12th Mar 2008 07:01
Ascribe plc12 March 2008 Press Release 12 March 2008 Ascribe plc ("Ascribe" or "the Group") Interim results for the six months ended 31 December 2007 Ascribe plc (AIM:ASP), the health IT group, reports its interim results for thesix months ended 31 December 2007. Basis of Reporting Results reported under International Financial Reporting Standards ("IFRS") forthe first time; comparatives have been restated. Highlights • Record capital order book of £3.1m (up £0.9m on 2006), supports full year expectations • Turnover down 5.6% to £7.1m (2006: £7.5m) • Recurring revenue 71% of total turnover (2006: 66%) • Adjusted* operating profit of £1.0m (2006: £1.8m) • Adjusted* basic EPS of 0.70 pence (2006: 1.28 pence) • Investment into sales, operations and development staffing to meet anticipated order upturn • Research and development expenditure (gross of capitalisation) increased 18% to £1.7m (2006: £1.5m) *before charges for amortisation of acquired intangible assets and share-basedpayments Stephen Critchlow, Executive Chairman of Ascribe commented: "I am pleased withthe Group's performance over the past six months, although the headline figuresdo obscure our rate of progress. Recognising that the second half bias in ourbusiness, due to the NHS' April year end, has increased, we have built our orderbook to a record level and we continue to increase our market share.Anticipating the increased pipeline, we have developed new products and havegrown our sales and development teams. The Board remains confident that we candeliver our full year expectations and I look forward to updating the market inSeptember." - Ends - For further information:Ascribe plcStephen Critchlow, Executive Chairman Tel: +44 (0) 870 053 4545Jeremy Lee, Group Finance Director www.ascribe.com Cenkos Securities plcIan Soanes, Corporate Finance Tel: +44 (0) 20 7397 [email protected] www.cenkos.com Media enquiries:AbchurchJustin Heath / Stephanie Cuthbert Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Executive Chairman's Statement I am delighted with the Group's performance over the past six months. We havebuilt our capital order book to a record level. Orders for new implementations,excluding recurring maintenance revenue which is also committed, stand at £3.1m.The delivery issues from the tail end of last year have been resolved giving usincreased confidence that we will deliver the market's full year profitexpectations. We continue to increase our market share and have written, testedand installed multiple web based solutions on our new software platform. TheGroup has maintained its investment in its development and operations capabilityin response to the continued growth that is widely expected in the US$100bnworld-wide health informatics market and to ensure delivery of the order book. In response to the growing pipeline, we have expanded our sales and developmentteams and developed new products. These new products have enhanced ourintegrated clinical workstation to allow interoperability between our ownapplications and the national initiatives in each country in which we trade.Microsoft has supported us in this development using their latest technology. Ascribe is seeing a significant uplift in interest within the UK as the NationalProgramme for IT "NPfIT" continues to move officially towards local decisionmaking. The published move to local procurement in December led to asignificant increase in the number of orders, including: • 48% increase in first-half of new capital orders of Pharmacy solutions • 43% increase in Emergency Care orders • 43% increase in Electronic Patient Record orders including orders for "Choose & Book" and "18 Week Wait" functionality Orders for our customers within Mental Health are lower than last year when weachieved a single £1.7m order which is still being implemented to plan. I am encouraged by the quality and depth of our order pipeline and from thedevelopment of new products that will stimulate further solutions for existingand new customers. Since its acquisition in October, Scorpio InformationSystems Limited has been successfully and fully integrated into the Group. Both parties have benefited from the cross selling opportunities of a widercustomer network and we have already achieved nearly £1m of orders coming fromthe sale of Ascribe solutions to the Scorpio user base. In addition, Scorpiohas benefited from being part of a larger organisation, which providesreassurance for prospective and existing customers as well as access to thewider customer contacts and resources of the Ascribe group. By having a common platform from which we offer all of our solutions, we areable to increase the offering to our customers, who will often save the cost ofinvestment in the solution within the first year of its use. Our customers arealso reporting considerable improvements in patient safety, which gives themfurther incentive to work