20th Oct 2009 07:00
20 October 2009
Earthport plc (the 'Company' or the 'Group')
Preliminary Results for the year ended 30 June 2009
Earthport plc, the global payments utility, announces its unaudited preliminary results for the year ended 30 June 2009.
Financial Highlights
Revenue decreased to £1.57 million (2008: £1.92m).
Option and Warrant costs (as required by accounting standards), a non cash item, rose to £2.34m from £0.64m.
Net losses increased to £7.30m (2008: £3.38m).
Finance costs fell to £152,000 (2008: £325,000).
Loss per share increased to 8.90p (2008: 5.14p).
Debt reduced further to £704,000 (2008: £1,101,000).
Cash at the end of the year was £885,000.
Operational Highlights
Transaction volume increased 51%.
Opening of US office was key step in establishing leads and developing traction.
Good progress at Earthport Middle East with several strong new client wins.
Relationship with IBM further demonstrated at Sibos 09.
Cash to Bank Account service established through MCashback with a leading international retailer.
Board Changes
Mike Harrison moves to Non Executive Chairman.
Lance Browne moves to Non Executive Vice Chairman.
Commenting on the results Chief Executive Officer, James Bergman, said:
"Whilst we announce these results today, they reflect the impact to the business predominantly during the second half of the last fiscal year (January to June).
"Things have normalised now for your business and its prospective clients. For Earthport the recession created challenges and we have survived and become stronger. As noted in a previous RNS, the non-receipt of monies from the Middle East disappointed us. The Board, however, believes that, through various arrangements, the Company has sufficient resources to continue to develop the business to its full potential. We are now better prepared than ever to take advantage of the upturn with substantive momentum and focus. We are committed to ensuring that this year we deliver on the opportunity that has been afforded to us by the uniqueness of our proposition, service and position.
"Everybody in the Earthport organisation firmly believes and understands the focus and effort that is required to increase our run rate revenue and execute on the opportunities at hand to transform our business."
For further information, please contact:
|
Earthport plc Mike Harrison, Chairman James Bergman, Chief Executive Officer |
+44 (0)20 7220 9700 |
|
Panmure Gordon Adam Pollock Dominic Morley |
+44 (0)20 7459 3600 |
|
Financial Dynamics Jonathon Brill / Alex Beagley / Laura Proudlock |
+44 (0)20 7831 3113 |
CHAIRMAN'S STATEMENT
INTRODUCTION
The challenges of the global economy, particularly those faced by financial services companies, in 2008-2009 are well documented and the repercussions of industry uncertainty were felt at Earthport, as everywhere else. Nonetheless, dramatic change and consolidation in the banking sector, as well as other commercial sectors, is bringing with it fresh opportunities to provide core services such as transaction banking through cost-effective, innovative delivery models. Earthport's services enable banks to address new market segments, capture new revenue, liquidity and market share, and reduce costs.
The financial results were not as positive as we had hoped. Earthport revenues fell to £1.57m in the year ended 30 June 2009 from £1.92m in the previous year, and net losses increased from £3.4m to £7.3m. Operating costs increased, primarily due to an increase in option and warrant-related costs to £2.3m from £0.6m; this is a non-cash item. Other factors included rises in: staff and contractor costs to £3.4m from £2.8m; write offs to £420,000 from £65,000; and travel and entertainment costs to £368,000 from £223,000. In addition, last year's tax credit of £280,000 was written off this year.
Despite the above, we have begun creating foundations from which your Company can grow to occupy a valuable place in the global payments market. We have expanded our global footprint: Earthport USA was established in April 2008 and Earthport Middle East in January 2009. Both are making rapid progress. The opening of the US office is a key step developing new business leads in that market and we are now gaining significant traction. Pleasing progress has also been made by Earthport Middle East. Several new clients, Al Ghurair Exchange House, Al Ghurair International Exchange House, Al Ansari Exchange House and Lulu Exchange House have already been signed. While they did not contribute to revenue for the year ended 30 June 2009, they are contributing to revenue for the current year.
Progress was also made on several other fronts. In March 2008, Earthport announced that it was collaborating with Adobe Systems to develop and market a secure trade financing solution as a product for the financial services community, and the initial client was a major UK financial institution. In February 2009, we were able to name that financial institution as Lloyds TSB. Development of the service continues through into 2010. We are delighted to be working with such a high-profile financial services brand.
Earthport has vigorously promoted its strategy as a white label supplier to others, especially banks. This clear focus coincided with dramatic change in the banking industry, in which key services such as transaction banking have emerged from the credit crunch with greater commitment and focus than ever before. In parallel, major regulatory initiatives, including the G8 commitment to reducing remittance fees by at least 50%, play directly to Earthport's strengths.
