28th Aug 2008 07:00
28 August 2008
SERVICEPower TECHNOLOGIES PLC
("SERVICEPower " or the "Company")
Half-yearly Results
SERVICEPower (LSE:SVR), a market leader for outsourced service and field management, announces its unaudited Half-yearly Results for the six months ended 30 June 2008.
Financial Highlights
Revenues increased by 58% to £8.0m (H1 2007: £5.1m)
EBITDA trading loss (as defined in the results section below) decreased to £0.04m (H1 2007: loss of £1.05m)
Loss before tax decreased to £0.3m (H1 2007: £1.3m)
£5m Placing approved by shareholders post period end
Operational Highlights
Restructuring of UK and US operations complete
Global Sales operation increased from 13 to 27 people
New SERVICEOutsourcing service launched; securing first contract for $2.9m (£1.5m) post period end
Move to AIM approved at EGM on 22 August 2008
Mark Duffin, CEO, SERVICEPower, commented, "We have successfully completed the restructuring programme and SERVICEPower is now a more efficient, sales focussed organisation as a result. The significant improvements in revenues and gross margins over H1 2007 are testament to the success of this new focus.
"We now have the infrastructure and funding in place for us to execute our strategy of maximising our opportunities in our traditional market while simultaneously expanding into new geographies and new market segments. We therefore look forward to an exciting future with both enthusiasm and confidence."
For further information, please contact:
|
SERVICEPower Technologies PLC |
KBC Peel Hunt Ltd. |
ICIS Limited |
|
Tel: +1 410 571 6333 |
Tel: 020 7418 8900 |
Tel: 020 7651 8688 |
|
Mark Duffin, Executive Director |
Matt Goode |
Tom Moriarty |
|
Adele Oliver, Vice-President Marketing |
Oliver Stratton |
Bob Huxford |
About SERVICEPower
SERVICEPower, publicly traded on the London Stock Exchange (LSE:SVR), provides a suite of products and services that enable companies to maximise the effectiveness of their field service personnel ensuring the optimal balance between cost of operations and customer satisfaction.
SERVICEPower's technology allows clients to locate, schedule, and route field service engineers in real time while ensuring they have the correct mix of skills. Where a Company has no in-house field service personnel SERVICEPower is able to offer a fully outsourced, white-labeled, network of independent field service engineers across multiple industries and trades. SERVICEPower also provides warranty chain management, call centre services and business intelligence for manufacturers, retailers and TPAs. Customers include blue-chip companies such as GE, Marsh and Siemens and its solutions are offered throughout the US, Canada, the UK, Europe and Asia.
INTERIM MANAGEMENT REPORT
Introduction
During the period, SERVICEPower has successfully completed the restructuring programme begun in November of 2007. The Company is now a more efficient, sales focussed organisation and the success of this strategy can be evidenced in the 58% improvement in revenues and the gross margin growing from 39% in H1 2007 to 53% in H1 2008.
SERVICEPower now has the infrastructure in place to maximise the considerable market opportunities that have been identified in our traditional markets, such as consumer electronics and insurance, and within a number of new market verticals, such as home improvement, while the recently approved £5m fund raising will give the Company the resources to build the necessary scale and momentum.
Organisational Restructuring
During the past 6 months SERVICEPower continued to implement the restructuring program that began in November 2007. The management structure has been rationalised, the US operations have been consolidated, lines of communication have been improved, staff remuneration has been reviewed and the sales and marketing function has been reorganised and expanded.
This restructuring has now been successfully completed and has resulted in the creation of a more efficient organisation. Administration costs savings made during the period as a result of these efficiencies were redeployed in building the new sales team.
Sales & Marketing
A central tenet of the operational review was to redirect SERVICEPower's focus from technology towards Sales & Marketing in order to maximise the considerable opportunities available within its target markets. To this effect SERVICEPower has combined staff from the outsourcing and software divisions, for whom Sales & Marketing formed an element of their roles, and formed a dedicated and focussed global sales operation covering all of the Company's offerings.