with us as their preferred software provider. We have a large pipeline of existing customers who have a single departmentalproduct who are now looking to buy the complete integrated package. We receivedour first substantial order of this kind in December. This marks a significantchange in our business. Single departmental product sales are worth between£20,000 and £200,000 whereas the complete integrated solution will exceed £1mper customer. Some of our other NHS customers, to whom we have already suppliedintegrated packages, already see us as their sole supplier - we have sincereceived further significant orders from these Trusts who are expanding to takethe whole suite of our applications. Our customer pipeline does not yet include any benefits that may arise from thepublishing of the NPfIT's ASCC ("Alternative Supplier Catalogue") due in April2008. A large component of our order book will be delivered in the second half of ourfinancial year which, combined with targeted investment in key staff during thefirst half, means the sales and profitability for the year will be skewed to thesecond half. The reported results are in line with our expectations, leaving usconfident in the Group's prospects for the year and its ability to deliver valueto all of its stakeholders. Financial results These results are the first that the Group has reported under InternationalFinancial Reporting Standards (IFRS) and, consequently, the comparative figuresin respect of the six months ended 31 December 2006 have been restated. In the six months ended 31 December 2007 sales were £7.1m (2006: £7.5m). Anexcellent order intake in December meant that the actual order book taken into2008 was at a record high. Long-term maintenance contract revenues continue to underpin the businesscomprising 71% of total turnover for the six months ended 31 December 2007(2006: 66%). Sales from markets other than the UK and Republic of Irelandcomprised 17% (2006: 16%) of first half sales. Operating profit in the six months ended 31 December 2007 was £0.9m (2006:£1.8m) The Group continues to invest both in the development of new software and in theenhancement of existing software that is available to clinicians in order toimprove patient care, increase operational efficiencies, generate customer costsavings and improve functionality. The Board believes that this will strengthenthe Group's ability to grow new sales and profit in future periods. Basic earnings per share for the period was 0.66 pence (2006: 1.24 pence). Balance Sheet and Funding At 31 December 2007 the Group had net assets of £13.3m (2006: £11.0m). At the same date the Group's net debt was £4.1m (2006: £3.9m). In line withprevious years the Group spends more cash in the first half of the year and ishighly cash generative in the second half. This is due to the high level ofannual maintenance contracts which are invoiced in April - the start of the NHSfiscal year. Pharmacy Success in Hospital Pharmacy has come from sales of UK Medicine Managementsolutions with new web-based technologies being delivered successfully to sitesin the UK and Asia Pacific. These new technologies can act as an incentive forhealthcare providers to offer a range of brand new integrated services such as 'Electronic Prescribing' and 'Robotic Dispensing', designed to reduce medicalrisks to patients and thereby improve the safety standards offered byprofessional healthcare clinicians and organisations. Mental Health & Community Care Our Community Healthcare solutions business has performed satisfactorily in thefirst half of this financial year with additional revenues coming from softwareupgrades and requested increases in functionality and capacity. Primary & Unscheduled Care Ascribe's Emergency Department software, which delivers patient tracking andcare management systems into A&E and Unscheduled Care departments hasstrengthened its market base in the UK and overseas. Its success stems from thesystem's ability to meet clinician's needs and also provide departmentalreporting allowing Trusts to claim effectively for their 'payment by results'income. Our installed sites report that they can reduce costs and recouprevenues that more than offset the system's cost, within the first year of use. Electronic Patient Records Ascribe is seeing increased interest in combining our solutions at single sites.This enables healthcare providers to achieve additional improvements to patientsafety and compile more comprehensive electronic health care records for theirpatients. A recent order has seen a single site request a whole suite ofAscribe's systems for a number of its departments. Acquisitions On 22 October 2007, Ascribe acquired 100% of the share capital of ScorpioInformation Systems Limited for a total consideration of £1.31m (£0.88m in cashand £0.43m by the issue of 1.04 million new ordinary shares). The business,based in Hythe, Southampton, is a supplier of