21st Feb 2005 11:37
eServGlobal Limited21 February 2005 Appendix 4D eServGlobal Limited ABN 59 052 947 743 Financial Report and Appendix 4D For the half-year ended 31 December 2004 The half-year financial report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the 2004 annual financial report. Results for announcement to the market Results A$ '000 Revenues from ordinary activities Up 54% to 17,669 Profit from ordinary activities after taxattributable to members Up - to 31 Net profit for the period attributable to members Up - to 31 Dividends (distributions) Amount per security Franked amount per security Current period Interim dividend declared Nilc -% Final dividend paid N/A c -% Previous corresponding period Interim dividend declared Nil c -% Final dividend paid Nil c -% Record date for determining entitlements to the N/Adividend. Brief explanation of revenue, net profit and dividends (distributions). The consolidated entity achieved sales revenue for the period of $17,446,000 (2003 $11,263,000) - an increase of 55%.The gross profit realised was $7,826,000 (45%) (2003 $3,661,000 (32%)) - an increase of 114%. EBITDA for the periodwas $1,300,000. (2003 EBITDA loss $1,703,000) The net result of the consolidated entity for the half year ended 31 December 2004 was a profit before tax of $114,000(2003 loss $5,055,000). Income tax expense was $83,000 (2003 $1,479,000) resulting in a profit after tax for the periodof $31,000 (2003 loss $6,534,000). Operating cash flow was an outflow of $4,271,000 for the period. This unusual result was caused by a combination oflarge expenditures early in the half and major revenue milestones late in the half. Costs incurred early included theLondon AIM listing ($587,000) and setup costs for outsourcing in India ($294,000). The timing of contracted paymentmilestones, for a number of projects, was such that $4,850,000 was invoiced in December and will be receipted in thesecond half. Net cash at 31 December 2004 was $10,719,000. Directors' Report The directors of eServGlobal Limited submit herewith the financial report forthe half-year ended 31 December 2004. In order to comply with the provisions ofthe Corporations Act 2001, the directors report as follows: The names of the directors of the company during or since the end of the halfyear period are: Ian Buddery, Executive Chairman Patrick McGrory, Chief Executive Officer Francois Barrault, Non Executive Director Graham Libbesson, Non Executive Director Jim Pratt, Non Executive Director David Smart, Non Executive Director Roger Allen, Non Executive Director (resigned 8 September 2004) Review of Operations This report is to be read in conjunction with other reports issuedcontemporaneously. eServGlobal Limited is a public company listed on the Australian and London(AIM) Stock Exchanges. Headquartered in Sydney, Australia, the eServGlobal grouphas operations throughout the world with offices in Wellington (NZ), Hong Kong,Ipswich (UK), Brussels (Belgium), the Netherlands, Denmark and Poland. eServGlobal develops and deploys telephony network software and services fortelecommunications carriers worldwide. We specialise in large scale IN(Intelligent Networking) environments, supporting voice and data services forfixed line and wireless carriers. Our IN systems are in use in the publicnetworks of leading operators in Europe and Asia Pacific. The consolidated entity achieved sales revenue for the period of $17,446,000(2003 $11,263,000) - an increase of 55%. The gross profit realised was$7,826,000 (45%) (2003 $3,661,000 (32%)) - an increase of 114%. EBITDA for theperiod was $1,300,000. (2003 EBITDA loss $1,703,000) The net result of the consolidated entity for the half year ended 31 December2004 was a profit before tax of $114,000 (2003 loss $5,055,000). Income taxexpense was $83,000 (2003 $1,479,000) resulting in a profit after tax for theperiod of $31,000 (2003 loss $6,534,000). The operating cash flow for the period was a net outflow of $4,271,000. Thisunusual result was caused by a combination of large expenditures early in thehalf and major revenue milestones late in the half. Costs incurred earlyincluded the London AIM listing ($587,000) and setup costs for outsourcing inIndia ($294,000). The timing of contracted payment milestones, for a number ofprojects, was such that $4,850,000 was invoiced in December and will bereceipted in the second half. Net cash at 31 December 2004 was $10,719,000. Auditors Independence Declaration Our