Several additional sales staff have also been recruited during the period culminating in SERVICEPower increasing its global sales operations from 13 staff members prior to the review to 27 members today. The Company has increased the number of staff within its US Sales Force to a total of 18 and now has a dedicated UK and European Sales team comprising of 9 staff members.
In addition the Company has improved the saleability of its products by consolidating them into a single product suite which, along with its service offerings, is now available under a unified, easily identifiable brand.
The Sales & Marketing restructuring has now been completed, the success of which can be evidenced through a number of contract wins with blue-chip clients made during the period including Bosch Tools, Airwell Fedders and a multi million dollar contract with one of the largest in-home service providers in the US. In real terms SERVICEPower's Sales & Marketing division increased revenues by 58% to £8.0m (H1 2007: £5.1m) while gross margins were up 14% against the same period last year.
Launch of New Service: SERVICEOutsourcing
As discussed in the preliminary results statement in April, the Company has identified a significant opportunity to expand its outsourcing business into additional geographies and vertical markets. SERVICEPower is therefore pleased to announce the successful launch of SERVICEOutsourcing, a new service designed to meet this opportunity.
Unique in today's market, SERVICEOutsourcing delivers a 100% outsourced, turnkey, white-label, field service solution, across multiple industries, in multiple geographies. This will enable clients to offer the full range of field services to their customers - for example installation or maintenance of purchased goods - as if it were their own in-house network. SERVICEOutsourcing will recruit, train, certify and optimise the performance of a network of global field service personnel, to be offered to any organisation that either desires a field service network but cannot build one, or wishes to outsource its existing field service operations.
The intention is for SERVICEOutsourcing to ultimately be able to offer any form of field service to any consumer facing organisation. It is SERVICEPower's intention to roll out the service over the forthcoming years to successive industries and geographies as capacity permits, commencing with the US Home Improvement Industry, which has been estimated by Lowes to be worth over $755bn (£383bn). A report from the University of Iowa has stated that almost 50% of the market opportunity in Home Improvement is missed when installation is not provided with the product.
The signing of SERVICEOutsourcing's first contract, also announced today, validates the powerful value proposition this service represents. The Company has signed an agreement with Exaco Trading Inc, a North American distributor of Greenhouses based in Austin Texas, worth US $2.9m (£1.5m) over 5 years to become its exclusive provider of field services.
The opportunity for SERVICEOutsourcing to address the huge potential demand for a fully outsourced field service solution could prove transformational to SERVICEPower. As such SERVICEOutsourcing will represent a core element of SERVICEPower's offering going forward.
Results
Total revenues for the half year increased by 58% to £8.0 million in H1 2008 (H1 2007: £5.06 million). Outsourcing revenue increased by 28% to £4.53 million (H1 2007: £3.54 million) whilst software licence and consultancy revenue increased by 129% to £3.48 million (H1 2007: £1.52 million).
A breakdown of revenue is as follows:
|
June 2008 |
June 2007 |
||
|
Outsourcing: |
£ million |
£ million |
|
|
Hosting / SaaS |
1.24 |
0.97 |
|
|
Outsourcing US |
1.95 |
1.36 |
|
|
Outsourcing UK |
1.24 |
1.15 |
|
|
Mobility |
0.10 |
0.06 |
|
|
Total |
4.53 |
3.54 |
|
|
Software licence and consultancy: |
|||
|
Licences |
1.91 |
0.36 |
|
|
Implementation & Support |
1.57 |
1.16 |
|
|
Total |
3.48 |
1.52 |
The gross profit for the business rose significantly to £4.25 million, from £1.96 million in H1 2007. This translated to gross margins increasing to 53%, from 39% in H1 2007.
The Company's EBITDA trading loss decreased to £0.04 million (H1 2007: loss of £1.05 million) being the total loss from operations of £0.25 million (H1 2007: £1.32 million), adjusted for depreciation of £0.04 million (H1 2007: £0.05 million), amortisation of £0.16 million (H1 2007: £0.15 million) and exchange loss of £0.01 million (H1 2007: loss of £0.07 million). The total loss before tax decreased to £0.29 million from a loss of £1.30 million in 2007. The loss per share for the period decreased to 0.26p (H1 2007: loss per share of 1.39p).