clinical information managementsystems to the NHS. The Group, which had £0.62m of cash at acquisition, reportedturnover of £0.52m and an operating profit of £0.24m in its most recentstatutory accounts. Prospects With 60-70% of our annual turnover coming from recurring maintenance contractsour expected revenue growth in the remainder of this year will depend on thedelivery of our existing order book and of new orders that are expected in thesecond half. We expect double-digit percentage revenue growth for the year toJune 2008 in comparison to 2007. This will be dependent on the continued saleof licences to new and existing customers together with the associatedimplementation revenues. We expect this new business to accrue across all ourdepartmental and enterprise-wide solutions. The Board would like to thank all of Ascribe's employees for their continuedhard work and commitment throughout the past six months. We continue toexperience significant change as we grow, expand our customer offerings andcontinue the integration of the acquired businesses, and I am encouraged by howfar we have come in this process and how much stronger we are as an organisationas a result. I remain confident about the outlook for the Group for the remainder of thefinancial year. We have never been better positioned for the medium to longterm as our Group performance meets the demand coming from a move to localprocurement. Stephen CritchlowExecutive Chairman12 March 2008 Consolidated Income StatementSix months ended 31 December 2007 Six months to Six months to Year ended 31 Dec 2007 31 Dec 2006 30 June 2007 Notes (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 Revenue 2 7,056 7,474 15,313Cost of Sales (550) (486) (1,544) Gross profit 6,506 6,988 13,769Research and development costs (1,278) (1,074) (2,036)Amortisation of acquired intangible assets (17) - -Impairment of goodwill - - (194)Share based payments (34) (52) (98)Administration (4,274) (4,089) (8,217)Operating profit before the amortisation of acquiredintangibles, impairment ofgoodwill and share basedpayments 954 1,825 3,516 Operating profit 903 1,773 3,224 Finance income 51 14 38Finance expenses (142) (125) (225) Profit before income tax 812 1,662 3,037Tax expense (49) (249) (387) Profit for the period 763 1,413 2,650 Earnings per ordinary share Pence Pence Pence- basic 3 0.66 1.24 2.32- diluted 3 0.64 1.15 2.20 The results for the six month period ended 31 December 2006 and the year ended30 June 2007 have been restated in accordance with IFRS. Statement of Recognised Income and ExpenseSix months ended 31 December 2007 Six months to 31 Six months to 31 Year ended Dec 2007 Dec 2006 30 June 2007 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 Currency translation differences (22) 52 (12) Net income recognised directly in equity (22) 52 (12)Profit for the period 763 1,413 2,650 Total income recognised for the period 741 1,465 2,638 The results for the six month period ended 31 December 2006 and the year ended30 June 2007 have been restated in accordance with IFRS. Consolidated Balance Sheet At 31 Dec 2007 At 31 Dec 2006 At 30 Jun (unaudited) (unaudited) 2007 Notes £'000 £'000 (unaudited) £'000ASSETSNon-current assetsProperty, plant and equipment 741 246 507Goodwill 17,823 18,961 17,443Software and customer contracts 592 - -Development costs 1,155 386 714 20,311 19,593 18,664 Current assetsTrade and other receivables 4 3,787 3,970 3,063Deferred income tax asset - - 12Cash and cash equivalents - 155 4,190 3,787 4,125 7,265 Total assets 24,098 23,718 25,929 LIABILITIESCurrent liabilitiesTrade and other payables 5 (4,893) (4,996) (8,287)Current income tax liabilities (133) (676) (306)Borrowings (1,804) (1,657) (700)Provisions and other liabilities (1,160) (160) (1,160) (7,990) (7,489) (10,453) Non-current liabilitiesBorrowings (2,345) (2,382) (2,724)Provisions and other liabilities (500) (2,880) (500) (2,845) (5,262) (3,224) Total liabilities (10,835) (12,751) (13,677) NET ASSETS 13,263 10,967 12,252 SHAREHOLDERS' EQUITY 6Share capital 1,174 1,142 1,143Shares to be issued - 675 650Share premium account 10,273 9,182 9,220Merger reserve 561 561 561Retained earnings 1,255 (593) 678 TOTAL EQUITY 13,263 10,967 12,252 The figures as at 31 December 2006 and 30 June 2007 have been restated inaccordance with IFRS. Consolidated Cash Flow Statement 6 months to 31 6 months to 31 Year ended Dec 2007 Dec 2006 30 Jun 2007 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Cash flows from operating activitiesCash (used in)/ generated from operations (3,063) (1,917) 4,287Interest paid (142) (46) (225)Income tax paid (282) (90) (594) Net cash (used in)/ generated by operating activities (3,487) (2,053) 3,468 Cash flows from investing activitiesPurchase of property, plant and equipment (328) (10) (385)Capitalised development costs (596) (265) (788)Acquisition of subsidiary, including expenses (956) - (38)Payment of deferred