auditors have provided the Board of Directors with a signed IndependenceDeclaration in accordance with s307C of the Corporations Act 2001. Thisdeclaration is included at the end of this report. Directors' Report (cont.) Rounding Off of Amounts The Company is a company of the kind referred to in ASIC Class Order 98/0100,dated 10 July 1998, and in accordance with that Class Order amounts in thedirectors' report and the financial report are rounded off to the nearestthousand dollars. Signed in accordance with a resolution of directors. On behalf of the directors: Ian BudderyDirectorLondon, 21 February 2005 INDEPENDENT REVIEW REPORT TO THE MEMBERS OF ESERVGLOBAL LIMITED Scope We have reviewed the financial report of eServGlobal Limited for the half-yearended 31 December 2004 as set out on pages 5 to 13. The financial reportincludes the consolidated financial statements of the consolidated entitycomprising the disclosing entity and the entities it controlled at the end ofthe half-year or from time to time during the half-year. The disclosingentity's directors are responsible for the financial report. We have performedan independent review of the financial report in order to state whether, on thebasis of the procedures described, anything has come to our attention that wouldindicate that the financial report is not presented fairly in accordance withAccounting Standard AASB 1029 "Interim Financial Reporting" and other mandatoryprofessional reporting requirements in Australia and statutory requirements, soas to present a view which is consistent with our understanding of theconsolidated entity's financial position, and performance as represented by theresults of its operations and its cash flows, and in order for the disclosingentity to lodge the financial report with the Australian Securities andInvestments Commission. Our review has been conducted in accordance with Australian Auditing Standardsapplicable to review engagements. A review is limited primarily to inquiries ofthe entity's personnel and analytical procedures applied to the financial data.These procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance provided is less than given in an audit. Wehave not performed an audit and, accordingly, we do not express an auditopinion. Auditor's Independence Declaration The independence declaration provided to the Directors of eServGlobal Limited on18 February 2005 would be in the same terms if it was given to the Directors onthe date this review report is made out. Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the half-year financial report of eServGlobalLimited is not in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity'sfinancial position as at 31 December 2004 and of its performance for thehalf-year ended on that date; and (ii) complying with Accounting Standard AASB 1029 "InterimFinancial Reporting" and the Corporations Regulations 2001; and (b) other mandatory professional reporting requirements in Australia. DELOITTE TOUCHE TOHMATSU Catherine HillPartnerChartered Accountants Sydney, 21 February 2005 The liability of Deloitte Touche Tohmatsu is limited by, and to the extent of,the Accountants' Scheme under the Professional Standards Act 1994 (NSW). Directors' Declaration The directors declare that: (a) the attached financial statements and notes thereto comply withAccounting Standards; (b) the attached financial statements and notes thereto give a true and fairview of the financial position and performance of the consolidated entity; (c) in the directors' opinion, the attached financial statements and notesthereto are in accordance with the Corporations Act 2001; and (d) in the directors' opinion, there are reasonable grounds to believe thatthe disclosing entity will be able to pay its debts as and when they become dueand payable. Signed in accordance with a resolution of the directors made pursuant to s. 303(5) of the Corporations Act 2001. On behalf of the directors: Ian Buddery Patrick McGroryExecutive Chairman Chief Executive Officer/Director London, 21 February 2005 London, 21 February 2005 Consolidated Statement of Financial Performance for the half-year ended 31 December 2004 Consolidated Note Half-Year Ended Half-Year Ended 31 December 2004 31 December 2003 $'000 $'000 Sales revenue 17,446 11,263 Cost of sales (9,620) (7,602) Gross profit 7,826 3,661 Other revenue from ordinary activities 223 209Sales and marketing expenses (3,213) (2,537)Administration expenses (3,935) (5,599)Corporate