Cash balance increased to £1.0 million at 30 June 2008 from £0.3 million at 30 June 2007 following entry into a £1m loan facility on 6 June (see below). In view of the Company's focus on growth in the short to medium term, the directors do not recommend the payment of a dividend at this time.
Loan Facility
On 6 June SERVICEPower entered into a £1m loan facility agreement, repayable by 31 December, which was drawn down immediately in full. On approval of the fundraising the loan became repayable to the lenders at the Company's election either through:
a. the issuance of a convertible loan note (the "Convertible") to the lenders. The Convertible will give the lenders the right to convert the Convertible into ordinary shares in SERVICEPower at the lower of 5p per ordinary share or the price ordinary shares are issued at in the Placing (the "Placing Price"). The rate of interest on the Convertible is 8% per annum, compounded every 6 months; or
b. the issuance of new ordinary shares in the Company at the lower of 4p per ordinary share or a 20% discount to the Placing Price.
The loan facility was used to fund the working capital needs of the Company during the restructuring process.
Fundraising
Post the period end, the Company received approval from shareholders to place 100,000,000 ordinary shares with new and existing institutional investors. £5m (approximately £4.6 million net of expenses) will be raised in conjunction with the Company's move to AIM on 26 September 2008. These funds will be used to provide additional working capital and will allow the Company to continue to execute on its new sales-led strategy, involving the expansion into new geographies and verticals and the necessary building of scale.
Move to AIM
At the EGM held on 22 August, SERVICEPower shareholders approved the Company's move from the full list of the London Stock Exchange to AIM, which the Board believes to be a more appropriate market at this time.
Transferring to AIM will also result in lower costs and will offer greater flexibility particularly with regard to executing corporate transactions more quickly should any opportunities arise. The Company's shares will be admitted to trading on AIM on 26 September 2008.
Principal risks and uncertainties
On page 7 of its 2007 Annual Report (a copy of which is available at SERVICEPower's website at www.servicepower.com), the Company set out what the Directors regarded as being the principal risks and uncertainties facing the Group and which could have a material impact on the Group's long-term performance. Those which continue to be the most applicable in the short term are:
- Customer procurement timescales: The Group sells large software contracts to global organisations which may have lengthy procurement processes that can stretch over a number of months. This risk is currently being mitigated through seeking to focus future revenue streams towards transactional business which has increased by 28% compared to the first half of 2007.
- Unpredictable cashflow: A significant portion of cash receipts comes from the signing of contracts by large corporate customers, the timing of which is very difficult to predict due to long procurement cycles. The Group has sought to reduce the impact of such sales by increasing transactional sales by 28%, compared to the first half of 2007, and by identifying and introducing administrative cost savings.
- Recruitment, retention and training of employees: SERVICEPower operates in a knowledge based industry and recognises the importance of the recruitment and retention of its highly skilled workforce.
- The deterioration of general economic conditions in the Group's main markets of North America, the United Kingdom and Europe due to the impact of the credit crunch. However, the affect of these difficulties may not impact on the Group's revenue as long as the strong Return on Investment case of the Company's services continues to be proven to new customers who are looking to reduce their cost base. The Group monitors its actual cost base against budget and will make reductions if appropriate.
Going concern
The Directors have prepared these half-yearly results on the going concern basis, on the assumption that the fundraising and move to AIM referred to above are completed as anticipated.
Outlook
SERVICEPower has successfully completed its organisational restructuring during the period and the Company is now on a firm footing, with the appropriate infrastructure and resources in place to execute on its chosen strategy of increasing sales of its outsourcing and field services offerings and expanding into new geographies and new market segments.
The second half of the year has started well, with the investment into Sales & Marketing building a considerable pipeline, which is expected to yield significant results toward the end of 2009. Additionally, the transformational opportunities presented by new initiatives such as SERVICEOutsourcing, mean the Company can look to the future with enthusiasm and confidence.