consideration - (850) (850)Cash acquired with acquisition of subsidiary 615 - -Interest received 51 14 38 Net cash used in investing activities (1,214) (1,111) (2,023) Cash flows from financing activitiesProceeds from borrowings - 900 1,431Repayment of borrowings (379) (305) (557)Issue of equity share capital 6 - -Dividends paid to company's shareholders (198) (148) (148) Net cash (used in)/ generated from financing activities (571) 447 726 (Decrease)/ increase in cash and cash equivalents (5,272) (2,717) 2,171 Net cash and cash equivalents at start of period 4,190 2,031 2,031 Exchange gains and losses on cash and bank overdrafts (22) (53) (12) Net cash and cash equivalents at end of period (1,104) (739) 4,190 Cash generated from operating activitiesProfit before income tax 812 1,662 3,037Adjustments for:- Depreciation 94 58 168- Amortisation 172 - 195- Goodwill impairment charge - - 194- Loss on disposal of property, plant and - - 4equipment- Share based payments 34 52 98- Finance costs 91 111 187Changes in working capital:- Trade and other receivables (707) (846) 49- Trade and other payables (3,559) (2,954) 355 (3,063) (1,917) 4,287 Notes 1. Basis of preparation For the year ended 30 June 2007 and previous accounting periods, the Groupprepared its audited full year and unaudited interim financial statements underUK Generally Accepted Accounting Principles ("UK GAAP"). From 1 July 2007, theGroup is required to prepare its published financial statements in accordancewith International Financial Reporting Standards ("IFRS") as adopted by theEuropean Union ("EU") and implemented in the UK, as well as those parts of theCompanies Act 1985 that are applicable to companies reporting under IFRS. UKGAAP differs in some areas from IFRS. Ascribe plc's transition date for the adoption of IFRS is 1 July 2006 and thecompany has prepared its opening IFRS balance sheet at that date. The interim financial statements of Ascribe plc for the six months ended 30December 2007 have been prepared in accordance with the principal accountingpolicies set out in Appendix 1 - these policies have been consistently appliedto all periods presented. The interim financial statements have been prepared inaccordance with those IFRS standards, as adopted by the EU, and IFRICInterpretations issued and effective as at the time of issuing these interimfinancial statements. The IFRS standards and IFRIC Interpretations that will beapplicable at 30 June 2008, including those that will be applicable on anoptional basis, are not known with certainty at the time of preparing theseinterim financial statements. The changes to accounting policies are explained in Appendix 2, together with areconciliation of the balance sheets at 30 June 2006, 31 December 2006 and 30June 2007, and of the profit and loss account for the periods to 31 December2006 and 30 June 2007, as reported under UK GAAP to the balance sheet and incomestatement under IFRS, as reported in these financial statements. The note alsoincludes a reconciliation of net assets at the date of transition. These unaudited interim statements do not constitute statutory financialstatements within the meaning of Section 240 of the Companies Act 1985. Thefinancial statements for the year ended 30 June 2007 were prepared in accordancewith UK GAAP and have been delivered to the Registrar of Companies and on whichthe auditors issued an unqualified audit report. The comparative figures for theyear ended 30 June 2007 have been restated as highlighted in the "Basis ofPreparation" note above and are an abridged version of the full financialstatements (as restated for IFRS) for that period. No financial statement willbe filed for the six months ended 31 December 2007. 2. Segmental information 6 months to 31 6 months to 31 Year ended Dec 2007 Dec 2006 30 June 2007 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Revenue by geography United Kingdom and ROI 5,849 6,276 13,107 Rest of the World 1,207 1,198 2,206 7,056 7,474 15,313Revenue by product Maintenance income 5,005 4,948 9,619 Income relating to sales of software 2,051 2,526 5,694 7,056 7,474 15,313 3. Earnings per share 6 months to 31 6 months to 31 Year ended Dec 2007 Dec 2006 30 June 2007 (unaudited) (unaudited) (unaudited) Adjusted profit for the period* (£'000) 814 1,465 2,942Profit for the period (£'000) 763 1,413 2,650Basic weighted average number of shares ('000) 115,459 114,179 114,250Fully diluted weighted average number of shares ('000) 119,082 123,120 120,487Earnings per share (pence) - basic 0.66 1.24 2.32 - diluted 0.64 1.15 2.20 - adjusted 0.70 1.28 2.58 * Adjusted profit for the period represents the profit after taxation for theperiod excluding charges in relation to amortisation of acquired intangibles,impairment of goodwill and share based payments. 