20th Dec 2007 15:50
Cashbox PLC20 December 2007 Press Release 20 December 2007 Cashbox Public Limited Company ("Cashbox" or "the Company") Preliminary Results for the year ended 30 June 2007 Cashbox (AIM:CBOX), the independent Automated Teller Machine ("ATM") deployerand operator, announces its preliminary results for the year ended 30 June 2007. John Maples, Chairman said"2006/07 has been a transformational year for Cashbox. As a result of changingfunding partners and executive management, the underperforming business of muchof the year, has evolved into a predictable, consistent, execution focusedcompany, with a clear strategy for growth and future profitability". Year ended Year ended 30 June 2007 30 June 2006Machines installed at period end 1,442 1,058Turnover £000 4,380 3,159Gross Margin % 27% 29%EBITDA *+ £000 (3,510) (2,048)Loss on ordinary activities before exceptionals*£000 (4,056) (2,458)Loss on ordinary activities after exceptionals£000 (6,741) (3,637)Loss per share before exceptionals*(pence) (6.3) (5.8)Loss per share after exceptionals (pence) (10.5) (8.5)Net debt £000 855 315 * exceptional items are £2,000,000 and £685,000 in year ended 30 June 2007relating to litigation settlement costs and lease termination costs respectivelyand £1,179,000 in year ended 30 June 2006 relating to listing and share optioncosts.+ EBITDA is defined as Earnings before interest, tax, depreciation andamortisation, share based payments and exceptional items, (see note 11). Highlights • Installed estate increased to 1,442 despite difficulties with lease provider during year; increasing installed estate market share (of surcharging IADs) from 4.2% to 5.7%, with a smaller growth from 1.4% to 1.5% share of the total IAD transaction volumes market. • Turnover up 39% from last year. • Loss on ordinary activities increased due to higher administration costs and lease termination costs. • Replacement of previous lease facilities with new loan facilities signed in June 2007. • Further £3.26m of equity raised in May 2007 and £583,000 convertible loan note issued in December 2007. • Litigation settled with Hanco at a total of £2.0m. For further information: Cashbox plcDavid Auger, Chief Financial Officer Tel: +44 (0) 1256 [email protected] www.cashboxplc.co.uk Seymour Pierce LimitedJonathan Wright Tel: +44 (0) 20 7107 8000 www.seymourpierce.com Fairfax IS PLCEwan Leggat Tel: +44 (0) 20 460 4389 www.fairfaxplc.com Media enquiries:Threadneedle CommunicationsJosh Royston / Graham Herring Tel: +44 (0) 20 7936 9606 www.threadneedlepr.co.uk CHAIRMAN'S STATEMENT My statement as Chairman of Cashbox comes following a difficult period for theCompany. The dismissal of the founder and former CEO, Carl Thomas, has meantthat the Company has had to meet an unanticipated challenge. Further, it wasnecessary to change funding providers, resulting in delays in the installationof ATMs across our estate. This has meant that the Company has gone through achallenging year to say the least. Each of these factors would have beenimpossible to envisage at the start of the year. We now have a new Chief Executive Officer in Ciaran Morton and a new ChiefFinancial Officer in David Auger. Together with Matt Thomas and Andy Wilmott,they form a first class senior executive team, which gives us confidence for thefuture. They have already negotiated new funding arrangements with the Bank ofScotland, which provide greater access to capital and the flexibility needed toroll out our ATMs more aggressively. Despite these difficulties, we have continued to benefit from one of the UK'sfastest organically grown estates of ATMs. We have negotiated new agreements,which complement our already impressive client list. These new contracts willopen up opportunities for further growth in the Group's estate. At the beginningof the year (July 2006) the business had 1,058 installed ATMs. This rose to1,442 installed ATMs by June 2007 and was over 1,750 by the middle of December2007. 2007 results Sales for the year to 30 June 2007 were £4,380,000 (2006: £3,159,000) resultingin an operating loss of £5,932,000 (2006: £3,396,000) and a loss before tax of£6,741,000 (2006: £3,637,000). These results are very disappointing but therewere exceptional items of £2,000,000 litigation settlement costs and anexceptional finance charge of £685,000 to resolve the Group's lease financearrangements as well as the large professional fees in connection with the Hancolawsuit and other legal and financial expenses. Consistently, through the year, Cashbox has continued to secure contracts toroll out ATMs into both independent and managed sites. There continues to be alarge number of contract opportunities ahead for the Company which we willcontinue to pursue. We have maintained our focus on the Merchant Fill model which has seen theestate grow by 36.2% in the last year. This model continues to present the bestoption for many of our customers who, in turn, are able to offer an added valueservice to their customers. The business model has further been developed toensure that the commissions paid out to the merchant relate directly to thetransaction levels in that particular site. Resource With the challenges highlighted above, the Company's resilience anddetermination to succeed have been evident in the past year. I believe that wehave a Company which is professional and resolute in its partnership with itscustomers, and one that continues to ensure that the customer experience withCashbox is productive. I believe our shareholders can have confidence that wehave built a professional team that will create both significant value forinvestors and an effective service for our customers. Hanco Litigation In October 2007, we were able to agree a full and final settlement with Hanco inrespect of the long standing litigation between the two companies. In thesettlement, Cashbox ATM Systems Limited will pay an additional £1.8m, on top ofthe £200,000 already paid. As previously announced to the market andshareholders, Cashbox ATM Systems Limited has the benefit of a joint and severalindemnity from Carl Thomas