The corporate market continues to express deepening dissatisfaction with the payments services it can source through traditional channels. Meanwhile, SEPA (the Single Euro Payments Area) continues to struggle to articulate a value proposition to corporate clients. Earthport has widened its services to corporates, from its standard credit transfer to support for open account trade, a cheaper and above all lower fraud risk alternative to plastic card for internet transactions, and increasingly into the e-invoicing market. These segments significantly widen Earthport's accessible target market.
Earthport's business model continues to receive positive feedback from target customers, industry analysts and industry press. Our application for a full eMoney licence is currently with the FSA, and will considerably strengthen the offering. Whilst the unexpected effects of last year's troubled environment disrupted a number of advanced sales campaigns, the widened market opportunity coupled with the positive effect of industry regulatory changes gives us confidence that the next 12 months will see step-function improvements in transaction volumes, breadth and quality of clients served, and, as a result revenue growth.
On 30 June 2009, Earthport announced a strategic review. The review led to discussions with a number of prominent organisations and global corporate entities. Some of these discussions resulted in new business developments whilst others have advanced existing business relationships and enabled the organisations concerned to receive a better insight into the long term strategy and potential of Earthport. As well as raising Earthport's profile with third parties, ongoing discussions range from franchising opportunities to developing new strategic channels to market.
We remain encouraged by Earthport's ability to get the attention of large, global organisations. As a small company, perseverance and focus will be key to closing deals and increasing market penetration. In our favour, we have the ability and talent to innovate at a time when larger players in the industry are hampered by market circumstances and when innovation is in high demand.
OPERATIONAL AND FINANCIAL REVIEW
Transaction volume for the year ended 30 June 2009 grew by 51% compared to the year ended 30 June 2008. From July to December 2008, transaction volume grew 81% over the same period in 2007. From January to June 2009, transaction volume grew 33% over the same period in 2008.
The results were disappointing. Revenue for the year ended 30 June 2009 has decreased by 18.1% to £1.57m (2008: £1.92m). The fall in revenue was primarily attributable to certain one-off items booked in 2008. The Group's operating loss has increased by 105.4% to £6.86m (2008: £3.34m). Operating costs increased, primarily due to an increase in option and warrant-related costs to £2.3m from £0.6m, a non-cash item. Other factors included rises in: staff and contractor costs to £3.4m from £2.8m; write offs to £420,000 from £65,000; travel and entertainment costs to £368,000 from £223,000. Finance costs fell to £0.15m (2008: £0.33m). Net loss increased by 116% to £7.30m (2008: £3.38m). This includes the write off of last year's tax credit of £280,000. The loss per share increased 73% to 8.89p (2008: 5.14p). During the year, the Group raised £2.9m of equity, net of expenses. Debt was reduced to £0.7m (2008: £1.10m). Cash decreased to £0.89m (2008: £3.66m).
BUSINESS/BANKING OPERATIONS
During the last 12 months Earthport has continued with its efforts to consolidate and grow the Earthport banking network. Within the key payment market place of Europe this consolidation has focused on growing the existing banking relationships with SEB Group and the Raiffeisen Group resulting in significant improvements to both geographical coverage and system automation. Following this partnership approach Earthport has improved and expanded coverage in the Middle East and South East Asia through the establishment of a banking relationship with Standard Chartered Bank (SCB). Integration and testing continues on local accounts opened through the SCB relationship in Thailand, Vietnam and the Philippines. Each of these is expected to be operational by the calendar year end.
Recently Earthport has taken on local representation in the Middle East, Japan and Brazil. This has facilitated the establishment of local banking relationships in these traditionally hard to acquire banking territories and it is anticipated that there will be growing transactional demand for these regions as we bring them online.
Earthport client volume increased in 2009 and we have strived to improve and invest in our payment processes and tools to facilitate this ever increasing collection and payment demand. To this end a significant amount of effort has been expended in upgrading the validation of customer supplied bank data to increase the performance levels of Earthport's payment platform.
IT DEVLOPMENT
The work delivered by the Development Team continues to provide a strong basis on which to provide additional capabilities and features to the EPS2 payment platform. Among the most exciting achievements has been the completion of the industry-standard WSDL interface that allows our customers to integrate their computer systems to ours significantly faster, and with a richer set of commands. We currently have two top-tier clients integrating using the new interfaces and early feedback has been extremely encouraging. The WSDL interface will enable our customers to benefit immediately, at no cost and with no additional effort, from expansions to our banking coverage.