4. Trade and other receivables At 31 Dec 2007 At 31 Dec 2006 At 30 Jun 2007 (unaudited) (unaudited) (unaudited) Trade receivables 2,613 2,862 2,008Amounts recoverable on contracts 93 93 92Other debtors 94 108 12Prepayments and accrued income 987 907 951 3,787 3,970 3,063 5. Trade and other payables At 31 Dec 2007 At 31 Dec 2006 At 30 Jun 2007 (unaudited) (unaudited) (unaudited) Trade payables 401 536 1,245Social security and other taxes 371 493 906Other creditors 87 - 181Accruals 451 473 327Deferred income 3,583 3,494 5,628 4,893 4,996 8,287 6. Statement of changes in Shareholders' Equity Share Shares to be Share Premium Merger Retained Total Equity Capital Issued Account Reserve Earnings (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 As at 1 July 2006 1,142 - 9,182 561 (1,910) 8,975 Profit for the period 1,413 1,413 Share based payments change 52 52 Shares to be issued 675 675 Dividends (148) (148) As at 31 December 2006 1,142 675 9,182 561 (593) 10,967 Profit for the period 1,237 1,237 Share based payments change 46 46 Exchange differences (12) (12) Shares to be issued 1 (25) 24 - Premium on 1p ordinary shares issued 14 14 As at 1 July 2007 1,143 650 9,220 561 678 12,252 Profit for the period 763 763 Share based payments change 34 34 Exchange differences (22) (22) Dividends (198) (198) Shares to be issued 20 (650) 630 - Issue of new shares 11 11 Premium on 1p ordinary shares issued 423 423 As at 31 December 2007 1,174 - 10,273 561 1,255 13,263 Appendix 1 Summary of significant accounting policies The principal accounting policies applied in the preparation of theseconsolidated financial statements are set out below. These policies have beenconsistently applied to all periods presented. 1. IFRS exemptions As permitted by paragraph 13 of IFRS 1, "First Time Adoption of IFRS", the Grouphas taken advantage of an exemption and has elected not to apply IFRS 3 to theBusiness Combinations that took place before the date of transition to IFRS - 1July 2006. As a result, the carrying value of goodwill at 30 June 2006 isfrozen, subject to impairment reviews after then in accordance with IFRS 3. 2. Basis of consolidation The Group financial statements consolidate those of the Company and itssubsidiary undertakings drawn up to 31 December 2007. Subsidiaries are entitiesover which the Group has the power to control the financial and operatingpolicies so as to obtain benefits from its activities. The Group obtains andexercises control through voting rights. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by Group companies. The cost of an acquisition is measured as thefair value of assets given, equity instruments issued and liabilities incurredor assumed at the date of acquisition, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date. The excess of the cost of acquisition overthe fair value of the Group's share of the identifiable net assets acquired isrecorded as goodwill. If the cost of acquisition is less than the fair value ofnet assets acquired, the difference is recognised directly in the incomestatement. 3. Segmental reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. Save for the geographical and productanalysis of turnover set out in Note 2 to the half yearly results the Directorsconsider that the Group's activities constitute one class of business -healthcare informatics. 4. Revenue recognition Turnover comprises the value of goods and services provided during the period,excluding value added tax, and includes income from licences, projectimplementation, installation, support, maintenance, training, consultancy andthe supply of third party software and hardware. Each element of turnover isrecognised when: i) Delivery of goods or provision of services has taken place;ii) There are no significant obligations remaining to be delivered; andiii) Collection of the amount due from the customers is reasonably assured The supply of licences is only recognised when the software is installed andappropriate training provided. Revenue for project implementation, installation,training and consultancy is recognised proportionately as the work progresses.The supply of hardware is recognised on delivery to the customer. For maintenance sales, only that proportion of revenue is recognised whichrelates to the part of the maintenance period falling within the accountingyear. Income recognised in turnover but not invoiced at the period end is recorded inprepayments and accrued income in debtors. Where invoices are raised in advanceof the provision of services they are recorded as deferred income in creditors. Revenue on long-term contracts is ascertained in a manner appropriate to thestage of completion of the contract at the period end date, with due regard toanticipated future costs. Amounts recoverable on such contracts are includedwithin debtors. Payments on account in excess of turnover are included withincreditors. Full provision is made for losses on all contracts in the year inwhich the loss is first foreseen. 