and Anthony Sharp in connection with this litigation,which Directors intend to enforce to recover the £2m. This brings to an end thelitigation which has been a drain on management time, and was continuing toincur substantial legal bills. The Board did not believe that continuing thelitigation was in the best interests of shareholders. The Board was surprised and disappointed to receive a letter from Anthony Sharpdisputing the validity of his indemnity to Cashbox ATM Systems Limited. TheBoard has subsequently received legal advice supporting that the indemnity isvalid and enforceable. As the indemnity is a reimbursement and receipt is notvirtually certain, the amount recoverable will not be recorded as a receivableuntil receipt is virtually certain in accordance with UK GAAP. Hence, the valueof the indemnity does not appear on the Balance Sheet. However, shareholders canrest assured that the Board intends to pursue the indemnity to the full extentof its powers. Post Balance Sheet Events The rollout of ATMs has been slower than expected for several reasons, not leastbeing changes to the production procedure of our ATM supplier. This, coupledwith a maturing market, has led to slower installation rates than originallyplanned. Breakeven, which was expected towards the end of 2007, is now forecastfor summer 2008. As a result we have had to raise new operating capital, as wellas re-structure our existing arrangements with Bank of Scotland. I am happy toreport that we have achieved this. Bank of Scotland have agreed to lengthen our drawdown period from March 2008 toDecember 2008, with a corresponding reduction in the required facility from £8mto £6m, reflecting current trading conditions. This was agreed on the basis thatwe raised £1m of funding for operating capital, which we have done in the formof one convertible loan and one non-convertible loan. The convertible loan of£583,000 has already been loaned to the Company and the non-convertible loan of£417,000 is available from 31 March 2008.The Board are proposing a fund raisingin 2008 about which shareholders will be notified in due course. The Board recognises that there are now two main goals for the business: •To continue to exploit the opportunity in the market to grow the core business organically. With that in mind, Matthew Thomas (Chief Technology Officer), and Andrew Wilmott (Technical Director) will focus upon driving the execution of this growth taking major roles within the Executive Board of the operating company, Cashbox ATM Systems Limited. They will relinquish their plc roles in order to achieve this goal. •To develop a more external focus, with a view to deriving value from transactions in what we believe to be a market ready for consolidation. This requires the Board leadership to leverage a different skill-set from that of running and growing an existing business operation. Cashbox is fortunate to have that talent already in place. It is my intention to step down at the AGM and allow Non-executive Director, Robin Saunders, with her considerable financial market experience, to replace me as Chair, to take forward this next phase of Cashbox's evolution. Non-executive Director, Stephen L Brown, will also stand down at the next AGM, to enable a balanced Board of two Executives, Ciaran Morton and David Auger, and two Non-executives, Robin Saunders and William Hughes to leverage transactional value in a changing market. 2007/08 The current year will be one of high expectations, challenges and hard work forCashbox, with demanding yet achievable goals. The rollout of ATMs will continueand we intend to reach monthly break-even during 2008. I send my fellowDirectors and all the staff at Cashbox my best wishes for their future success. John MaplesChairman19 December 2007 CHIEF EXECUTIVE'S STATEMENT Whilst the last year has clearly been a challenging one for the business, it hasalso clearly proved that Cashbox has the resilience, capabilities and thecorrect strategy to thrive in a highly competitive marketplace. There has beenconsiderable change within both the Executive Management Team and theNon-executive Board. However, staff both old and new have remained fully focusedupon the cornerstones of our business, namely: •The continuing acquisition of key client contracts with high volume estates; •The rapid conversion and installation of profitable sites within these estates; •The provision of outstanding service and support levels to drive transaction volumes; and •The utilisation of a robust and flexible platform technology and reporting systems to ensure the maximum level of uptime for all ATMs. During the course of 2006/07, Cashbox was hampered in its ability to executeagainst those cornerstones by a lack of funding. This situation was resolved inJune 2007 by the signing of a deal with Bank of Scotland. A lack of funding alsocauses a business to wholly focus upon the short term rather than plan for thelong term. Securing a funding partner has enabled management to restructure thebusiness with a view to meeting short term requirements whilst providing asecure and stable platform for the consistent and predictable execution of thegrowth business plan over the medium to long term. These changes are designed to focus the business, especially sales and supportoperations, upon meeting the needs of our customers. An Account Management teamhas been created to develop a partnership approach with our key clients. Thissingle point of contact provides regular site penetration and transactionreports, and works with our clients to target new sites and create marketingmaterials to drive additional estate penetration as well as transaction volumeswithin existing sites. Closer links to our clients and the resulting increased understanding of theirbusiness priorities also allows for the efforts of the Field Sales team to beco-ordinated with our clients' internal marketing efforts. This has resulted inover 30% growth of site conversions H2 v H1 in 2006/07. This performance isexpected to be maintained, if not accelerated further, in 2007/08; especiallywith the recent