Lindsay Bury Mark Duffin
Chairman CEO
28 August 2008
Responsibility statement
We confirm that to the best of our knowledge:
a. the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
b. the interim management report includes a fair review of the information required by DTR 4.2 7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
Chief Executive Officer
Mark Duffin
28 August 2008
ServicePower Technologies plc
Condensed consolidated income statement for the six months ended 30 June 2008
|
Unaudited |
Unaudited |
Audited |
||
|
6 months to |
6 months to |
12 months to |
||
|
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
||
|
Note |
£'000 |
£'000 |
£'000 |
|
|
Revenue - software solutions |
3 |
3,476 |
1,519 |
5,803 |
|
- outsourcing services |
4,530 |
3,542 |
8,263 |
|
|
_________ |
_________ |
_________ |
||
|
Total revenue |
8,006 |
5,061 |
14,066 |
|
|
Cost of sales |
(3,759) |
(3,101) |
(7,905) |
|
|
_________ |
_________ |
_________ |
||
|
Gross profit |
4,247 |
1,960 |
6,161 |
|
|
_________ |
_________ |
_________ |
||
|
Administrative expenses |
(4,492) |
(3,282) |
(6,725) |
|
|
_________ |
_________ |
_________ |
||
|
(Loss)/profit from operations |
||||
|
- software solutions |
(166) |
(703) |
648 |
|
|
- outsourcing services |
(79) |
(619) |
(1,212) |
|
|
_________ |
_________ |
_________ |
||
|
Total loss from operations |
(245) |
(1,322) |
(564) |
|
|
Investment revenue |
9 |
19 |
32 |
|
|
Finance costs |
(49) |
- |
- |
|
|
_________ |
_________ |
_________ |
||
|
Loss before taxation |
(285) |
(1,303) |
(532) |
|
|
Taxation |
4 |
- |
145 |
70 |
|
_________ |
_________ |
_________ |
||
|
Loss for the period |
(285) |
(1,158) |
(462) |
|
|
_________ |
_________ |
_________ |
||
|
Pence |
Pence |
Pence |
||
|
Loss per share |
||||
|
Basic and diluted |
5 |
(0.32p) |
(1.39p) |
(0.54p) |
|
_________ |
_________ |
_________ |
All amounts relate to continuing activities.
ServicePower Technologies plc
Condensed consolidated statement of recognised income and expense for the six months ended 30 June 2008
|
Note |
Unaudited |
Unaudited |
Audited |
|
|
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Exchange differences on translation of foreign |
||||
|
Operations |
9 |
13 |
123 |
(34) |
|
_________ |
_________ |
________ |
||
|
Net income/(loss) recognised directly in equity |
13 |
123 |
(34) |
|
|
Loss for the period/year |
(285) |
(1,158) |
(462) |
|
|
_________ |
_________ |
________ |
||
|
Total recognised income and expense for the |
||||
|
for the period/year |
(272) |
(1,035) |
(496) |
|
|
_________ |
_________ |
________ |
ServicePower Technologies plc
Condensed consolidated balance sheet at 30 June 2008
|
Note |
Unaudited |
Unaudited |
Audited |
|
|
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
||
|
Assets |
£'000 |
£'000 |
£'000 |
|
|
Non current assets |
||||
|
Intangible assets |
1,392 |
1,599 |
1,550 |
|
|
Property, plant and equipment |
6 |
205 |
116 |
180 |
|
_________ |
_________ |
_________ |
||
|
1,597 |
1,715 |
1,730 |
||
|
Current assets |
||||
|
Inventories |
42 |
19 |
- |
|
|
Finance lease receivables |
255 |
- |
88 |
|
|
Trade and other receivables |
3,830 |
2,381 |
2,955 |
|
|
Cash and cash equivalents |
1,019 |
320 |
1,520 |
|
|
Derivative financial instrument |
7 |
1,800 |
- |
- |
|
_________ |
_________ |
_________ |
||
|
6,946 |
2,720 |
4,563 |
||
|
_________ |
_________ |
_________ |
||
|
Total assets |
8,543 |
4,435 |
6,293 |
|
|
_________ |
_________ |
_________ |
||