5. Dividend distributions Interim dividends are recognized in the financial statements in the period inwhich they are paid. Final dividends are recognised in the period whenshareholders right to receive payment has been established by approval at aGeneral Meeting. 6. Property, plant and equipment All property, plant and equipment is shown at cost less accumulated depreciationand any accumulated impairment losses. Cost includes expenditure that isdirectly attributable to the acquisition of the items. Depreciation is provided to write off the costs, less estimated residual values,of all fixed assets on a straight-line basis. It is calculated at the followingrates: • Leasehold improvements the lifetime of the lease• Office equipment 20% - 33.33% per annum• Computer equipment 33.33% per annum• Motor vehicles 33.33% per annum 7. Intangible assets - goodwill Goodwill represents the excess of cost of an acquisition over the fair value ofthe Group's share of the net identifiable assets of the acquired subsidiary atthe date of acquisition. Separately recognised goodwill is tested annually forimpairment and carried at cost less accumulated impairment losses. Impairmentlosses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the purpose of impairmenttesting. The allocation is made to those cash-generating units or groups ofcash-generating units that are expected to benefit from the business combinationin which the goodwill arose. 8. Intangible assets - research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing ofnew or improved products) are recognised as intangible assets when it isprobable that the project will be a success, considering its commercial andtechnological feasibility, and costs can be measured reliably. Other development expenditure is recognised as an expense as incurred. The cost of an internally generated intangible asset comprises all directlyattributable costs necessary to create, produce, and prepare the asset to becapable of operating in the manner intended by management. Directly attributablecosts include employee costs incurred on software development, together withassociated overhead. Amortisation commences in the month costs are incurred and the amortisationperiod is based on the period that the Group expects to derive economic benefitfrom the developments. This is currently estimated between 1 and 5 years. 9. Intangible assets - customer contracts and relationships Acquired customer contracts and relationships are shown initially at fair value.Customer contracts and relationships are prudently deemed to have a finite lifeand are carried at cost less accumulated amortisation. Amortisation iscalculated using a straight-line method to allocate the costs of customercontracts and relationships over their estimated life. 10. Intangible assets - software Acquired software is shown initially at fair value. Software has a finite usefullife and is carried at cost less accumulated amortisation. Amortisation iscalculated using a straight-line method to allocate the costs of software overits estimated useful life. 11. Trade receivables Trade receivables are recognised at fair value less provision for impairment. Aprovision for impairment is established when there is objective evidence thatthe Group will not be able to collect all amounts due according to the originalterms of the receivables. 12. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call withbanks, other short-term highly liquid investments with original maturities ofthree months or less. 13. Financial instruments and derivatives The Group's financial instruments comprise borrowings, cash and cash equivalentsand other items, such as trade receivables and trade payables, that arisedirectly from its operations. The main purpose of these financial instruments isto provide working capital and raise finance for the Group's operations. The Group does not enter into derivative transactions such as interest rateswaps and forward contracts. 14. Trade payables Trade payables are recognised at fair value. 15. Borrowings Borrowings, including bank overdrafts, are recognised at fair value, net oftransactions costs incurred. Borrowings are classified as current liabilitiesunless the Group has an unconditional right to defer settlement of the liabilityfor at least one year after the balance sheet date. 16. Deferred Consideration The terms of an acquisition may provide that the fair value of the purchaseconsideration, which may be payable in cash or shares at a future date, dependson uncertain future events such as the future performance of the acquiredcompany. The amounts recognised in the financial statements are the fair valueof the deferred consideration that is reasonably expected to be paid at thebalance sheet date. 17. Provisions Provisions for liabilities are recognized when the company has a present legalor constructive obligation as a result of past events, and it is considered morelikely than not that an outflow of resources