addition of a Telephone Sales team to drive estate penetration.Recently acquired clients such as Total Fitness and Marstons Pub Company areexperiencing a rapid fulfilment of their estate's potential thus reducing thetime to generate substantial revenues. The provision of outstanding support services are increasingly the key businessdifferentiator between Cashbox and all other players in the market. By retainingall these functions in-house, Cashbox can ensure the quality and timeliness ofall installation, upgrade and repair services. The Help Desk and Sales Supportteams were also recently merged to provide available scale for any particularpriority task, such as large scale customer roll out, software upgrades andloading graphic images. However, the real benefit has been the sharing of information about clientneeds, issues and requests across the organisation, reducing response times andincreasing our ability to proactively manage anticipated issues. As a result,despite growth in the installed base of nearly 50% over the past year, we havebeen able to maintain our benchmark of resolving 85% of all ATM performanceissues immediately by phone, the remainder being handled in person by trainedengineers within twenty-four hours of the fault being logged. This dedicatedapproach to service ensures we experience ATM uptime in excess of 98% as anaverage across the entire estate. In this way, our clients are continuallydriving increased footfall to their locations, and increased spending at theselocations from customers who always enjoy access to cash. Moving into 2007/08, it is the Cashbox experience - the actual verbal andphysical interaction with Cashbox staff - that will differentiate us from ourcompetition. After discussing the business goals of any potential client, ourin-house survey team assesses whether an ATM can deliver those goals wholly, orin part. This then drives the discussions between Sales Management and theon-site Merchant to agree mutually beneficial contract terms, prior to anyinstallation. This integrated and professional approach to meeting our clients'business needs together with our company wide commitment to service excellencewill ensure that Cashbox customers are fully informed as to what the ATM canachieve for their business, and that both parties have a realistic expectationof transaction performance. A true partnership that we expect to build upon andrenew during the lifetime of the contract. As the Bank of Scotland funding allows for the regular purchase and roll-out ofATMs to drive revenues, similarly the Executive Management are seeking ways tooptimise operational efficiencies, whilst driving towards sustainable profitablegrowth. All major supplier contracts have been renegotiated resulting inincreased funds to invest in sales and support areas. Additional sales headcountand capital expenditure on Customer Relationship Management software has partlybeen funded out of operational efficiencies. The placement strategy continues to drive our growth, but we have taken steps toensure that the rapid deployment of ATMs does not affect future profitability. Anew approach in customer contracts, which grow merchant commissions in line withtransaction volume, ensures that even low transacting ATMs generate significantprofits over the contract duration. Transaction volumes, as expected, continue to grow, and, more importantly,average transactions per ATM have not suffered as a result from the swing inemphasis from sales and managed ATMs to placement ATMs. This has been driven inpart by the high quality machines used. We have recently upgraded from the Tidel3400 to the 3600, which we believe to be "best in class". With enlarged screenand enhanced colour graphics, keypad and security features, the 3600 providestangible reassurance to merchant and user alike. In conclusion, a difficult year of trading, where a lack of funding and personalgovernance created an environment where execution was severely hampered.However, the staff and the new management are energised about the future. Therestructuring has created purpose and enabled focus upon those key elements ofour business that create the foundation of our long-term, profitable future.Exit run rates from 2006/2007 are very encouraging and are built upon in H1 2007/08. As I look to 2007/08, I am fully resolved that the defining element of this newCashbox will be the delivery of consistent and predictable performance. We willachieve this by developing meaningful partnerships that deliver true mutualvalue with all of our clients, and by demanding more of ourselves and ourperformance. Ciaran MortonChief Executive Officer19 December 2007 OPERATING AND FINANCIAL REVIEW The Operating and Financial Review should be read in conjunction with theCondensed Financial Statements starting on page 10. The figures for year ended30 June 2006 have been restated following the adoption of the accountingstandard FRS20 on share based payments. Operationally the business has been fundamentally restricted by the fundingdifficulties which prevented the roll-out of ATMs across sites under contract.The Board considers reaching critical mass and profitability key objectives andthe number of installations in a period to be one of the Key PerformanceIndicators, KPIs. During the year the estate was increased by 384 machines with 631 installs and247 uplift of machines, as the machine locations were optimised when newmachines were not available. With difficulties involving General Capital VentureFinance (GCVF) not being resolved until the end of June 2007, the increase inthe second half of the year was only marginally up on the first half. Theproportion of machines operating under the placement model, where Cashboxretains ownership of the machine, continued to increase and at 30 June 2007 was34% of the total estate. Turnover Turnover for the year was £4.4m, up 39% on last year as the business continuedto grow and further machines were installed, albeit at a slower rate thanenvisaged. Gross transaction revenues were up 40% on last year to £4.0m as theinstalled base of machines