|
Current liabilities |
||||
|
Trade and other payables |
(2,285) |
(2,012) |
(2,697) |
|
|
Deferred revenue |
(1,463) |
(937) |
(1,430) |
|
|
Other creditors |
(80) |
(51) |
(72) |
|
|
Short term loan liability |
7 |
(2,800) |
- |
- |
|
_________ |
_________ |
_________ |
||
|
Total liabilities |
(6,628) |
(3,000) |
(4,199) |
|
|
_________ |
_________ |
_________ |
||
|
Net assets |
1,915 |
1,435 |
2,094 |
|
|
_________ |
_________ |
_________ |
||
|
Equity |
||||
|
Share capital |
8,926 |
8,912 |
8,926 |
|
|
Share premium account |
15,206 |
15,206 |
15,206 |
|
|
Share scheme reserve |
458 |
308 |
414 |
|
|
Exchange translation reserve |
356 |
500 |
343 |
|
|
Other reserve |
(3,008) |
(3,008) |
(3,008) |
|
|
Retained earnings |
(20,023) |
(20,483) |
(19,787) |
|
|
_________ |
_________ |
_________ |
||
|
Total Equity |
1,915 |
1,435 |
2,094 |
|
|
_________ |
_________ |
_________ |
ServicePower Technologies plc
Condensed consolidated cash flow statement for the six months ended 30 June 2008
|
Note |
Unaudited |
Unaudited |
Audited |
|
|
6 months to |
6 months to |
12 months to |
||
|
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Net cash flows (used in)/received from operating activities |
8 |
(1,442) |
(1,003) |
415 |
|
Investing activities |
||||
|
Interest received |
9 |
19 |
32 |
|
|
Purchases of property, plant and equipment |
(68) |
(6) |
(110) |
|
|
Expenditure on intangible assets |
- |
(120) |
(217) |
|
|
_________ |
_________ |
_________ |
||
|
Net cash used in investing activities |
(59) |
(107) |
(295) |
|
|
_________ |
_________ |
_________ |
||
|
Financing activities |
||||
|
Proceeds on issue of shares |
- |
1,142 |
1,140 |
|
|
New short term loan |
1,000 |
- |
- |
|
|
_________ |
________ |
_________ |
||
|
Net cash received from financing activities |
1,000 |
1,142 |
1,140 |
|
|
__________ |
_________ |
_________ |
||
|
Net (decrease)/increase in cash and cash equivalents |
(501) |
32 |
1,260 |
|
|
Cash and cash equivalents at beginning of period/year |
1,520 |
262 |
262 |
|
|
Effect of exchange rate changes |
- |
26 |
(2) |
|
|
__________ |
__________ |
_________ |
||
|
Cash and cash equivalents at end of period/year |
1,019 |
320 |
1,520 |
|
|
_________ |
_________ |
_________ |
ServicePower Technologies plc
Notes to the condensed set of financial statements for the six months ended 30 June 2008
1. General Information
The interim report has been prepared on the basis of the accounting policies set out in the Group's financial statements for the year ended 31 December 2007. The financial information set out in this document does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was modified by the inclusion of an added emphasis paragraph which highlighted the existence of a material uncertainty that cast significant doubt on the Company and Group's ability to continue as a going concern. The report did not contain statements under section 237(2) or (3) of the Companies Act 1985.
The half-yearly report has not been audited or reviewed by the Company's auditors.
2. Accounting policies
The annual financial statements are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with International Accounting Standards 34 'Interim Financial Reporting', as adopted by the European Union.
The same accounting policies and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest audited financial statements for the year ended 31 December 2007 and published by the Group on 28 April 2008.