The past year has seen enhancements in the automation of sanctions/embargo list checking, conformance to the American-led FATF-VII (Financial Action Task Force recommendation 7) recommendations, and implementation of the Payment Services Directive (PSD).
Recognising that a substantial portion of our future business is likely to come from customers with a need for large numbers of remittances, we have invested in a batch input framework capable of handling extremely large numbers of instructions. This will benefit many of our existing customers whose computer systems currently spend much time 'talking' to our computer systems, and where submission of a batch of payments better fits their business model.
To improve further our service and the value we offer to payment processing customers, we have enhanced our bank registration processes, focusing on two main areas. The first is improving bank validation to reduce the possibility of incorrect data being entered. The second is by using state-of-the-art technology to find the most appropriate way to send a user's payment, often via payment networks that would be inaccessible to the clients themselves. The result is to provide faster reflection time, lower settlement cost, and in some instances enabling payments that would not otherwise be possible.
As reported in last year's Annual Report, the program of server consolidation and upgrades has been performed to further improve resilience and reliability, with system availability continuing to exceed our 99% targets.
BOARD CHANGES
Finally, as will be announced separately, I am moving to a non-executive Chairman role. Lance Browne will be increasing his involvement in your Company by taking the role of Vice-Chairman.
Mike Harrison
Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Whilst we announce these results today, these reflect the impact to the business predominantly during the second half of the last fiscal year (January to June).
Things have normalised now for your business and its prospective clients. For Earthport the recession created challenges and we have survived and become stronger. We are now better prepared than ever to take advantage of the upturn with substantive momentum and focus. We are committed to ensuring that this year we deliver on the opportunity that has been afforded to us by the uniqueness of our proposition, service and position.
Everybody in the Earthport organisation firmly believes and understands the focus and effort that is required to increase our run rate revenue and execute on the opportunities at hand to transform our business
OUTLOOK
Earthport has made steady progress since the end of June 2009.
Once again the presence of the Company at Sibos, 14 to 18 September 2009, in Hong Kong showcased its capabilities to the banking world and helped pave the way forward with future clients and partners. Our position on the IBM stand allowed maximum access to business opportunities and, combined with our sponsorship of the Financial Services Club survey on the readiness of the market for SEPA and PSD, provided substantial exposure to the important decision makers present at this major event.
Through the contract with Mcashback, a cash to bank account service has been established with a leading international retailer. Currently, at the rollout stage, this service is expected to expand rapidly by opening more access points and covering more countries.
The IBM GERS conference on 16 to 17 September 2009 opened up opportunities for the Company as a number of companies at the conference expressed interest in utilising the Earthport system. Earthport USA is pursuing other serious opportunities and expects to close some of these in the near future.
As previously mentioned, Earthport Middle East has already signed several Exchange Houses which are used by migrant workers to remit money home. While they did not contribute to revenue for the year ended 30 June 2009, they are contributing to revenue for the current year. The resulting transaction volumes are expected to increase as users grow in numbers and the country coverage widens. As announced earlier this, Earthport did not receive the £2m it was expecting from its Middle East partner, and this has had an obvious detrimental affect.
Despite this, the Board believes that through various other arrangements, the Company will have sufficient resources to continue to develop the business to its full potential.
The Lloyds TSB initiative, now named Lemur, is at the internal testing stage, having received some customer feedback. It continues to make progress against the background of the Lloyds TSB / HBoS merger.
The European Payments Services Directive, which comes into force in November 2009, is a new regulatory regime giving consumer protection to payments services provided by firms such as Earthport - and thus significantly strengthens Earthport's proven value proposition. Earthport's approach to the PSD is to be compliant in Europe, and to provide the same service level to its clients outside Europe, and thus to drive best practice globally.
The clients coming on line as I write and those in the immediate pipeline will help consolidate our desired positioning at the forefront of the international payments industry.
Earthport is on track to achieve its goal of becoming the utility of choice for high volume international payments, which is utilised by banks, financial institutions and corporates.