increased. Other revenues, principally from the saleof machines, increased to £0.4m but the increase has slowed as the focuscontinues to be on the placement model. Gross margin Gross margin for the year was 27%, 2 percentage points lower than the previousyear which benefited from service income from relocating a number of acustomer's ATMs. The margin on Transaction fees continued to improve with 31%for the year against 29% in the comparable period. This is expected to continueas the ATM estate continues to grow with the higher margin placement machinesmaking up a greater proportion of the estate. Administration costs Administration costs have risen significantly from last year as the businesscontinues to resolve ongoing issues. In particular salary and other relatedcosts are up significantly, but in line with expectations as the average numberof employees employed by the Group has risen from 22 in the year ended 30 June2006 to 44 in the year ended 30 June 2007. 2006 also included share basedremuneration costs of £574,000 associated with the IPO recorded as anexceptional item. While staff costs are considerably higher, the second half wasonly 18% higher than the first half, as the staffing levels reached theappropriate level to take the business forward and grow the ATM estate. Thecurrent number of employees in October 2007, 50, is not expected to increasesignificantly as the business moves forward for the foreseeable future.Vehicle and motor expenses have also increased reflecting the growing salesforce. However these are expected to be reduced once the fleet is migrated fromshort term rental contracts currently in place to a vehicle financingarrangement with Bank of Scotland as part of the long term refinancing of thebusiness. Occupancy costs were £316,000 for the year up 21% all relating totelephony while travel and entertaining expenses increased by 50% for the year.The majority of this increase related to higher spend in the first half of theyear and spending has been dramatically reduced from the last quarter of theyear. The other significant area of overheads are professional fees which amounted to£874,000 during the year. This includes the cost of resolving some of thedifficulties the business has faced during the year, particularly in the secondhalf with the litigation costs of the Hanco case, cancelling the financingarrangement with GCVF, arranging the new financing facility with Bank ofScotland and the dismissal of the former chief executive. As the new managementteam resolve these issues and progress to a more "business as usual" situationit is expected that the professional fees being incurred will significantlyreduce. EBITDA Earnings before interest, tax, depreciation, amortisation, share based paymentsand exceptional items. This is considered a KPI for the business at its currentstate of development. EBITDA, was a loss of £3.5m compared to £2.0m last year,with the increased losses due to higher administration costs, (a reconciliationto statutory headings is included in note 11). Non cash administration costs Non cash administration costs of depreciation and costs associated with sharebased payments, principally the employee share option scheme, meant that theoperating loss was £3.9m before exceptionals, £1.7m worse than last year beforeexceptionals, while the operating loss after exceptionals was £5.9m and lastyear was £3.4m reflecting £2.0m settlement costs recorded this year and IPOcosts and share option costs at the time of the IPO of £1.2m. Interest costs Interest costs for the year amounted to £809,000 which included the finance costof exiting the GCVF lease facilities of £685,000 which has been treated as anexceptional item. This includes a cash cost of £467,000 being the settlement ofthe interest element of future rental payments under the lease agreementstogether with the write off of prepaid fees £189,000 and the remaining accretionof warrants cost issued to GCVF, £29,000, which were cancelled as part of thesettlement. Other interest costs were £161,000 partially offset by interestincome of £37,000 which arose on the Group's Bank of England settlement account. Loss on ordinary activities The Loss on ordinary activities for the year was £6.7m compared to a £3.6m losslast year with the higher gross profits failing to offset the higher overheads.Before exceptional items, losses for the year were £4.0m, against £2.5m lastyear as explained above. The operating loss of £5.9m gave rise to a net cashoutflow from operating activities of £2.5m, with non cash items included in theoperating loss of £0.4m and movements in working capital of £3.0m. Closelymonitoring cashflow is critical for a business which is loss making, as Cashboxcurrently is, consequently all the headings within the cashflow are consideredKPIs. Working capital movements Working capital movements provided a cash flow benefit as reported for the year.The underlying performance of the same is critical to the Group maintaining asound financial base. At 30 June 2006, total operating debtors amounted to £1.3m of which £840,000related to amounts due from GCVF included in Trade debtors and relating to thepurchase and sale and leaseback of machines and other fixed assets. The last ofthese monies was not received until the middle of September 2006, over 16 weeksafter it was due to be paid. This created cash-flow difficulties that lead todelays in the purchase and roll out of ATMs. Trade Debtors at 30 June 2007 wereminimal, reflecting the situation where transaction revenues are collectedautomatically through the settlement process and the sale of machines hasreduced. Total debtors at 30 June 2007 were £0.8m, including £479,000 inrelation to VAT, £306,000 of which related to VAT on the purchase of assets backfrom GCVF, to be recovered from Her Majesty's Revenue and Customs (HMRC). Inaddition, but not recognised in the accounts, as explained in note 10, is£2,000,000 due from Anthony Sharp, previously Chairman, and Carl Thomas,previously CEO, under the terms of the indemnity signed by them as part of theIPO process under which they are