16th May 2006 07:01
Messaging International Plc16 May 2006 Messaging International Plc / Market: AIM / Epic: MES / Sector: Technology 16 May 2006 Messaging International Plc ("Messaging International" or the "Company") Final Results Chairman's Statement Messaging International Plc, the AIM listed provider of innovative messagingservices announces the audited consolidated results for the year ended 31December 2005 which include the accounts of TeleMessage Ltd from its date ofacquisition on 20 July 2005. Financials In line with the board's expectations, the group turnover was £219,793 with apre-tax loss of £392,919. At 31 December 2005, the group's cash balances werein excess of £950,000. Since Messaging International Plc's successful flotation onto the AIM market inAugust 2005, raising £1.2m net of costs, your company has made significantprogress and have signed a number of key contracts with global telecomoperators. We continue to enhance our products with the view to becoming one ofthe leading international messaging software solutions providers. Our products Messaging International Plc's integrated communications solutions offermessaging services and products, enabling service providers and enterprises tosend, receive, and manage voice, text and multimedia messages from a wide rangeof communication media - the Internet, PC, client WAP-enabled device or anyfixed-line or mobile phone. Multimedia messages can be sent, replied orforwarded to individuals or groups and to various communication devices,including landline phone, mobile phone, fax, e-mail, SMS, Instant Messenger(e.g. ICQ), and pager. Global operations Some of our worldwide customers include: Canada: Roger Wireless, the largest mobile operator in Canada with whom we havea continuing revenue-sharing relationship, covering SMS to Landline including anadditional Text-to-Song feature. USA: The United States messaging market has historically lagged behind itsEuropean and Asian equivalents. However, the market is at last showing adramatic increase in messaging traffic, as well as a greater demand formessaging solutions from operators. As a direct result of our efforts in theUnited States, our Text-to-Landline solution, a service whereby text messagesare converted to automated voice messages for delivery to landline phones, wasrecently launched across the network by Sprint-Nextel, one of the top tiermobile providers in the country. The product is also in pilot trials with twoother large American operators, and we hope to announce additional agreementssoon. Asia Pacific: We are also delighted to have announced our first contract in theAsia-Pacific market, another region which is forecast to grow considerably inthe future. In February 2006, we signed a deal to develop and provide a fullycustomised messaging solution to a leading provider of wire-linetelecommunication services in China. This service is scheduled to launch in thevery near future. Others: In Israel, we have signed a deal with Pelephone, one of the country'sleading mobile operators, to launch a tailored service based on our "MailPlug-in" application, enabling users to send text messages direct from theirPCs. It is the first such service in Israel, and it is also being tested bythree other mobile operators in the country. In the West Indies, Cable &Wireless Jamaica has adopted our innovative Text-a-Tune product, enablingcustomers to insert music clips into their Text-to-Landline messages. New initiatives We are continuing to improve our offerings, develop new products and maximiseour market potential. As a result, in February 2006 we launched a number of newproducts at the 3GSM World Congress in Barcelona which attracted considerableinterest. These include: MMS capability: Our new Multimedia Message System (MMS) capability enablessubscribers to send multimedia content (pictures, music, video or text) from thePC to a mobile phone. Fully integrated into the leading PC applications, theproduct incorporates a MMS composer and player which allows the subscriber toedit, preview and convert any PC content to mobile format. Web browser integration: With our new PC Toolbar Plug-in, our services will beintegrated into the Internet Explorer and Mozilla Firefox web browsers. Thetoolbar provides subscribers with the ability to effortlessly send multimediacontent to mobile phones from their computer with just a few mouse clicks. Outlook Express integration: Our software plug-in can now be used with MicrosoftOutlook Express in addition to the existing Microsoft Outlook and Lotus Notesversions. As Outlook Express is integrated into the Windows operating systemincluded with every PC, compatibility opens the way to significant growth ofboth consumer and small-business users. IMS compatibility: We have addressed the issue of the telephony operators'migration towards IP networks allowing integrated data, voice and video servicesover the internet backbone. Our products can now work in IP MultimediaSubsystem (IMS) enabled networks and incorporate presence preferences, allowingsubscribers to choose on which device they want to receive messages. Prospects During 2005, we focused on widening our customer base and our product platformto capitalise on the fast growing global messaging market. We are proud of the progress we have made to date and are confident that ourproduct range will continue to attract further international customers. We alsocontinue to investigate a number of acquisition opportunities complementary toour core business. Finally, I would like to thank all those involved in the company for their hardwork during the year and the flotation process. I look forward to workingtogether with our very dedicated team in the coming year, continuing to buildthe company into the leading player in the messaging arena, and to generatevalue for our shareholders. We are due to hold our first annual general meeting on 29 June 2006 and referyou to the AGM notice on page 25 of this document. Horacio FurmanChairman CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005Continuing operations Notes 2005 £ Revenue 2 219,793 Cost of revenue (168,594) Gross profit 51,199 Operating expensesResearch and development (182,655)Selling and marketing (149,003)General and administrative (131,912) Total operating expenses (463,570) Operating loss 3 (412,371) Interest receivable and similar income 6 19,452 Loss before taxation (392,919) Taxation 7 - Loss after taxation 8 (392,919) Earnings per share from continuing operationsBasic and diluted loss per ordinary share 9 (0.7)p None of the group's activities were discontinued in the period. The notes on pages 14 to 24 form part of these financial statements. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 31 DECEMBER 2005 2005 £ Exchange differences on translation of foreign operations (8,887) Net deficit recognised directly in equity (8,887) Loss for the period (392,919) Total recognised income and expense (401,806) CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2005 Notes Group Company 2005 2005 £ £ Non current assetsGoodwill 10 3,236,617 -Other intangible assets 11 1,631 -Tangible assets 12 52,371 -Investment in subsidiary undertakings 13 - 3,269,000Other investments 14 84,338 - 3,374,957 3,269,000 Current assetsTrade and other receivables 15 181,501 500,045Cash and cash equivalents 954,888 840,836 1,136,389 1,340,881 Total assets 4,511,346 4,609,881Current liabilitiesTrade and other payables 16 (220,549) (19,321) 915,840 1,321,560 Net current assets Non current liabilitiesProvisions 17 (116,228) - Total liabilities (336,777) (19,321) Net assets 4,174,569 4,590,560 Share capital 18 576,900 576,900Share premium account 19 3,999,475 3,999,475Foreign currency translation reserve 20 (8,887) -Revenue reserves 20 (392,919) 14,185 Equity 21 4,174,569 4,590,560 The financial statements were approved by the board of directors and authorisedfor issue on 12 May 2006. Irvin FishmanFinancial director The notes on pages 14 to 24 form part of these financial statements. CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2005 Note 2005 £ Net cash outflow from operating activities 24 (344,006) Investing activitiesInterest and similar income 19,452Purchase of tangible assets (13,261)Investments (9,193)Net overdrafts acquired with subsidiary (5,479)Net cash used in investing activities (8,481) Financing activitiesIssue of equity share capital 1,574,998Shares issue costs (292,625)Net cash from financing activities 1,282,373 Net increase in cash and cash equivalents 929,886 Cash and cash equivalents at the beginning of the year 25,002 Cash and cash equivalents at the end of the year 954,888 The notes on pages 14 to 24 form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2005 1. Significant accounting policies The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards "(IFRS)" for the first time and have been preparedon a historical cost basis. No disclosures regarding the transition to IFRShave been presented as the company did not commence trading until this financialperiod. The significant accounting policies applied by the company and its subsidiariesin the financial statements on a consistent basis are as follows: a. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe company and entities controlled by the company (its subsidiaries) made up to31 December each year. Control is achieved where the company has the power togovern the financial and operating policies of any subsidiary undertaking so asto obtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to profit and loss in the period ofacquisition. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. b. Goodwill Goodwill arising on the acquisition of subsidiaries representing the excess ofthe cost of acquisition over the fair value of the assets and liabilities of itssubsidiaries at the date of acquisition are included in the intangible assets. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in arriving at the profit orloss. c. Other non-current assets: (i) Patents Patents are stated at cost and capitalised and are amortised on a straight linebasis over eight years which is the estimated economic life of the patents. (ii) Property, plant and equipment Property, plant, and equipment are stated at cost net of accumulateddepreciation. Depreciation is calculated using the straight-line method overthe estimated useful lives of the assets at the following annual rates: %Computers 33Electronic Equipment 15-25Furniture and Office Equipment 7-15Leasehold Improvements 10 The carrying values of property plant and equipment are reviewed for impairmentwhen events or changes indicate the carrying value may not be recoverable. Ifany such indication exists and carrying values exceed recoverable amounts suchassets are written down to their recoverable amounts. d. Revenue recognition Revenue represents amounts receivable from licensing of messaging services toservice providers and from hosting and maintenance fees net of discounts, valueadded tax and other sales taxes. The group recognise revenue when delivery of the product has occurred, a fee isdeterminable, no further obligations exist and collectibility is probable. Deferred revenue includes amounts received from customers for which revenue hasnot yet been recognised. e. Research and development Research and development costs are treated as an expense and are written off inthe group's consolidated income statement in the year incurred. f. Employee costs: (i) Share options The group has complied with the requirements of IFRS2 "Share-based Payments." The group have therefore recognised that in granting share options to directorsand employees an expense reflecting the difference between the fair value ofoutstanding options and their exercise price should be treated as an expense inthe group's consolidated income statement. Fair value has been calculated byreference to the market value of the shares at the balance sheet date. (ii) Severance pay Pursuant to Israeli severance pay law, employees of more than one year areentitled to one month's salary for each year employed or a portion thereof. Theliability for severance pay is calculated based on the most recent salary ofemployees multiplied by the number of years of employment at the balance sheetdate. The group's liability for the employees is mitigated by monthly depositsby way of investments in suitable insurance policies. The value of thedeposited funds is based on the cash surrender value of the insurance policies.The deposited funds include profits accumulated up to the balance sheet date.The funds may be withdrawn on the fulfilment of the severance pay obligation. g. Deferred taxation The company and its subsidiary undertakings account for deferred tax using theliability method and as such recognise all timing differences between thegroup's profits chargeable to tax and its results as shown in the financialstatements. These timing differences arise from the inclusion of gains andlosses for tax purposes in different periods from those in which they arerecognised in the financial statements. Deferred tax assets are only recognisedto the extent it is probable that the future taxable profits will be availableagainst which deductible temporary differences can be utilised. Deferred tax ismeasured on a non-discounted basis at rates of tax expected to apply in theperiods in which the timing differences are expected to reverse. h. Foreign currency Transactions in foreign currency are recorded at the rate of exchange prevailingat the date of the transaction. All differences are taken to the incomestatement. Assets and liabilities denominated in foreign currency aretranslated into sterling at the rate of exchange prevailing at the balance sheetdate. On consolidation, income and expenditure of subsidiary undertakings aretranslated into sterling at average rates of exchange in the period. Assets andliabilities are translated into sterling at the rate of exchange ruling at thebalance sheet date. Exchange differences arising from the use of average ratesfor translating the results of foreign subsidiaries or from the translation ofnet assets on the acquisition of foreign subsidiary undertakings are taken tothe group's translation reserves. i. Comparative figures As the company did not trade in the period prior to 31 December 2004,comparative figures have been excluded from these financial statements. At 31December 2004, the company's equity of £25,002 was represented by cash at bank. 2. Revenue a. Group activities The group activities are in a single business segment, being the development ofend-user media messaging management systems. b. Revenues by geographical market and customer location The group's operations are located primarily in Israel and the business ismanaged on the basis of one reportable segment. Analysis of revenues by geographical market and customer location are asfollows: 2005 £ Israel 85,172United