will be required to settle thatobligation, and the amount can be reliably estimated. Provisions are measured atthe present value of the directors' best estimate of the expenditure required tosettle the obligation at the balance sheet date. 18. Deferred taxation Deferred tax balances are recognised in respect of all timing differences thathave originated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future or a right topay less tax in the future have occurred at the balance sheet date. Deferred tax assets are regarded as recoverable and recognised in the financialstatements when, on the basis of available evidence, it is more likely than notthat there will be suitable taxable profits from which the future reversal ofthe timing differences can be deducted. The recoverability of tax losses isassessed by reference to forecasts which have been prepared and approved by theBoard. The deferred tax assets and liabilities are not discounted. 19. Foreign currency transactions Transactions in foreign currencies are recorded at the rate of exchange rulingat the date of the transaction. Monetary assets and liabilities denominated inforeign currencies are translated to sterling with the rate of exchange rulingat the balance sheet date, or at the contracted rate when covered by a forwardexchange contract. Differences on exchange arising from the retranslation of theopening net investment in subsidiary undertakings are taken to reserves andreported in the statement of recognised gains and losses. All other foreignexchange differences are taken to the profit and loss account. 20. Operating leases Operating lease rentals are charged to the profit and loss account on anaccruals basis over the term of the lease 21. Pension costs Contributions to staff and directors defined contribution pension schemes arecharged to the profit and loss account in the period in which they becomepayable 22. Shares Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares are shown in equity as a deduction fromthe proceeds of the issue. 23. Share based payments The Group issues share options as a long term incentive plan to certainemployees. The fair value of the employee services received in exchange for thegrant of the options is recognised as an expense. The total amount to beexpensed over the vesting period is determined by reference to the fair value ofthe options at the date they are granted, excluding the impact of any non-marketvesting conditions. The fair value of the share-based payments is expensed on a straight line basisover the vesting period, based on the estimates of the shares what willeventually vest. Non-market vesting conditions are included in assumptions aboutthe number of options that are expected to vest. Fair value is measured usingthe Black-Scholes model. Appendix 2 Explanation of transition to IFRS The tables below show the main impact of IFRS on:- a) the consolidated income statements for the year ended 30 June 2007 (date oflast UK GAAP statements) and the six months ended 31 December 2006 (half yearcomparative period) and; b) the consolidated balance sheets as at 1 July 2006 (date if transition toIFRS), 30 June 2007 (date of last UK GAAP statements) and 31 December 2006 (halfyear comparative period). The main areas of these financial statements impacted by the transition to IFRSare detailed below. Consolidated Income Statement UK GAAP to IFRS reconciliation Six months ended 31 December 2006 Year ended 30 June 2007 Previously Prior year Adjusted Effect of IFRS UK GAAP Effect of IFRS reported adjustment UK GAAP IFRS IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Note Revenue 7,474 - 7,474 - 7,474 15,313 - 15,313 Cost of Sales (486) - (486) - (486) (1,544) - (1,544) Gross profit 6,988 - 6,988 - 6,988 13,769 - 13,769 Research and development i) costs (1,339) 265 (1,074) - (1,074) (2,036) - (2,036) Amortisation of acquired intangible assets - - - - - - - -Goodwill amortisation ii) (771) - (771) 771 - (1,536) 1,342 (194)Share based payments (52) - (52) - (52) (98) - (98)Other administration and general overheads (4,089) - (4,089) - (4,089) (8,217) - (8,217) Operating profit before the impairment ofgoodwill and share basedpayments 1,560 265 1,825 - 1,825 3,516 - 3,516 Operating profit 737 265 1,002 771 1,773 1,882 1,342 3,224 Finance income 14 - 14 - 14 38 - 38Finance expenses (125) - (125) - (125) (225) - (225) Profit before income tax 626 265 891 771 1,662 1,695 1,342 3,037 Tax credit/ (expense) iii) (239) - (239) (10) (249) (387) - (387) Profit for the period 387 265 652 761 1,413 1,308 1,342 2,650 Consolidated Balance Sheet UK GAAP to IFRS reconciliation At 31 December 2006 At 30 June 2007 At 30 June 2006 Prior Previously year Effect Effect Effect reported adjust- Adjusted of IFRS UK GAAP of IFRS UK GAAP of IFRS UK GAAP ment UK GAAP IFRS IFRS IFRS (un- (un- (un- (un- (un- (un- (un- (un- (un- (un- (un- audited)audited) audited)audited) audited) audited) audited) audited) audited) audited) audited) Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ASSETSNon-currentassets Property, plant andequipment 246 - 246 - 246 507 - 507 294 - 294 Goodwill Software and customerrelation-ships iii) 18,190 - 18,190 771 18,961 17,235 208 17,443 18,961 - 18,961 Development costs i) - 386 386 - 386 714 - 714 121 - 121 18,436 386 18,822 771 19,593 18,456 208 18,664 19,376 - 19,376 Currentassets Trade and otherreceivables 3,970 - 3,970 - 3,970 3,063 - 3,063 3,124 - 3,124 Deferred income taxasset - - - - - 12 - 12 - - - Cash and cash equivalents 155 - 155 - 155 4,190 - 4,190 3,160 - 3,160 4,125 - 4,125 - 4,125 7,265 - 7,265 6,284 - 6,284 LIABILITIES Currentliabilities Trade and otherpayables (4,996) - (4,996) - (4,996) (8,287) - (8,287) (7,932) - (7,932) Current income taxliabilities iv) (666) - (666) (10) (676) (306) - (306) (510) - (510) Borrowings (1,657) - (1,657) - (1,657) (700) - (700) (1,888) - (1,888) Provisions and other ii) & liabilities v) (150) 150 - (160) (160) (1,000) (160) (1,160) (1,000) (160) (1,160) (7,469) 150 (7,319) (170) (7,489) (10,293) (160) (10,453) (11,330) (160) (11,490) Non-currentliabilities Borrowings (2,382) - (2,382) - (2,382) (2,724) - (2,724) (1,791) - (1,791) Provisions ii) and otherliabilities (1,250) (1,630) (2,880) - (2,880) (500) - (500) (3,405) - (3,405) (3,632) (1,630) (5,262) - (5,262) (3,224) - (3,224) (5,196) - (5,196) NET ASSETS 11,460 (1,094) 10,366 601 10,967 12,204 48 12,252 9,134 (160) 8,974 SHAREHOLDERS'EQUITY Share capital 1,142 - 1,142 - 1,142 1,143 - 1,143 1,142 - 1,142 Shares to be issued ii) 2,155 (1,480) 675 - 675 650 - 650 - - - Share premium account 9,182 - 9,182 - 9,182 9,220 - 9,220 9,181 - 9,181 Merger reserve 561 - 561 - 561 561 - 561 561 - 561 Retained earnings (1,580) 386 (1,194) 601 (593) 630 48 678 (1,750) (160) (1,910) TOTAL EQUITY 11,460 (1,094) 10,366 601 10,967 12,204 48 12,252 9,134 (160) 8,974 Notes Prior year adjustments i) Capitalised development - SSAP 13 The Group adopted the provisions of SSAP 13 when it reported its results for theyear ended 30 June 2007. Development costs were recognised as intangible assetsonce it was probable that the product will generate future economic benefits, itis technically feasible and the costs can be measured reliably. All otherdevelopment costs are expensed to the income statement as incurred. The changeresulted in the reporting of development costs, after amortisation, in thebalance sheet of £0.72m and £0.12m as at 30 June 2007 and 30 June 2006respectively. The capitalised development costs in the balance sheet as at 31December 2006, of £0.39m, have been similarly restated to reflect adoption ofSSAP 13. The results for the six months ended 31 December 2006 increased by£0.26m by reversal of development costs previously expensed to the incomestatement under UK GAAP and to the amortisation of development expenditure. ii) Contingent deferred considerations The treatment of contingent deferred considerations equity was reconsidered inthe financial statements for the year ended 30 June 2007 and accounts adjustedto reflect this as a liability in accordance with FRS 25. As a consequence, netassets decreased by £2,155,000 and £1,480,000 as at 30 June 2006 and 31 December2006 respectively. There was no affect on the profits of either 2006 or 2007. IFRS adjustments iii) IFRS 3 Business Combinations Under UK GAAP, goodwill arising on a business combination was amortised over itsestimated economic life. Under IFRS, goodwill is not amortised but is tested forimpairment at least annually. The adjustments therefore relate to the write backof goodwill amortisation charged from the date of transition to IFRS less anyimpairment loss charged during the period. iv) IAS 12 Income Taxes The adjustments represent deferred tax provided as a result of the impact ofconversion to IFRS. They principally result from the difference in treatment ofdevelopment costs under IFRS in the financial statements with the treatment ofdevelopment costs in the computation of taxable profits. v) IAS 19 Employee Benefits Under IFRS, an accrual is recognised for employee's annual holiday entitlementaccrued, but not taken, at the balance sheet. Consolidated Cash Flow UK GAAP to IFRS reconciliation In relation to cash flow reporting, under UK GAAP the Group has previouslyreported its cashflows in accordance with FRS 1 (Revised 1996) 'Cash FlowStatements'. The objectives and principles of this standard are similar to thoseset out in the equivalent IFRS standard, IAS 7 'Cash Flow Statements'. Otherthan differences in respect of classification of cash flow items, reportingunder IAS 7 has had no significant effect on the reported net cash flows for theyear ended 30 June 2007 (date of last UK GAAP statements) and the six monthsended 31 December 2006 (half year end comparative period). -ENDS- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ASP.L