jointly and severally liable for the settlementreached with Hanco. The increase in operating creditors resulted in a cash inflow of £2,661,000.However underlying operating creditors were at a similar level with £543,000 ofthis inflow as a result of increases in the "Bank of England settlement"creditor which relates to the settlement of amounts withdrawn by consumers backto the merchants who filled the ATMs with cash as part of the three daysettlement process. It also includes the impact of the 2007 year end falling ona Saturday compared to a Friday last year. In addition, at 30 June 2007, a£2,000,000 liability is included in Other Creditors in relation to the Hancolitigation of which £200,000 was paid on 24 July 2007 as described in note 9. Servicing of finance costs Servicing of finance costs were £580,000 including £467,000 in relation to theGCVF settlement. Fixed asset purchases The investment in the future of the business through the purchase of fixedassets, principally ATMs, was £693,000. These costs resulted in a net cashoutflow before financing of £3.7m for the year, less than the £4.6m reported in2006. However while the majority of this reflects the losses being made ratherthan investment in the business, this is disappointing. Financing Despite the difficulties faced by Cashbox, existing and new investors in thebusiness have continued to be supportive. During the second half of the year,loans of £2.8m were raised in February and March to allow the Company time tolook at the financing alternatives. As part of the ongoing discussions with Bankof Scotland, the Company raised £3.3m in new shares following an extraordinarygeneral meeting in May 2007, being £0.6m in cash and £2.7m in the conversion ofthe loans raised a few months earlier. The key to the success of the placementmodel is the financing of the purchase of the ATMs and in June 2007 the Companyreached settlement with GCVF, allowing the release of the charge GCVF held overthe Company's assets and allowing alternative funding from Bank of Scotland. Thenet cash inflow from financing for the year was £4.7m, offsetting the cashoutflow before financing and resulting in a net increase in cash of £0.9m. Forthe period until the Company moves to profitability, the long term financing ofthe business has been reviewed and the refinancing described in note 9 actioned. Increase in cash The net increase in cash of £0.9m comprises an increase in cash held in the BOEsettlement account of £1.1m less a reduction in other cash of £0.2m. Cash at theyear end held in the BOE settlement account amounted to just over £1.3m, over£200,000 in excess of the corresponding BOE settlement liability. Future developments and outlook Following the year-end, the Group has been utilising the Bank of Scotland loanfacility and is continuing the planned roll-out of ATMs with the installed baseincreasing to over 1,750 machines by the middle of December. This is an increaseof 308 machines from the year end with 393 installations including 85relocations. The 85 relocations are part of our ongoing plan to churn locations,replacing low transacting sites with those with higher potential transactionvolumes. This churn policy also provided our ATM supplier with time to gear upproduction capabilities at their new manufacturing facility. While transactionvolumes in the summer were slightly below expectations, overall transactionrevenues are continuing to grow with the increased installed base of ATMs andare in line with future revenue expectations. As part of the budgeting exercise for the new financial year, the new managementteam has undertaken a thorough review of the cost base of the Group and hasidentified considerable scope for cost savings without restricting the Group'sability to grow to profitability. A series of action plans and targets have beenput in place across the business to realise these savings going forward,particularly in the areas of vehicle costs, telephone communications, travel andentertaining and professional fees. Marketing expenditure has also beensignificantly reduced as the Company has moved towards targeting specificsectors as opposed to the entire potential ATM community. It is anticipated thatthese initiatives, together with the planned growth in the number of ATMs willbring the Group to a break even position towards the end of the next financialyear. However, if the losses are forecast to extend beyond that point, thenadditional cost saving measures, including possible reductions in staff, havenot been ruled out. CASHBOX PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 JUNE 2007 Notes Year Year ended ended 30-6-07 30-6-06 as restated £'000 £'000 Turnover 4,380 3,159 Cost of sales (3,219) (2,245) --------- ---------Gross profit 1,161 914 Administrative expenses (5,093) (3,131) Exceptional items: Share based remuneration (options) charge - (574) relating to listing Other listing costs - (605) Litigation settlement costs 2 (2,000) - --------- ---------Total administrative expenses (7,093) (4,310) --------- ---------Operating loss (5,932) (3,396) Interest receivable andsimilar income 37 13Interest payable andsimilar charges (161) (254)Exceptional finance charges 2 (685) - --------- ---------Net interest payable andsimilar charges (809) (241) --------- --------- Loss on ordinary activitiesbefore and after taxation (6,741) (3,637) --------- ---------Loss per ordinary share (pence) 3 Basic (10.5) (8.5)p Diluted (10.5) (8.5)p Loss on ordinary activitiesexcluding exceptional costs andbefore and after taxation (4,056) (2,458) All amounts relate to continuing activities. CASHBOX PLCCONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 30 JUNE 2007 Notes Year ended Year ended 30-6-07 30-6-06 as restated £'000 £'000Loss on ordinary activities aftertaxation (6,741) (3,637) --------- ---------Total recognised gains and losses (6,741) (3,637) Prior year adjustments 1- share based payments (75) ---------Total recognised gains and losses sincethe last annual report (6,816) --------- CASHBOX PLCCONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2007 Notes 30-6-07 