States of America 78,611Rest of the world 56,010 219,7933. Operating loss 2005The following costs have been included in arriving at the operating loss: £ Staff costs (see note 4 below) 305,342Auditors' remuneration (company - £10,000) 21,363Research and development expenditure 182,655Depreciation of property, plant and equipment 8,281Amortisation of patents 307 4. Staff numbers and costs 2005Payroll costs include: £ Staff payroll and related costs 267,504Directors' remuneration 37,838 305,342 Details of directors' remuneration are set out in note 5 below. The average number of employees (including directors) employed by the group: Management and administration 5Development, sales and marketing 25 30 5. Directors' remuneration The analysis of directors' remuneration is: Total £Executive directors 33,672Non-executive directors 4,166 37,838 Horacio Furman has waived his right to director's fees of £5,000 per annum. Details of share options granted to directors under the unapproved share optionscheme are as shown in the directors' report. 6. Investment and similar income 2005 £Interest on bank deposits 14,037Net gains on foreign currency transactions 5,415 19,452 7. Taxation 2005 £ Current tax charge - Factors affecting the tax charge:Loss on ordinary activities before taxation (392,919) Loss on ordinary activities before taxation multiplied by (117,875) the standard rate of tax applicable in the UK. Effects of:Depreciation and amortisation 2,576Non-recognition of losses 115,299 Current tax charge - In accordance with IAS 12 the company and the group have not recognised deferredtax assets as they do not anticipate that profits generated in the short termwill exceed accumulated losses generated by the subsidiaries prior toacquisition. In addition, TeleMessage Ltd in Israel was granted approved enterprise statusfor its investment programme. The main benefit arising from such status is thereduction in tax rates on income. The company's income from the "ApprovedEnterprises" scheme is tax exempt for four years commencing with the year itfirst earns taxable income and then would be subject to a reduced tax rate ofbetween 10% and 25% for a period of up to six years. Since the company hasincurred losses to date it has not utilised any of the aforementioned taxbenefits. 8. Loss attributable to ordinary shareholders The company has taken advantage of the exemption under Section 230(1)(b) of theCompanies Act 1985 from presenting its own income statement however the profitdealt with in the financial statements of the company was £14,185. 9. Loss per ordinary share The calculation of the loss per ordinary share is based on the loss aftertaxation of £392,919 and 56,171,781 ordinary shares being the weighted averagenumber of shares in issue in the period. In view of the loss, share options and warrants are anti-dilutive and thereforethe diluted loss per share has not been presented. 10. Goodwill 2005 £ Cost at 1 January 2005 -Acquisition of subsidiary (see note 13 below) 3,236,617Cost at 31 December 2005 3,236,617Impairment at 1 January 2005 and 31 December 2005 - Carrying value at 31 December 2005 3,236,617 If the acquisition of TeleMessage Ltd and its subsidiary had been completed onthe first day of the financial year, group revenues for the year would have been£467,254 and the group loss attributable to ordinary shareholders of the parentwould have been £768,507. 11. Other intangible assets 2005 £ Cost at 1 January 2005 -Acquisition of subsidiary 1,938Cost at 31 December 2005 1,938Amortisation at 1 January 2005 -Amortisation in the year (307) Carrying value at 31 December 2005 1,631 The above additions represent the fair value of patents on acquisition of thecompany's subsidiary undertakings. 12. Tangible assets Group £ Cost at 1 January 2005 -Property, plant and equipment acquired on acquisition of subsidiary 47,391Additions 13,261Cost at 31 December 2005 60,652Depreciation at 1 January 2005 -Depreciation in the year (8,281) Carrying value at 31 December 2005 52,371 All the above assets are included in the accounts of subsidiary undertakings. 13. Investment in subsidiary undertakings On 20 July, the company acquired the entire share capital of TeleMessage Ltd, acompany incorporated in Israel and its wholly owned subsidiary, TeleMessage Inc.a company incorporated in the USA. Details of the price and consideration are as set out below: £65,380,000 ordinary shares of 0.5p issued at 5p per share together with 25,000,000 warrants 3,269,000 The fair value of the net assets on acquisition was: Patents 1,938Investments 75,145Equipment 47,391Receivables 228,809Payables-short term (218,510) 134,773Provisions (note 17) (102,390)Net assets 32,383Goodwill 3,236,617 3,269,000 14. Other Investments Other investments of £84,338 represents the value of funds at 31 December 2005invested in insurance policies, in order to provide for employee severanceobligations pursuant to Israeli severance pay law and staff contracts ofemployment, which are relevant to the company's principal subsidiary undertakingin Israel. 