4th Mar 2008 07:01
Appian Technology PLC04 March 2008 Appian Technology plc / Ticker: ATT / Market: AIM / Sector: Technology Appian Technology plc ("Appian" or "the Company") Final Results 4 March 2008 Appian Technology plc, the AIM-traded provider of Automatic Number PlateRecognition ('ANPR') systems and traffic management products and solutions,announces its results for the year ended 30 September 2007. Overview • Progress made in a number of areas, particularly in product and market development• As previously announced, difficult second half due to order delays - sales of £4.78 million (2006: £5.15 million)• Order flow increased in first quarter of this year and healthy pipeline of new business• UK market continuing to develop and international market strengthening, notably in the Middle East, Central and South America, Europe and North Africa• Over 30 trials conducted worldwide which should lead to new business opportunities• Investment and development programme during 2007 resulting in wider product portfolio• Post year end, contracts announced with three police forces, a UK military base and a prestigious Middle Eastern hotel• Cost reduction programme underway• Placing of new shares raised £1.5 million gross in December 2007; intention to issue convertible loan note to raise up to £1 million, interest for £480,000 already received• Confident of capitalising on position as a leading internationally recognised brand in ANPR and traffic management Chairman's Statement I am pleased to update shareholders on the progress we made during the yearended 30 September 2007 and to give an overview on current trading. Since my last report, Appian Technology plc has seen some significant changes,which I believe have strengthened its position in the market, enabling us tomaximise the potential of its proprietary ANPR related products and services.Progress has been made in a number of areas, particularly in product and marketdevelopment, resulting in Appian now being recognised as a global brand in ANPRand traffic management. We carried out over 30 trials worldwide, which have ledto product approval in a number of markets, tailoring of our product forspecific circumstances which we anticipate will lead to future business. Wealso made progress in camera development and product rollout and we believe thatwe now have the best of breed in recognition cameras, which we have commencedselling as stand alone products. However, whilst the underlying business was strengthened, the second half of thelast financial year was a difficult period for Appian, during which manyanticipated orders were delayed by circumstances outside of our control or ourcustomers. Importantly, we did not lose any business which we expected to winand the order flow has increased in the first quarter of this year. In addition,there was an increase in cost due to the acquisition of Genesis, which was onlysustainable at the higher levels of sales experienced in the first half. Allcosts have been reviewed and, following the end of the Genesis earn-out period,greater focus on cost management is being achieved, which will reduce ourongoing cost base, particularly in the second half of this year. On a more optimistic note, the Group's addressable markets are expanding. The UKmarket is continuing to develop - for example we have contracts with all majorhigh-spending metropolitan police forces. International markets are forecast toreplicate the UK penetration levels, and ANPR spend is predicted to grow by 20%per annum. We have secured additional market footholds notably in the MiddleEast, Central and South America, Europe and North Africa, so we believe the doorhas been opened and the concept is tried, tested and proven. In the UK, we have a blue-chip customer base. During the year, the Group wonvarious UK police orders, in many cases displacing competing ANPR providers tobecome the supplier of choice. Notable contract wins in the period included a£270,000 order for a fixed site system from a UK metropolitan police force,orders for our new COBRA ANPR camera range and a £350,000 order from a WestCountry constabulary. We also won an order from the Civil Nuclear Constabulary,for mobile systems worth £185,000. In the commercial sector, we are sellingstatic and mobile systems to individual companies and commercial systemsintegrators at an increasing rate. A new parking ANPR system was installed atthe prestigious NEC site in Birmingham. Follow-on business is expected for thistype of application. Internationally, we won orders in Latin