30-6-06 £'000 £'000Fixed assets Tangible assets 1,090 674 Current assets Stocks 110 22 Debtors 850 1,492 Cash at bank and in hand 1,452 536 --------- --------- --------- 2,412 2,050Creditors: amountsfalling due within one year 4 (4,717) (2,225) --------- --------- ---------Net current liabilities (2,305) (175) --------- --------- ---------Total assets less currentliabilities (1,215) 499 Creditors: amountsfalling due after morethan one year 4 (2,305) (679) --------- --------- ---------Net liabilities (3,520) (180) --------- --------- ---------Capital and reserves Called up share capital 832 614 Share premium account 6,925 3,880 Merger reserve 2,180 2,180 Warrants reserve - 37 Profit and loss account (13,457) (6,891) --------- --------- ---------Shareholders' deficit 5 (3,520) (180) --------- --------- --------- CASHBOX PLCCONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2007 Notes Year ended Year ended 30-6-07 30-6-06 £'000 £'000Net cash outflow fromoperating activities 6 (2,477) (4,327) ---------- ----------Returns on investments and servicing offinance Interest received 37 13 Interest paid (150) (254) Lease termination costs paid (467) - ---------- ----------Net cash outflow from returns oninvestment and servicing of finance (580) (241) ---------- ----------Capital expenditure and financialinvestment Purchase of tangible fixed assets (693) (44) ---------- ----------Net cash outflow from capitalexpenditure and financial investment (693) (44) ---------- ----------Cash outflow before use ofliquid resources and financing (3,750) (4,612) ---------- ----------Financing Issue of ordinary shares for cash (net 584 5,339 of issue costs) New loans 5,100 Cash advances from finance lease 500 provider Loans repaid (130) (457) Capital element of finance leases (1,388) - repaid Sale and leaseback of tangible fixed - 215 assets ---------- ----------Net cash inflow from financing 4,666 5,097 ---------- ----------Increase in cash 916 485 ---------- ---------- CASHBOX PLCNOTES TO THE PRELIMINARY STATEMENTFOR THE YEAR ENDED 30 JUNE 2007 1. Accounting policies and basis of presentation of financial informationThese financial statements have been prepared under the historical costconvention and in accordance with applicable United Kingdom Accounting Standardson a going concern basis and the accounting policies have been appliedconsistently in all years. These statements should be read in conjunction withthe Group's Annual Accounts for the year ended 30 June 2006. This financial information does not constitute the Company's statutory accountsfor the years ended 30 June 2007 or 30 June 2006 within the meaning of section240 of the Companies Act 1985. The financial information for the year ended 30 June 2007 has been extractedfrom the audited statutory accounts which will be sent to shareholders anddelivered to the Registrar of Companies after the forthcoming AGM. The Auditors'report on those accounts was unqualified and did not include reference to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their report and did not contain a statement under s237 (2) or (3)Companies Act 1985. The financial information for the year ended 30 June 2006 has been extractedfrom the statutory accounts which have been filed with the Registrar ofCompanies. The auditors' have reported on those accounts; their report wasunqualified but included an emphasis of matter statement regarding materialuncertainties over going concern. The auditors' report did not contain astatement under s237 (2) or (3) Companies Act 1985. Going concern The Group incurred a loss of £6,741,000 (2006 £3,637,000) for the year and hadnet current liabilities of £2,305,000 (2006 £175,000) at the balance sheet dateand net liabilities of £3,520,000 (2006 £180,000). The Directors have prepared projected cash flow information for a periodincluding twelve months from the date of approval of these accounts. A keyassumption is the rate of installations of new machines which the Directorsbelieve is reasonable. On the basis of this cash flow information, anddiscussions with and the continued support of the Group's bankers, the Directorsare confident, based on current results, projections and the Group's cashposition at the date of the approval of the financial statements, that the Groupwill be able to continue to trade for the foreseeable future. As a result of theabove, the Directors consider it appropriate to prepare the financial statementson the going concern basis. Accordingly the financial statements do not reflect any adjustments that wouldbe required in the event that the Group were unable to achieve its forecast cashflows. Change of accounting policy - Share-based employee remuneration The Group has adopted FRS 20 'Share based payment' which is obligatory forperiods commencing on or after 1 January 2006. The Group issues equity settled share based payments including share options andwarrants to certain Directors and employees. In accordance with the FRS,equity-settled share based payments are measured at fair value at the date ofgrant using an appropriate option pricing model. The fair value determined atthe date of grant is expensed to the profit and loss account on a straight linebasis over the vesting period. At the balance sheet date the cumulative changein respect of each award is adjusted to reflect the actual levels of optionsvesting or expected to vest. Prior to the adoption of FRS 20, the Group recognised the financial effect ofthe share based payments when shares and share options were awarded to employeesby making a charge to the profit and loss account based on the differencebetween the market value of the Company's shares at the date of grant and theoption exercise price in accordance with UITF Abstract 17 (revised 2003)'Employee Share Schemes'. The credit entry for this charge was taken to theprofit and loss reserve and reported in the reconciliation of movements inshareholders' funds. The standard was applied to all grants of equity instruments as the earliestgrant by the Company was 29 March 2006. For the year ending 30 June 2006, the change in accounting policy has resultedin net decrease in profit (increase in loss) for the year of £75,000(share-based payments expense) being £4,000 exceptional costs, in addition tothe £570,000 recorded under the old policy, on the options issued to key staffat the time of the IPO as remuneration for services relating to the IPO processtogether with £71,000 ordinary costs in relation to Award One options andwarrants. For 2007, the impact of share-based payments is a net charge to incomeof £138,000. The share-based payments expense has been included in theadministrative expenses. 