3. Business segments
Principal activities are as follows:
Software solutions
Outsourcing services
Segment information about these businesses is presented below:
|
Unaudited six months ended |
Software |
Outsourcing |
Group |
|
|
30 June 2008 |
solutions |
services |
Total |
|
|
2008 |
2008 |
2008 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Revenue from external sales |
3,476 |
4,530 |
8,006 |
|
|
_________ |
_________ |
_________ |
||
|
Loss from operations |
(166) |
(79) |
(245) |
|
|
Investment income |
9 |
|||
|
Finance costs |
(49) |
|||
|
_________ |
||||
|
Loss before tax |
(285) |
|||
|
Tax |
- |
|||
|
_________ |
||||
|
Loss after tax |
(285) |
|||
|
_________ |
|
Unaudited six months ended |
Software |
Outsourcing |
Group |
|
|
30 June 2007 |
solutions |
Services |
Total |
|
|
2007 |
2007 |
2007 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Revenue from external sales |
1,519 |
3,542 |
5,061 |
|
|
_________ |
_________ |
_________ |
||
|
Loss from operations |
(703) |
(619) |
(1,322) |
|
|
Investment income |
19 |
|||
|
Tax |
145 |
|||
|
_________ |
||||
|
Loss after tax |
(1,158) |
|||
|
_________ |
||||
|
Audited twelve months ended |
Software |
Outsourcing |
Group |
|
|
31 December 2007 |
solutions |
Services |
total |
|
|
2007 |
2007 |
2007 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Revenue from external sales |
5,803 |
8,263 |
14,066 |
|
|
_________ |
_________ |
_________ |
||
|
Profit/(loss) from operations |
648 |
(1,212) |
(564) |
|
|
Investment income |
32 |
|||
|
_________ |
||||
|
Loss before tax |
(532) |
|||
|
Tax |
70 |
|||
|
_________ |
||||
|
Loss after tax |
(462) |
|||
The Group sells software licences to global organisations which may have lengthy procurement processes. For this reason forecasting revenue relating to these contracts is unpredictable and the cash receipts therefore uneven.
4. Taxation on loss from ordinary activities
No tax charge arises in the current period due to the losses incurred. Tax credits of £145,000 and £70,000 arose in the periods ended 30 June 2007 and 31 December 2007 respectively relating to a research and development refunds. 5. Loss per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
|
Unaudited |
Unaudited |
Audited |
|
|
6 months to |
6 months to |
12 months to |
|
|
30 June |
30 June |
31 December |
|
|
2008 |
2007 |
2007 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Loss for the purpose of basic and diluted loss per share |
285 |
1,158 |
462 |
|
_________ |
_________ |
_________ |
|
|
Number of shares |
|||
|
Number |
Number |
Number |
|
|
Weighted average number of ordinary shares for the |
|||
|
purpose of basic and diluted loss per share |
89,264,299 |
83,165,371 |
86,197,159 |
|
_________ |
_________ |
_________ |
|
|
Loss per share |
|||
|
Pence |
Pence |
Pence |
|
|
Basic and diluted loss per share |
0.32p |
1.39p |
0.54p |
|
_________ |
_________ |
_________ |
6. Property, plant and equipment
On 2 April 2008, the Group purchased a software platform from Konaware Inc., a software developer based in San Francisco, to enable the further development of its GPS products. The cost was $155,000 (£77,694).
7. Short term loan liability
On 6 June 2008, a convertible bridging loan of £1 million was raised through three existing investors in the Company. The loan is repayable at the earlier of the following events:
If a resolution is passed to approve the fundraising and the fundraising is subsequently completed, the Company has the option to settle the loan in the following ways:
By way of issue of new ordinary shares in the Company at the lower of 4 pence a share or a 20% discount to the price paid for shares to be issued in the fundraising: or
Through the issue of a convertible loan note, which would give the investors the right to convert the loan note at the lower of 5 pence a share or the price paid for the new shares issued in the fundraising. The loan note will incur interest at 8%, which will compound every six months and roll up into the value of the note.
2. If no resolution approving the fundraising has been passed or, if passed, such resolution contains terms which are not satisfactory to the lenders by 31 December 2008, the outstanding principal and accrued interest will be multiplied by 200% and will be immediately repayable by the Company.