James Bergman
Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2009
|
Notes |
2009 £'000 |
2008 £'000 |
|
|
Continuing operations: |
|||
|
Revenue |
4 |
1,568 |
1,915 |
|
Cost of sales |
8 |
(402) |
(390) |
|
|
|
||
|
Gross profit |
1,166 |
1,525 |
|
|
Administrative expenses |
8 |
(5,534) |
(4,234) |
|
Share-based payment |
(2,335) |
(627) |
|
|
Loss on available for-sale-investment |
13 |
(160) |
- |
|
|
|
||
|
Operating loss |
|
(6,863) |
(3,336) |
|
Finance costs |
6 |
(152) |
(325) |
|
|
|
||
|
Loss before taxation |
7 |
(7,015) |
(3,661) |
|
Taxation |
9 |
(280) |
280 |
|
|
|
||
|
Loss attributable to equity shareholders of the Company |
(7,295) |
(3,381) |
|
|
|
|
||
|
Loss per share - basic and fully diluted |
10 |
(8.90p) |
(5.14p) |
|
|
|
||
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 June 2009
|
2009 £'000 |
2008 £'000 |
||
|
Loss attributable to the equity shareholders of the company |
(7,295) |
(3,381) |
|
|
Total recognised income and expense for the year, attributable to the equity shareholders of the company |
(7,295) |
(3,381) |
|
|
|
|
||
|
CONSOLIDATED BALANCE SHEET |
|||
|
at 30 June 2009 |
|||
|
Notes |
2009 £'000 |
2008 £'000 |
|
|
Assets |
|||
|
Non-current assets |
|||
|
Property, plant and equipment |
12 |
90 |
139 |
|
Investments |
13 |
- |
160 |
|
Deferred tax asset |
9 |
- |
280 |
|
|
|
||
|
90 |
579 |
||
|
|
|
||
|
Current assets |
|||
|
Trade and other receivables |
14 |
1,117 |
2,436 |
|
Cash at bank and in hand |
15 |
885 |
3,655 |
|
|
|
||
|
2,002 |
6,091 |
||
|
|
|
||
|
Total assets |
2,092 |
6,670 |
|
|
Liabilities |
|||
|
Current liabilities |
|||
|
Trade and other payables |
16 |
(1,250) |
(3,254) |
|
Borrowings |
17 |
(407) |
(340) |
|
|
|
||
|
(1,657) |
(3,594) |
||
|
|
|
||
|
Non-current liabilities |
|
|
|
|
Borrowings |
17 |
(297) |
(761) |
|
|
|
||
|
Total liabilities |
(1,954) |
(4,355) |
|
|
|
|
||
|
NET ASSETS |
138 |
2,315 |
|
|
|
|
||
|
Equity Capital and reserves |
|||
|
Ordinary shares |
18 |
31,810 |
30,968 |
|
Share premium |
19 |
46,774 |
44,732 |
|
Employee benefit trust reserve |
20 |
(101) |
- |
|
Merger reserve |
21 |
9,200 |
9,200 |
|
Share-based payment reserve |
23 |
3,440 |
1,354 |
|
Warrant reserve |
24 |
233 |
816 |
|
Retained earnings |
25 |
(91,218) |
(84,755) |
|
|
|
||
|
EQUITY ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS OF THE COMPANY |
138 |
2,315 |
|
|
|
|
||
COMPANY BALANCE SHEET
at 30 June 2009
|
Notes |
2009 |
2008 |
|
|
|
£'000 |
£'000 |
|
|
Assets |
|||
|
Non-current assets |
|||
|
Property, plant and equipment |
12 |
90 |
139 |
|
Investments |
13 |
1 |
161 |
|
Deferred tax asset |
9 |
- |
280 |
|
|
|
||
|
91 |
580 |
||
|
|
|
||
|
Current assets |
|||
|
Trade and other receivables |
14 |
1,324 |
2,339 |
|
Cash at bank and in hand |
15 |
832 |
3,654 |
|
|
|
||
|
2,156 |
5,993 |
||
|
|
|
||
|
Total assets |
2,247 |
6,573 |
|
|
Liabilities |
|||
|
Current liabilities |
|||
|
Trade and other payables |
16 |
(1,670) |
(3,674) |
|
Borrowings |
17 |
(407) |
(340) |
|
|
|
||
|
(2,077) |
(4,014) |
||
|
|
|
||
|
Non-current liabilities |
|
|
|
|
Borrowings |
17 |
(297) |
(761) |
|
|
|
||
|
Total liabilities |
(2,374) |
(4,775) |
|
|
|
|
||
|
NET (LIABILITIES)/ASSETS |
(127) |
1,798 |
|
|
|
|
||
|
Equity |
|||
|
Capital and reserves |
|||
|
Ordinary shares |
18 |
31,810 |
30,968 |
|
Share premium |
19 |
46,774 |
44,732 |
|
Merger reserve |
21 |
9,200 |
9,200 |
|
Share-based payment reserve |
23 |
3,440 |
1,354 |
|
Warrant reserve |
24 |
233 |
816 |
|
Retained earnings |
26 |
(91,584) |
(85,272) |
|
|
|
||
|
EQUITY ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS OF THE COMPANY |
(127) |
1,798 |
|
|
|
|
||
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2009
|
Notes |
2009 £'000 |
2008 £'000 |
|
|
NET CASH USED IN OPERATING ACTIVITIES |
32 |
(5,116) |
(4,851) |
|
|
|
||
|
INVESTING ACTIVITIES |
|||
|
Purchase of property, plant and equipment |
(40) |
(144) |
|
|
FINANCING ACTIVITIES |
|||
|
Issue of ordinary share capital (net of costs paid) |
2,783 |
8,466 |
|
|
Repayment of term loans |
(397) |
(271) |
|
|
|
|
||
|
Net cash FLOWS from financing ACTIVITIES |
2,386 |
8,195 |
|
|
|
|
||
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