America, the Middle East, Europe and theUSA. The Group has a 30% interest in a consortium which has a 10-year contractto run a new congestion charging scheme in Malta. This sophisticated systemcombines ANPR with a state of the art hourly billing system, allowing motoriststo view and pay charges on the Internet. The consortium intends to roll thisinitiative out to further congestion charging schemes. In the USA, we signed our first original equipment manufacturer agreement ('OEM') with a leading security software solutions group, Civica Software ('Civica'), our California based distributor. As part of the agreement, Appianreceives an equity position with an option to increase this shareholding at adefined price in the future. Civica is focused on developing and distributingtechnology products for the US Government and law enforcement agencies. Underthe terms of the agreement, Civica will integrate Appian's TalonSP(TM) recognition engine into its proprietary hardware and software system, PlateScan(TM), to create a superior product that enables customers to identify proactively vehicles of interest during routine patrols. The new integrated system is already generating considerable interest, with the first sale recently agreed. Following an intensive investment and development programme over the last 12months, we now have a wider product portfolio including both fixed site (Cobra,Stinger) and mobile (Viper and MShark) applications. As reported in the interimresults, we remain focused on developing innovative, high specification ANPRrelated products, which incorporate unique design features, in order to keep oursystems at the forefront of technology and accuracy. Our new COBRA camera,which commenced production in February 2007, has been well received in themarket. STINGER, a camera combined with a processor, is designed to recogniseand process licence plates and associated imagery in extreme conditions andtransmit the data to the user via wireless communications. Our third newcamera, the VIPER, a miniature in-car ANPR camera for the mobile market, wasalso launched in 2007, as was the hand held MShark, and the order book isimproving. A number of changes have been made to our management structure. In particular,we reorganised the sales teams, enabling them to further capitalise onopportunities and strengthened the management team. The management of Research &Development has also been significantly strengthened. David Hearn has given notice of his intention to leave the Board to pursue otheropportunities. Philip Lindsell, a chartered accountant who has held a number ofsenior finance roles within major UK companies, has been appointed as InterimCFO. Furthermore, I am pleased to announce that the Group has commenced the searchfor a non-executive Chairman, and look forward to updating shareholders in thenear future. We were also delighted to welcome Arbuthnot Securities Limited as our newnominated adviser and stockbroker. Its highly professional team supported usduring the recent fundraising and continue to provide valuable advice. Financials After an encouraging first six months of continuing the increased trend in salesgrowth, sales for the year ended 30 September 2007 were slightly down at £4.78million from £5.15 million previously, as a result of the slowdown in sales inthe second half. Gross margins decreased to 39.6% (2006: 52.8%) as a result ofsome "one off" costs totalling £384,000 in respect of stock write downs and theadditional costs associated with delivering the congestion charging scheme inMalta. The Group incurred a loss after tax of £2.97 million (2006: profit £5,000) whichis equivalent to a loss of 2p per share. Other operating expenses increased to £4.48 million (2006: £2.65 million) dueto: a full year's costs from Genesis of £894,000; an increase of £243,000 onresearch and development; an increase of £572,000 on sales and marketing; and,an increase of £121,000 on continuing to strengthen the management and aftersales team within the delivery and maintenance departments. These costincreases have significantly improved the Group's product lines and marketposition. In December 2007, the Group raised £1,390,000 net of expenses, through theplacing of 36,913,700 new ordinary shares at 4p per share with existing and newinstitutional investors, as well as certain directors of the Group. The Board is finalising plans regarding the issue of a convertible loan note toraise up to £1 million, of which interest for £480,000 has already beenreceived, to strengthen the balance sheet and