15. Trade and other receivables Group Company 2005 2005 £ £ Trade receivables 113,059 -Due from subsidiary undertaking - 458,875Due from government authorities 35,167 25,482Other receivables and prepaid expenses 33,275 15,688 181,501 500,045 16. Trade and other payables Group 2005 Company £ 2005 £ Trade payables 80,556 -Employee and payroll accruals 77,930 -Other accruals 52,974 19,321Deferred revenue 9,089 - 220,549 19,321 17. Provisions Group Company 2005 2005 £ £ Severance pay obligations of subsidiary undertakings 116,228 - On acquisition of the company's subsidiary undertaking, severance payobligations totalled £102,390. 18. Share capital Authorised: Group & company £ Number of ordinary shares of £1 each at 1 January 2005 1,000,000 1,000,000 Creation of 3,000,000 ordinary shares of £1 each 3,000,000 3,000,000 4,000,000 4,000,000 Conversion of each ordinary share of £1 each into 800,000,00 4,000,000 ordinary shares of 0.5p each Number of ordinary shares of 0.5p at 31 December 2005 800,000,000 4,000,000 Issued and fully paid ordinary shares: Fully paid Partly paid Group & company £ At 1 January 2005 2 99,998 25,002 24 May 2005 - funds from partly paid shares 99,998 (99,998) 74,998becoming fully paid 100,000 - 100,000 Conversion of ordinary shares of £1 each to 20,000,000 - 100,000ordinary shares of 0.5p each 20 July 2005 - issue of ordinary shares of 65,380,000 - 326,9000.5p each to acquire TeleMessage Ltd 2 August 2005 - placing of ordinary shares 30,000,000 - 150,000of 0.5p each Number of ordinary shares of 0.5p each 115,380,000 - 576,900at 31 December 2005 Share options The unapproved share option scheme was adopted by the board on 27 July 2005. At 31 December 2005 there were in existence 1,864,943 options to acquireordinary shares in the company of which 411,898 options were exercisable at 31December 2005. Directors: Number of Date Exercise Exercisable options price granted betweenGuy Levit 20,266 27.7.2005 5p 20.7.2006 - 7.6.2010Guy Levit 1,555 27,7.2005 2.17p 27.7.2005 - 15.11.2011David Rubner 500,000 27.7.2005 5p 20.7.2006 - 20.7.2015Other employees 1,343,122 27.7.2005 5p 27.7.2005 - 31.12.2014 1,864,943 On 1 March 2006 further share options were granted, details of which are givenin the directors' report. Warrants On 24 May 2005, the company authorised 100,000,000 warrants entitling holders tosubscribe for ordinary shares at 5p per ordinary share. At 31 December 2005, there were 50,000,000 of these warrants in issue. Number of warrants issued to: Directors 22,278,061Holders of more than 3% of warrants in issue: Reverse Takeover Investments Plc 10,000,000 Seymour Pierce Limited 5,000,000Others 12,721,939 50,000,000 19. Share premium account Group & Company £ Issue of 65,380,000 ordinary shares of 0.5p at 5p per ordinary share in order to acquire 2,942,100subsidiary undertakings Placing of 30,000,000 ordinary shares of 0.5p at 5p per ordinary share 1,350,000 Cost of share issues (292,625) 3,999,475 20. Reserves Group Group 2005 Company 2005 2005 £ £ £ Translation Revenue Revenue reserve reserve reserve Reserves at 1 January 2005 - - -(Loss)/profit from continuing operations - (392,919) 14,185Foreign currency translation differences (8,887) - - Reserves at 31 December 2005 (8,887) (392,919) 14,185 21. Statement of movements in equity Group 2005 Company £ 2005 £ Funds generated from partly paid up shares now fully paid 74,998 74,998Funds from the issue of 95,380,000 ordinary shares of 0.5p 4,769,000 4,769,000 for 5p per shareShare issue costs (292,625) (292,625)(Loss)/profit from continuing operations (392,919) 14,185Foreign currency translation differences (8,887) -Additions to equity 4,149,567 4,565,558Equity at 1 January 2005 25,002 25,002 Equity at 31 December 2005 4,174,569 4,590,560 22. Capital commitments The group had no significant capital commitments at 31 December 2005. 23. Financial commitments Lease agreements: The company's subsidiary in Israel has entered into operating leases for officefacilities and motor vehicles for periods of up to three years, all terminatingby 2008. At 31 December 2005 the future minimum commitments outstanding undernon-cancellable operating leases are: Group £ 2006 57,8342007 33,9612008 19,304 111,099 24. Reconciliation of operating loss to net cash outflow from operatingactivities Group £ £ (412,371) Adjustments for:Depreciation of tangible assets 8,281Amortisation of intangible assets 307Foreign currency translation differences (8,887) (299)Operating cash flows before movement in working capital (412,670) Reduction in receivables 47,308Increase in payables 7,518Increase in provisions 13,838 68,664 Net cash outflow from operating activities (344,006) * * ENDS * * Contacts: Guy Levit Messaging International Plc Tel: + 972 3 922 5252 Isabel Crossley St Brides Media & Finance Ltd Tel: +44 (0) 20 7242 447 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sigmaroc.