective and consequently determined there to be only one segment. These product revenues derive from the Group's owned software products and from the following main sources:

The entity is domiciled in the Republic of Ireland. The Group's external revenues are derived from the following main geographic locations:

Fluctuations in revenues with individual customers are typically due to a combination of up-front perpetual licence billings as well as the level and timing of development and other software customisation requirements with that customer (the latter being from both from initial customisation work following a new licence win and periodic projects driven by a customer's internal requirements and software upgrades).

During the period the Group derived revenues from the following external customers (reporting segment region in parenthesis) which individually represented 10% or more of total reported revenues for that year:

The total of non-current assets other than deferred income tax assets located in the Republic of Ireland is US$3.1m (2010: US$1.3m), and the total of non-current assets located in other countries is US$31.5m (2010: US$31.2m).

6 Exceptional Items

Exceptional expenses of US$0.8m relate to professional fees and other related expenses on the fundraising activities which occurred in 2011. These are non-recurring once off expenses. There is no tax impact of these exceptional items.