provide additional working capitalto fund the strong level of contracts won since the end of December. The cashtightened to February 2008 as a result of forecast Quarter One sale orders beingreceived later than anticipated in the quarter, a delay in supplier deliveriesin January which are now ramping up faster than the Group's credit lines allowresulting in certain key suppliers granting shortened credit facilities andlimits being imposed on the invoice discounting facility due to debtorconcentration. Current Trading and Outlook The delayed orders from the second half of 2007 are now materialising. Afterthe year end, Appian won a £540,000 contract with a major national police forcein the UK to install a new ANPR system, capable of processing in excess of 20million vehicle licence plates per day. This contract is the first phase of alarger two-phase contract, which is expected to be completed within 12 months. We also won two contracts with major UK police forces in the south and north ofEngland worth a total of £410,000. These comprised a £260,000 order to installour ANPR technology at a number of strategic fixed sites in the south of Englandand a £150,000 order for a fixed site ANPR system for a major city police forcein the north of England. We also recently announced two further orderstotalling £350,000 to supply ANPR technology to a UK military base and aprestigious Middle Eastern hotel. With our addressable markets expanding and showing strong potential, a widerproduct portfolio and more focused business, the Board is confident that Appiancan capitalise on its position as a leading internationally recognised brand inANPR and traffic management and deliver significantly enhanced sales. Whilstthe timing of the receipt of large orders will always be an issue for us, Ibelieve that 2008 will prove a pivotal year for the Group as successful trialsare converted into real contracts. I am therefore confident that theinitiatives we implemented during 2007 will have a positive impact on Appianduring 2008 and look forward to regularly updating shareholders with positivenews flow. Pat RyanExecutive Chairman4 March 2008 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear Ended 30 September 2007 2007 2007 2006 restated 2006 restated £ £ £ £ Notes Turnover 4,775,548 5,150,135 Cost of sales (2,883,089) (2,453,602) Gross profit 1,892,459 2,696,533 (4,476,695) (2,648,739) Other operating expenses FRS 20 Share Charge (224,355) (100,967) Depreciation (42,833) (20,537) Amortisation of goodwill andintangible assets (15,240) (5,574) Operating expenses (4,759,123) (2,775,817) Operating loss (2,866,664) (79,284) Impairment of investments (101,425) - Interest receivable 51,495 54,446 Interest payable (96,023) (58,351) Loss on ordinary activities (3,012,617) (83,189)before taxation Taxation 2 47,371 88,654 (Loss)/profit for the financial (2,965,246) 5,465year Basic and diluted (loss)/profit 3 (0.02) 0.0001per ordinary 1p share There were no recognised gains or losses in the financial year other than thosedealt with in the profit and loss account. Accordingly, no statement of totalrecognised gains and losses is prepared. CONSOLIDATED BALANCE SHEETAs at 30 September 2007 2007 2006 restated Notes £ £ Fixed assetsIntangible assets 4 2,001,153 2,247,024Tangible assets 167,474 60,622Investments 101,425 - 2,270,052 2,307,646 Current assetsStock 711,324 837,953Debtors 5 1,727,662 2,630,486Cash at bank and in hand 70,589 2,768,412 2,509,575 6,236,851 Creditors - Amounts falling due within one year 6 (2,743,174) (3,270,934) Net current (liabilities)/assets (233,599) 2,965,917 Total assets less current liabilities 2,036,453 5,273,563 Creditors - Amounts falling due after more than one year (247,921) (847,816) Net assets 1,788,532 4,425,747 Capital and reservesCalled up share capital 7 1,528,550 1,506,550Share premium account 8 10,372,023 10,290,347Merger reserve 8 623,432 623,432FRS 20 share reserve 8 375,629 151,274Profit and loss account 8 (11,111,102) (8,145,856) Shareholders' funds 9 1,788,532 4,425,747 CONSOLIDATED CASH FLOW STATEMENTYear ended 30 September 2007 2007 2006 Notes £ £ Net cash outflow from operating activities 10 (1,658,713) (1,369,382) Return on investments and servicing of finance 11 (44,528) (3,905) Taxation 47,371 88,654 Capital expenditure and financed investments 12 (815,604) (152,457) Acquisitions and disposals 13 (300) (622,215) Cash outflow before financing (2,471,774) (2,059,305) Financing 14 298,029 4,078,104 (Decrease)/increase in cash in the year 15 (2,173,745) 2,018,799 Notes to