expenses (786) (785)Borrowing costs (1) (4) Profit / (Loss) from ordinary activities before 2 114 (5,055)income tax expense Income tax expense relating to ordinary activities (83) (1,479) Net Profit / (Loss) 31 (6,534) Total changes in equity other than those resulting 31 (6,534)from transactions with owners as owners Earnings per share:Basic (cents per share) 0.0 (6.3)Diluted (cents per share) 0.0 (6.3) Notes to the Financial Statements are included on pages 9 to 13 Consolidated Statement of Financial Position as at 31 December 2004 Consolidated Note 31 December 30 June 2004 2004 $'000 $'000 Current AssetsCash assets 10,719 14,658Receivables 12,133 7,716 Total Current Assets 22,852 22,374 Non-Current AssetsOther financial assets -Property, plant and equipment 1,528 1,496Intangibles 24,076 24,861Other 3 402 598 Total Non-Current Assets 26,006 26,955 Total Assets 48,858 49,329 Current LiabilitiesPayables 4,466 4,398Current tax liabilities 171 142Provisions 389 412Other 4 1,355 2,230 Total Current Liabilities 6,381 7,722 Total Liabilities 6,381 7,722 Net Assets 42,477 41,607 EquityContributed equity 53,055 52,216Retained profits (10,578) (10,609) Total Equity 42,477 41,607 Notes to the Financial Statements are included on pages 9 to 13 Consolidated Statement of Cash Flows for the half-year ended 31 December 2004 Consolidated Inflows/(Outflows) Note Half-Year Ended Half-Year Ended 31 December 2004 31 December 2003 $'000 $'000 Cash Flows from Operating Activities Receipts from customers 12,919 17,192Payments to suppliers and employees (17,373) (16,359) Interest received 223 200Interest and other costs of finance paid (1) (4)Income tax paid (39) (36) Net cash (used in)/provided by operating activities (4,271) 993 Cash Flows From Investing ActivitiesPayment for property, plant and equipment (462) (179)Proceeds from sale of property, plant and equipment - 9Research and Development - (416) Net cash provided by/ (used in) investing activities (462) (586) Cash Flows From Financing ActivitiesProceeds from issues of equity securities 839 - Net cash provided by financing activities 839 - Net (Decrease)/Increase In Cash Held (3,894) 407 Cash At The Beginning Of The Half-Year 14,658 10,878Effects of exchange rate changes on the balance of (45) (114)cash held in foreign currencies Cash At The End Of The Half-Year 10,719 11,171 Notes to the Financial Statements are included on pages 9 to 13 Notes to the Financial Statements for the half-year ended 31 December 2004 1. BASIS OF PREPARATION The half-year financial report is a general purpose financial report prepared inaccordance with the Corporations Act 2001 and AASB 1029 "Interim FinancialReporting". The half-year financial report does not include notes of the typenormally included in an annual financial report and should be read inconjunction with the 2004 annual financial report. Significant Accounting Policies The accounting policies adopted in the preparation of the half-year financialreport are consistent with those adopted and disclosed in the 2004 annualfinancial report. 2. SIGNIFICANT TRANSACTIONS There are no significant transactions in the period other than as described inthe Review of Operations in the Directors' Report. Profit/(loss) from ordinary activities includes the following items of expense: Consolidated Half Year ended 31 Half-Year Ended 31 December 2004 December 2003 $'000 $'000 Costs incurred for listing on London Stock Exchange AIM 587 -market. Deferred Research & Development written down to - 862recoverable amount. Closure of business division and restructure - 1,263 Deferred tax assets written off - 1,479 Notes to the Financial Statements (Cont.) Consolidated Half-Year Ended Year Ended 31 December 2004 30 June 2004 $'000 $'000 3. OTHER NON-CURRENT ASSETS Deferred research and development costs 3,965 3,965Accumulated amortisation (3,563) (3,367)Net amount deferred 402 598 Research and development costs incurred during the half - 715year / year and deferred to future years.Research and development costs amortised during the half (196) (563)year / year.Research and development costs written off during the half - (863)year / year 4. OTHER CURRENT LIABILITIES Deferred income 1,355 2,230 Consolidated 31 December 2004 31 December 2003 Cents per Total Cents per Total Share $'000 Share $'000 5. DIVIDENDS Fully paid ordinary shares Recognised amounts Interim dividend provided for - - - - Special dividend paid in respect of prior financial year - - - - Final