The accounting for the convertible bridging loan agreement is prescribed in IAS 39. The Company did not elect to use the fair value option for this instrument on initial recognition.
The convertible bridging loan agreement contains two embedded derivatives (i.e. a purchased call option and a written call option). The embedded derivatives are deemed not to be closely related to the debt host contract and have therefore been bifurcated and accounted for separately.
Therefore, on initial recognition four financial instruments were recognised on the balance sheet (i.e. the cash received, the loan liability (the debt host contract) and two embedded derivatives).
The four financial instruments were initially measured at fair value with reference to quoted market prices, the cash and loan liability being subsequently measured at amortised cost (using the effective interest rate). The embedded derivatives are subsequently measured at fair value with fair value movements being recognised in profit or loss. (On initial recognition there was be no impact recognised in the income statement as the transaction was on-market).
As at 30 June 2008, accrued interest (using the effective interest rate) of £49,000 was recognised in the income statement.
As disclosed in note 10, a resolution to approve the fundraising was passed at the EGM on 22 August 2008.
The Group has no other bank facilities in place.
8. Notes to the cash flow statement
|
Unaudited |
Unaudited |
Audited |
|
|
6 months to |
6 months to |
12 months to |
|
|
30 June |
30 June |
31 December |
|
|
2008 |
2007 |
2007 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Loss from continuing operations |
(245) |
(1,322) |
(564) |
|
Adjustments for: |
|||
|
Amortisation of intangible assets |
155 |
147 |
308 |
|
Depreciation of property plant and equipment |
43 |
45 |
86 |
|
Increase in share-based payments provision |
44 |
- |
106 |
|
____________ |
____________ |
____________ |
|
|
Operating cash flows before movement in working |
|||
|
capital |
242 |
192 |
(64) |
|
(Increase)/decrease in inventories |
(42) |
(6) |
13 |
|
(Increase)/decrease in receivables |
(1,044) |
667 |
(843) |
|
(Decrease)/increase in payables |
(353) |
(534) |
510 |
|
____________ |
____________ |
____________ |
|
|
Cash (consumed in)/received from operations |
(1,439) |
127 |
(384) |
|
Income taxes received |
- |
- |
799 |
|
____________ |
____________ |
____________ |
|
|
Net cash (used in)/received from operating activities |
(1,442) |
(1,003) |
415 |
|
____________ |
____________ |
____________ |
9. Analysis of consolidated equity
|
Unaudited |
Unaudited |
Audited |
||
|
6 months to |
6 months to |
12 months to |
||
|
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
||
|
£'000 |
£'000 |
£'000 |
||
|
Called-up share capital |
||||
|
At beginning of period/year |
8,926 |
8,108 |
8,108 |
|
|
Shares issued during the period/year |
- |
804 |
818 |
|
|
____________ |
____________ |
____________ |
||
|
At end of period/year |
8,926 |
8,912 |
8,926 |
|
|
____________ |
____________ |
____________ |
||
|
Share premium account |
||||
|
At beginning of period/year |
15,206 |
14,857 |
14,857 |
|
|
Shares issued during the period/year |
- |
349 |
349 |
|
|
____________ |
____________ |
___________ |
||
|
At end of period/year |
15,206 |
15,206 |
15,206 |
|
|
____________ |
____________ |
___________ |
||
|
Exchange translation reserve |
||||
|
At beginning of period/year |
343 |
377 |
377 |
|
|
Exchange differences on translation of overseas |
||||
|
operations in the period/year |
13 |
123 |
(34) |
|
|
___________ |
____________ |
___________ |
||
|
At end of period/year |
356 |
500 |
343 |
|
|
___________ |
____________ |
___________ |
||
10. Events after the balance sheet date
The Group is seeking to raise £6 million, made up of a £1 million convertible bridging loan and a share capital of £5 million by way of issue of new ordinary shares. The funds are being raised to provide for working capital, product development, sales expansion and potential acquisitions. Concurrent with the placing, the Company passed resolutions to allow the Company to move to AIM. The funds are expected to be received in late September when the move to AIM takes place.
Related Shares:
SVR.L