the Financial Statements 1 Accounting Policies Historical Cost Convention The financial statements are prepared on the going concern basis, under thehistorical cost convention and in accordance with the Companies Act 1985 and applicable standards. Basis of Preparation The financial statements have been prepared in accordance with accountingstandards generally accepted in the United Kingdom and under UK GAAP (UK statutecomprising the Companies Act, 1985). The principal accounting policies are set out below. The policies have remainedunchanged from the previous year except that in preparing the financialstatements for the current period, the Group has adopted FRS 20 "share-basedpayment". The effect of this change in policy on the prior year financialstatements is to increase the operating expenses by £100,967, thus reducing theprofit for the year. A corresponding amount has been credited to a share optionreserve in accordance with FRS 20, together with a restatement of the openingreserves at 1 October 2005 of £50,307. As an AIM Listed Company, the Group must adopt IFRS for accounting periodscommencing on or after 1 January 2007. The Group is considering the impact ofIFRS in the meantime and reporting where appropriate. FRS 20 ''Share-based payment'' The Group issues share options to its employees under two schemes: the 2000Executive Share Option Scheme ("SOS") and under an Enterprise ManagementIncentives Plan ("EMI"). The Group also issues warrants to its directors. Inaccordance with FRS 20, the charges for these share options and warrants aremeasured at fair value at date of grant, using the Monte Carlo pricing model forthe warrants and the SOS plan and the binomial pricing model for the EMI plan.The fair value is then expensed on a straight line basis over the vestingperiod, based on the Group's estimate of the number of shares that willeventually vest, updated at each Balance Sheet date for options that have lapsedor been exercised. All options and warrants are equity-settled. Going Concern The financial statements have been prepared on the going concern basis whichassumes that the parent company and its subsidiaries will continue inoperational existence for the foreseeable future. In December 2007 the company raised £1,390,000 net of expenses, through theplacing of 36,913,700 ordinary shares of £0.01 each for a cash price of £0.04each to institutional and other investors. The proceeds which were received by12 December 2007 will be used for working capital. The directors have prepared projections to March 2009 reflecting current marketconditions and execution of a planned reduction in the cost base. Theseprojections are based on assumptions about sales growth and new business whichby their nature are subject to uncertainty as to the precice timing of theexpected improvement. The directors consider that, given the cash received inthe form of equity and the bank facilities available, the financial projectionsare achievable. The auditors have included an emphasis of matter statement with regard to goingconcern in their unqualified auditor's report. See note 16 for further details. 2 Taxation 2007 2006 £ £ (a) Analysis of Credit in Period: Taxation credit 47,371 88,654 The tax credit arises on research and development. (b) Factors Affecting Tax Credit for Period 2007 2006 restated £ £ Loss on ordinary activities before tax (3,012,617) (83,189) Loss on ordinary activities multiplied by standard rate of corporation tax in the (903,785) (24,957)UK of 30% (2006: 30%) Expenses not deductible for tax purposes 17,643 67,065 Depreciation for period in excess of capital allowances 12,795 (3,101) Utilisation of group tax losses (254,378) (39,995) Tax losses carried forward 1,127,725 988 Corporation tax credit for prior year 2,809 - Research and development tax credit for the prior year 44,562 88,654 Total current taxation (a) 47,371 88,654 The Group has carried forward tax losses of £5,600,000 (2006: £3,600,000). TheGroup has not recognised any deferred tax asset in respect of these losses oraccelerated capital allowances due to there being insufficient certaintyregarding their recovery. 3 (Loss)/Profit Per Ordinary 1p Share 2007 2006 restated (Loss)/profit after taxation - £ (2,965,246) 5,465 Weighted average number of ordinary shares in issue during the 147,188,146 105,978,955 year (Loss)/profit per ordinary 1p share - £ (0.02) 0.0001 (Loss)/profit per share has been calculated on the "net basis". Diluted earnings per share takes account solely of the potential future exerciseof share options and warrants granted and is based on a weighted number ofshares in issue of 148,098,146 (2006: 109,906,422). Diluted earnings per sharehas the same value as earnings per share when rounded to three decimal places. Due to the Group's loss for the year the diluted loss per share is the same asthe basic loss per share. The loss per share is wholly attributable tocontinuing operations. 