dividend paid in respect of prior financial year - - - - Fully paid ordinary shares Unrecognised amounts Interim dividend provided for - - - - - - - - Notes to the Financial Statements (Cont.) 6. SEGMENT INFORMATION The consolidated entity operates in one industry, the IT industry, and in thefollowing geographical segments: Information on Geographical Segments (primary reporting format) Segment Revenues EXTERNAL SALES INTER-SEGMENT TOTALGEOGRAPHICAL 2004 2003 2004 2003 2004 2003 $'000 $'000 $'000 $'000 $'000 $'000Asia Pacific 4,712 3,727 4,712 3,727Europe 12,734 7,545 12,734 7,545 Total of all geographies 17,446 11,272 17,446 11,272Eliminations -Unallocated 223 200Consolidated 17,669 11,472 Segment Results 2004 2003 $'000 $'000Asia Pacific (i) (see below) 991 (2,880)Europe 657 (319) -Total of all geographies 1,648 (3,199)Unallocated (ii) (1,534) (1,856)Profit / (loss) from ordinary activities before income tax expense 114 (5,055)Income tax expense relating to ordinary activities 83 1,479Net Loss 31 (6,534) (i) 2003 Asia Pac results include Research & Development costs of $1,098,000 written off oramortised during the half year and restructuring costs of $967,000, associated with the closure ofa business segment in July 2003. (ii) 2004 unallocated includes costs associated with the AIM listing of $587,000. Notes to the Financial Statements (Cont.) 7. IMPACTS OF ADOPTING THE AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS The consolidated entity will be required to prepare financial reports usingAustralian accounting standards that are equivalent to International FinancialReporting Standards (A-IFRS) and their related pronouncements for all periodsbeginning on or after 1 January 2005. Accordingly the consolidated entity'sfirst half year report prepared under A-IFRS will be for the half year reportingperiod ended 31 December 2005. A-IFRS also requires the consolidated entity torestate comparative period balances. As a result, the opening statement offinancial position of the consolidated entity as at 1 July 2004 will be restatedso that all transactions and balances are recognised and measured in accordancewith A-IFRS. Transitional adjustments will be reflected either as areclassification of items in the statement of financial position, or anadjustment of opening retained earnings. Various voluntary and mandatory exemptions are available to the consolidatedentity on first-time adoption, which will not be available on an ongoing basis.The exemptions provide relief from retrospectively accounting for certainbalances, instruments and transactions in accordance with A-IFRS. At the date of this report, the directors of eServGlobal Limited have completeda full impact study of the likely effect of the transition to A-IFRS on theconsolidated entity, and have developed a detailed plan for the management ofthe transition. Whilst a plan has been developed, the directors are yet tofinalise the financial impact of the transition to A-IFRS and also to decide onsome of the options that are available on initial adoption. These matters willbe finalised prior to 30 June 2005. Whilst the financial impact of the transition is still not finalised andaccordingly not disclosed in this financial report, the directors of eServGlobalLimited have identified the following as being the key accounting policydifferences expected to arise on transitioning to A-IFRS. This does notrepresent an exhaustive list of the differences that will arise, and furtheranalysis may change the consolidated entity's assessment of the importance orotherwise of the various differences. Key accounting policy differences Share-based payments Share-based compensation forms part of the remuneration of employees of theconsolidated entity (including executives). The consolidated entity does notrecognise an expense for any share-based compensation granted. Under A-IFRS, theconsolidated entity will be required to recognise an expense for suchshare-based compensation. Share-based compensation is measured at the fair valueof the share options determined at grant date and recognised over the expectedvesting period of the options. A reversal of the expense will be permitted tothe extent non-market based vesting conditions (e.g. service conditions) are notmet. The entity will not retrospectively recognise share-based payments vestedbefore 1 January 2005 as permitted under A-IFRS first time adoption. Notes to the Financial Statements (Cont.) Share-based payment (cont.) The