2. Exceptional items Year ended 30-6-07 Year ended 30-6-06 £'000 £'000Charged in arriving at operating losses:Litigation settlement costs 2,000 -Share based remuneration - 574Listing expenses - 605 ---------- ---------- 2,000 1,179 ---------- ----------Charged within interest costs:Lease termination costs 685 - ---------- ---------- 685 - ---------- ---------- The litigation settlement costs relate to the full and final settlement costs of£1,800,000 associated with the agreement reached with Hanco on 23 October 2007together with the costs order of £199,760 paid on 24 July 2007 as described innote 9. The Company's subsidiary, Cashbox ATM Systems Limited, has a joint andseveral Indemnity in connection with this litigation. In accordance withFinancial Reporting Standard No 12, the amounts due under the indemnity havebeen treated as a reimbursement as described in note 10. The £685,000 exceptional costs associated with terminating the leasearrangements with General Capital Venture Finance included the effective cashpayment of the interest element of future lease rentals £467,000 plus thenon-cash costs related to the write off of arrangement fees, £189,000, togetherwith write back of future warrant accretion costs £29,000. The agreementterminating the lease arrangements provided for full and final settlement of alloutstanding obligations if the Group purchased the assets legally owned by GCVFand GCVF agreed to release the debenture held over the Group's assets. 3. Loss per ordinary share Basic and diluted loss per share has been calculated on the basis of lossesafter taxation of £6,741,000 (2006: £3,637,000) and 64,129,470 1p ordinaryshares (2006: 42,692,407) being the weighted average number of shares in issueduring the year. The exercise of share options would have the effect of reducingthe loss per ordinary share and is therefore not dilutive under the terms ofFinancial Reporting Standard 22. 4. Creditors falling due within and after one year 30-6-07 30-6-06 £'000 £'000Amounts due within one year Trade creditors 731 592Taxation and social security 262 45Amounts due under finance leases 2 172Other creditors 2,111 469Accruals and deferred income 1,611 947 4,717 2,225Amounts due after one year Amounts due under finance leases 5 679Bank Loans 2,300 - 2,305 679 Included in Other creditors is an amount due of £1,999,760 due to Hanco ATMSystems Limited as a result of the settlement of litigation as described in note9. A reimbursement of this amount is due under a joint and several indemnity fromboth Carl Thomas (previously CEO) and Anthony Sharp (previously Chairman, and asignificant shareholder). This item has been treated as a reimbursement asdescribed in note 10 and will not be recorded as a receivable until receipt isvirtually certain in accordance with FRS 12. 5. Reconciliation of movements in shareholders' funds Year ended 30-6-07 Year ended 30-06-06 as restated £'000 £'000 Loss for the year (6,741) (3,637)Share based payments - credit to reserves 138 645 (6,603) (2,992) Issue of shares including premium 3,263 4,114Merger reserve creation - 1,706Warrants issued - 37 Movement in shareholders' funds (3,340) 2,865 Opening shareholders' deficit (180) (3,045) Prior year adjustments:Share based payments - credit to reserves 75 -Share based payments - debit to reserves (75) - Opening shareholders' deficit as restated (180) (3,045) Shareholders' deficit at end of period (3,520) (180) 6. Reconciliation of operating loss to net cash outflow from operatingactivities Year ended 30-6-07 Year ended 30-6-06 as restated £'000 £'000 Operating loss (5,932) (3,396) Share based remuneration charge 138 645Depreciation 284 98Accretion of warrants 27(Increase) / Decrease in stocks (88) 189Decrease / (Increase) in debtors 433 (1,294)Increase / (Decrease) in creditors 2,661 (569) ---------- ----------Net cash outflow from operating activities (2,477) (4,327) ---------- ---------- 7. Analysis of changes in net debt Cash in hand and Debt due within Debt due after Total net at bank one year one year debt £'000 £'000 £'000 £'000At 30 June 2006 536 (172) (679) (315) Reclassifications (679) 679 Cash flows 916 (2,670) (2,300) (4,054) Converted into shares 2,670 2,670 Cash advances from leaseprovider (500) - (500) Finance lease capitalrepayments 163 - 163 Lease terminationcapital repayments 1,225 1,225 New finance leases (2) (5) (7) Non cash items (37) (37) --------- --------- --------- ---------At 30 June 2007 1,452 (2) (2,305) (855) --------- --------- --------- --------- 8. Dividend The Directors are not able to declare a dividend. 9. Post balance sheet events In July 2007 the Company's subsidiary, Cashbox ATM Systems Limited, ("theCompany's subsidiary) was ordered to pay costs of £199,760 to Hanco ATM SystemsLimited ("Hanco") as part of the litigation brought by Hanco against Cashbox ATMSystems Limited, claiming that Carl J Thomas and Cashbox ATM Systems Limiteddiverted a business opportunity from Hanco to Cashbox. A total payment of£200,526 was made on 24 July 2007 including interest of £766 in accordance withthis order. On 23 October 2007 the Company's subsidiary reached full and final settlementwith Hanco concluding the ongoing litigation against the Company's subsidiary,brought by Hanco. Under the terms of the Settlement, the Company's subsidiary isliable to pay a further £1.8 million with interest if payment is deferred toHanco (the "Settlement Amount"). The Company's subsidiary has the option ofdeferring payment of the Settlement Amount for up to 2 years on the