4 Intangible Assets Research Goodwill and Software Total development £ £ £ £ Cost At 30 September 2006 2,060,201 192,397 19,642 2,272,240 Additions 300 463,069 - 463,369 Adjustment to deferred consideration (694,000) - - (694,000) At 30 September 2007 1,366,501 655,466 19,642 2,041,609 Amortisation At 30 September 2006 - 5,574 19,642 25,216 Charge for the year - 15,240 - 15,240 At 30 September 2007 - 20,814 19,642 40,456 Net Book Value At 30 September 2006 2,060,201 186,823 - 2,247,024 At 30 September 2007 1,366,501 634,652 - 2,001,153 The adjustment to deferred consideration of £694,000 relates to the purchase of Genesis UK Limited in 2006.Under the terms of the acquisition no further consideration is now due as certain targets were not achieved.Accordingly the creditor has been written back and the related goodwill reduced by the same amount 5 Debtors 2007 2006 £ £ Trade debtors 828,468 2,148,671 Called up share capital not paid (note 7) 37,500 37,500 Prepayments and accrued income 826,771 413,642 Other debtors 34,923 30,673 1,727,662 2,630,486 6 Creditors - Amounts falling due within one year 2007 2006 £ £ Bank overdraft 555,068 1,067,230 Trade creditors 1,053,409 1,224,015 Social security and other taxes 207,235 278,431 Other creditors 9,275 9,928 Deferred consideration 38,192 38,192 Accruals and deferred income 732,163 630,102 Convertible unsecured loan notes 87,457 - 2,743,174 3,270,934 The issued convertible unsecured loan notes attract interest at seven per cent per annum and are convertible intoordinary shares at an exercise price of seven pence. To date the loan note holders have not opted to convert but have agreed for them to be repaid over a 12 month period. 7 Called Up Share Capital 2007 2007 2006 2006 Number £ Number £ Authorised: Ordinary shares of £0.01 each 250,000,000 2,500,000 250,000,000 2,500,000 Redeemable preference shares of £1 each 50,000 50,000 50,000 50,000 250,050,000 2,550,000 250,050,000 2,550,000 Called Up Share Capital Ordinary shares of £0.01 each 147,854,995 1,478,550 145,654,995 1,456,550 Redeemable preference shares of £1 each 50,000 50,000 50,000 50,000 147,904,995 1,528,550 145,704,995 1,506,550 Called Up and Fully Paid: Ordinary shares of £0.01 each 147,854,995 1,478,550 145,654,995 1,456,550 Redeemable preference shares of £1 each 12,500 12,500 12,500 12,500 147,867,495 1,491,050 145,667,495 1,469,050 Preference Share Capital The redeemable preference shares rank pari passu for participation in theprofits and assets of the Company and entitle the holders to receive notice ofand to attend and vote at any general meeting of the Company. The Company may at any time give not less than 24 hours previous notice inwriting to the holders of the redeemable preference shares of its intention toredeem all or any part of these shares which have been issued and are fully paidup on in so far as they are paid up. The redeemable preference shares can only be redeemed out of distributableprofits or from the proceeds of a fresh issue of shares made for the purposes ofthe redemption. Appian Technology plc issued 50,000 redeemable preference shares in July 2000 onincorporation of the Company. Ordinary Share Capital During January 2007, 2,000,000 warrants were exercised at a price of £0.05 perordinary share, with the Group receiving a total consideration of £100,000.During June 2007, a further 200,000 warrants were exercised at a price of £0.05per ordinary share, with the Group receiving a total consideration of £10,000. 8 Reserves Share FRS 20 Merger Profit and Share FRS 20 Merger Profit and premium Reserve Reserve loss account premium Reserve Reserve loss account account account 2007 2007 2007 2007 2006 2006 2006 2006 restated restated £ £ £ £ £ £ £ £GroupBalance atbeginningof year 10,290,347 151,274 623,432 (8,145,856) 6,949,675 50,307 - (8,151,321)Retainedprofit/(loss)for the year - - - (2,965,246) - - - 5,465Arisingfromissues ofshares inthe year 81,676 - - - 4,098,183 - 623,432 -FRS ShareCharge - 224,355 - - - 100,967 - -Expensesof equityshare - - - - (757,511) - - -issues Balance at 10,372,023 375,629 623,432 (11,111,102) 10,290,347 151,274 623,432 (8,145,856)end ofyear The merger reserve arose on the acquisition of Genesis (UK) Limited. The merger reserve resulted from issue of7,556,757 shares in the consideration of the purchase of Genesis and the premium that arose on those shares. Theseshares were issued at £0.0925. 