recognition of the expense will decrease the consolidated entity's openingretained earnings on initial adoption of A-IFRS and increase share capital bythe same amount for share-based payments issued after 7 November 2002 but notvested before 1 January 2005. Similar impacts will also occur in future periods,however, quantification of the impact on equity and in the income statement of the existing share options granted asremuneration has not been completed at the reporting date. Income tax The consolidated entity currently calculates deferred taxes by accounting forthe differences between accounting profits and taxable income, which give riseto 'permanent' and 'timing' differences. Under A-IFRS, deferred taxes aremeasured by reference to the 'temporary differences' determined as thedifference between the carrying amount and the tax base of assets andliabilities recognised in the balance sheet. Because A-IFRS has a wider scope than the entity's current accounting policies,it is likely that the amount of deferred taxes recognised in the balance sheetwill increase. Adjustments to the recognised amounts of deferred taxes will also result as aconsequence of adjustments to the carrying amounts of assets and liabilitiesresulting from the adoption of other A-IFRS. The likely impact of these changeson deferred tax balances has not currently been determined. Goodwill Goodwill is currently amortised over a 20 year period. A-IFRS does not permitgoodwill to be amortised, but instead requires the carrying amount to be testedfor impairment at least annually. This change in policy may result in increasedvolatility in the profit and loss, where impairment losses are likely to occur. Business Combinations Historically, the acquisition of an entity or operation is accounted for underthe purchase method of accounting by the legal acquirer. Where consolidatedaccounts are prepared, the assets and liabilities purchased are initiallyrecognised at their fair values in the consolidated accounts. With the adoption of A-IFRS there are a number of recognition and measurementdifferences that result in relation to assets and liabilities acquired in abusiness combination, particularly in relation to intangible assets andrestructuring provisions. Acquired contingent liabilities must also berecognised at their fair values where acquired in a business combination. The impact of these changes in accounting policy on first-time adoption willdepend on whether the consolidated entity will elect to adopt the exemptionavailable to it to not reopen past acquisitions and retrospectively account forthem appropriately. The directors are yet to decided on whether to adopt theexemption. On an ongoing basis, this change in policy may significantly affectthe profit and loss and balance sheet, as the accounting going forwardsignificantly differs from the manner in which such transactions are treatedunder current Australian GAAP.Other information required to be given to ASX under listing rule 4.2A.3 Net tangible assets per security Current period Previous corresponding periodNet tangible assets per security 16.4 cents 15.8 cents Details of entities over which control has been gained or lost during the period Name of entity Date of gain or loss of Contribution to reporting control entity's profitN/A N/A N/A Dividends Amount Amount per Franked amount Amount per Date paid/ security per security at security of payable 30% tax foreign source dividend Interim dividend: Current year Nil N/A N/A N/A N/A Previous year Nil N/A N/A N/A N/A Final dividend paid in respect ofprevious financial year: Current period: Nil N/A N/A N/A N/AFinal dividend Previous corresponding period:Special dividendFinal dividend Nil N/A N/A N/A N/A The dividend or distribution plans shown below are in operation.N/A. The last date(s) for receipt of election notices for the+dividend or distribution plans N/A Details of associates and joint venture entities Name of entity Percentage of ownership interest Aggregate share of net profit held at end of period (loss) contributed to the reporting entity Current Previous Current period Previous corresponding corresponding period period $A'000 period $A'000 Total N/A N/A N/A N/A Please click on the following link to view the presentation to analysts regarding half year results http://www.rns-pdf.londonstockexchange.com/rns/8258i_-2005-2-21.pdf This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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