basis thatinterest will accrue on that sum at a rate of 5 per cent. per annum for thefirst year and at 20 per cent. per annum thereafter. The obligations of theCompany's subsidiary under the Settlement are guaranteed by the Company. The Company's subsidiary has a joint and several indemnity in connection withthis litigation, from Carl J Thomas (previously Chief Executive) and Anthony CJSharp (previously Chairman) signed on 23 March 2006 prior to the listing of theCompany on the AIM market of the London Stock Exchange in which the Indemnifiersjointly and severally agreed to keep the Company's subsidiary indemnified fromand against all Hanco expenses including any settlement costs and against alllegal and other costs, charges and expenses the Company and or its subsidiarymay incur in enforcing, or attempting to enforce, their rights under theIndemnity. The Company and its subsidiary propose to enforce the indemnity.In accepting the terms of the Settlement Hanco foregoes the right to bring anyfurther claims against the Company or its subsidiary and the other defendants inrelation to the subject matter of the proceedings. On 19 December 2007, the Company agreed further financing arrangements toprovide additional working capital to the business and rescheduled repayments ofthe loan facility with Bank of Scotland. While longer term financing isarranged, the Company has issued a convertible loan note for £583,788 togetherwith a separate non-convertible loan note for £416,212 for draw down after 31March 2008, both to MBC Investments Limited, a Gibraltar based company, bothbeing due for redemption on or before 31 March 2009. To secure the long term financial security of the Company, the Directors areconsidering funding alternatives to take place during early 2008. The Directorshave agreed with MBC Investments Limited that all shareholders should be in aposition to participate in the refinancing arrangements and has agreed, subjectto the Company raising sufficient financing for the offer, that MBC InvestmentsLimited will only take up its rights under the Convertible Loan Note and the Nonconvertible Loan Note to the extent that other current shareholders do notchoose to subscribe in any further funding arrangements. The Convertible note has a coupon attached of 9% per annum, calculated on amonthly basis and to be paid in cash upon redemption. The note has the right toconvert into 11,675,764 ordinary 1p shares in the Company at a conversion priceof 5p per share but not before 31 March 2008 except in the event of a capitalevent for the Company, including but not limited to a take over, capitalraising, liquidation, insolvency etc. Thereafter it may be converted at any timeat the option of the holder. The shares to which the Convertible note relateswill be held in a separate trust for the benefit of MBC Investments Limiteduntil the loan note is converted and / or the envisaged fundraising describedabove takes place. The Non-convertible loan note will have a coupon of 10% per annum on all drawnamounts until 30 April 2008 rising at a rate of 1.5% per month subject to a capof 20% per annum. 10. Contingencies On 17 July 2007 the Company's subsidiary wrote to Anthony CJ Sharp and Carl JThomas (the indemnifiers) under the terms of the deed of indemnity signed on 23March 2006. The Company's subsidiary has received a reply from Anthony Sharpinforming the Company that he does not consider the indemnity to be binding onhim. The Directors do not accept Mr Sharp's position and having taken legaladvice, believe the indemnity is enforceable. Discussions have been taking placewith the indemnifiers to resolve matters, however, if agreement with theindemnifiers cannot be reached in the near future then proceedings to recovermonies due under the indemnities will commence. As a result of Mr Sharp's position disputing the indemnity and concerns relatingto Mr Thomas' ability to pay, the Directors, while believing the indemnity isenforceable, have treated the receivable as a reimbursement in accordance withFinancial Reporting Standard No 12, Provisions and Contingencies, and sincereceipt is not virtually certain, have not recorded the amount due of £1,999,760in the accounts. Following the initial public offering of the Company it was expected that theabove indemnity would be replaced by a further indemnity from KKR Investmentmanagement SA , ("KKR", a company in which A CJ Sharp was expected to be aminority shareholder), Annenberg Investment Management SA (a company controlledby ACJ Sharp) and CJ Thomas severally (the "Further Indemnity") with solerecourse (in the case of Annenberg and CJ Thomas) to their respective holdingsof ordinary shares in the Company. The Further Indemnity was intended to comeinto effect only once KKR had unconditional finance in place, to thesatisfaction of the Directors and Seymour Pierce Limited (the Company'sNominated Advisor and Broker) to cover its liabilities under the FurtherIndemnity. As part of this agreement, the Company agreed to pay a cash fee inthe amount of £112,500 to KKR in respect of the provision of the FurtherIndemnity together with the issue of 187,500 new ordinary shares to KKR. Theseshares would only be issued once the Further Indemnity was unconditional.Pursuant to the deed, unconditional finance has not been put in place. 11. Non-GAAP terms EBITDA is earnings before interest, tax, depreciation, amortisation, share basedpayments and exceptional items and equals operating income before exceptionalitems plus depreciation, amortisation and share based payments. EBITDA, which we consider to be a meaningful measure of operating performance,particularly the ability to generate cash, does not have a standard meaningunder UK GAAP and may not be comparable with similar measures used by others. Year ended Year ended 30-6-07 30-6-06 as restated £'000 £'000 Operating loss (5,932) (3,396) Add back:Exceptional items 2,000 1,179Share based payments charge 138 71Depreciation 284 98 --------- ---------EBITDA (3,510) (2,048) --------- --------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Cake Box Holdi.