9 Reconciliation of Movements in Shareholders' Funds 2007 2006 restated £ £ Shareholders' funds/(deficit) at beginning of year 4,425,747 (494,864) (Loss)/profit for the financial year (2,965,246) 5,465 Share capital issued 22,000 850,075 Net share premium from issued shares 81,676 3,964,104 FRS 20 share charge 224,355 100,967 Shareholders' funds at end of year 1,788,532 4,425,747 10 Reconciliation of Operating Loss to Net Cash Outflow From OperatingActivities 2007 2006 restated £ £ Operating loss (2,866,664) (79,284) Depreciation 42,833 20,537 Amortisation of intangible assets 15,240 5,574 FRS 20 share charge 224,355 100,967 Decrease/(Increase) in debtors 902,824 (1,116,952) Decrease/(Increase) in stocks 126,629 (59,793) Decrease in creditors (103,930) (240,431) Net cash outflow from operating activities (1,658,713) (1,369,382) 11 Returns on Investment and Servicing of Finance 2007 2006 £ £ Interest received 51,495 54,446 Interest paid (63,396) (55,533) Finance lease interest paid (32,627) (2,818) Net cash outflow from returns on investment and servicing of (44,528) (3,905) finance 12 Capital Expenditure and Financial Investment 2007 2006 £ £ Payments to acquire investments (202,850) - Receipts from disposal of tangible fixed assets - 417 Payments to acquire tangible fixed assets (149,685) (22,036) Payments to acquire intangible fixed assets (463,069) (130,838) Cash outflow from capital expenditure and financial investments (815,604) (152,457) 13 Acquisitions and Disposals 2007 2006 £ £ Purchase of subsidiary (300) (755,905) Bank balances acquired on purchase of subsidiary - 161,856 Bank overdrafts acquired on purchase of subsidiary - (28,166) Net cash outflow from acquisitions and disposals (300) (622,215) 14 Financing 2007 2006 £ £ Proceeds from share issue 103,676 4,872,690 Share issue costs - (757,511) Finance lease receipts 242,360 - Capital element of finance lease repayments (48,007) (37,075) Net cash inflow from financing 298,029 4,078,104 15 Reconciliation of Net Cashflow to Movement in Net (Debt)/Funds 2007 2006 £ £ (Decrease)/increase in cash in the year (2,173,745) 2,018,799 Inception of finance leases (242,360) (8,893) Repayments of finance leases 48,007 37,075 Movement in net (debt)/funds in year (2,368,098) 2,046,981 Net funds/(debt) at beginning of year 1,659,880 (387,101) Net (debt)/funds at end of year (708,218) 1,659,880 16 Publication of non statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act 1985. The consolidated balance sheet at 30 September 2007 and the consolidated profitand loss account, consolidated cash flow statement, and associated notes for theyear then ended have been extracted from the Group's 2007 statutory financialstatements upon which the auditors opinion is unqualified and does not includeany statement under Section 237 of the Companies Act 1985. The auditors have included an emphasis of matter statement with regard to goingconcern in their unqualified auditor's report. They have considered the adequacyof the disclosure made in the Directors' Report and accounting policiesconcerning the group's ability to continue as a going concern. The groupsuffered losses of £3m during the year ended 30 September 2007 and, at thatdate, the group's current liabilities exceeded its current assets by £234,000.However ,the directors believe that the forecasts they have prepared for theperiod ending 31 March 2009, which indicate an improvement in trading and returnto profitability (together with available funding), enable them to form anopinion that the group can continue as a going concern for the foreseeablefuture. As explained in the accounting policies, there is material uncertaintyover the timing of forecast sales growth which may cast doubt over the group'sability to continue as a going concern. The financial statements do not includethe adjustments that would result if the group was unable to continue as a goingconcern. Their audit opinion is not qualified in respect of this matter. Those financial statements have not yet been delivered to the registrar ofcompanies. FOR ENQUIRIES Pat Ryan Appian Technology plc Tel: 01628 554750Hugo de Salis St Brides Media and Finance Limited Tel: 020 7242 4477 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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