(2,770) |
3,200 |
|
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR |
3,655 |
455 |
|
|
|
|
||
|
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
885 |
3,655 |
|
|
|
|
||
COMPANY CASH FLOW STATEMENT
for the year ended 30 June 2009
|
Notes |
2009 £'000 |
2008 £'000 |
|
|
NET CASH USED IN OPERATING ACTIVITIES |
32 |
(5,168) |
(4,839) |
|
|
|
||
|
INVESTING ACTIVITIES |
|||
|
Purchase of property, plant and equipment |
(40) |
(144) |
|
|
FINANCING ACTIVITIES |
|||
|
Issue of ordinary share capital (net of costs paid) |
2,783 |
8,466 |
|
|
Repayment of term loans |
(397) |
(271) |
|
|
|
|
||
|
Net cash FLOWS from financing ACTIVITIES |
2,386 |
8,195 |
|
|
|
|
||
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
(2,822) |
3,212 |
|
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR |
3,654 |
442 |
|
|
|
|
||
|
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
832 |
3,654 |
|
|
|
|
||
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2009
1. GENERAL INFORMATION
Earthport plc is a public limited company incorporated and domiciled in the England and Wales under the Companies Act 2006. The address of its principal place of business and registered office is 21 New Street, London EC2M 4TP.
The unaudited financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The balance sheet at 30 June 2009 and income statement, statement recognised income and expense, cash flow statement and associated notes for the year then ended have been extracted from the Company's unaudited 2009 financial statements upon which the auditor's opinion is expected to be qualified in respect of going concern. The report and accounts for the year ended 30 June 2009 will be posted to shareholders shortly and will be laid before the Annual General Meeting to be held at the Company's Registered Office on 11 December 2009 at 3.00pm. Statutory accounts for 2009 will be delivered to the Registrar following the Company's Annual General Meeting.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The financial statements have been prepared on the assumption that the Group is a going concern.
Since the balance sheet date, the Company has raised additional finance through the issue of equity of £0.41m. In addition a £1m Loan Note dated 5 October 2009 has been fully subscribed to.
When assessing the foreseeable future the directors have looked at a period of twelve months from the date of approval of the financial statements. The forecast cash-flow requirement of the business is contingent upon the ability of the Group to generate future sales. The uncertainty as to the timing of the future growth in sales, together with the potential impact on the follow-on funding arrangements require the directors to consider the Group's ability to continue as a going concern. Notwithstanding this uncertainty, the directors believe that the Group has demonstrated progress in achieving its objective of positioning the Group as an infrastructure supplier to the global payments industry, and therefore consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Company is to continue in operational existence for the foreseeable future.
3. ACCOUNTING POLICIES
Basis of preparation
The financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS'') as adopted by the European Union.
The financial statements have been prepared under the historical cost convention and the principal accounting policies are set out below.
At the date of issue of this statement the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
|
IFRS 1 |
Revised IFRS 1 First-time adoption of IFRS |
|
IFRS 2 |
Share-based payments - Amendment, vesting conditions and cancellations |
|
IFRS 3 |
Business combinations - Comprehensive revision on applying the acquisition method |
|
IFRS 7 |
Financial Instruments: Disclosures - Amendment; Reclassification of Financial Assets |
|
IFRS 8 |
Operating Segments |
|
IAS 1 |
Presentation of financial statements - Comprehensive revision including requiring a statement of comprehensive income |
|
IAS 23 |
Borrowing costs - Comprehensive revision to prohibit immediate expensing |
|
IAS 27 |
Consolidated and Separate Financial Statements - Amendments arising from IFRS 3 |
|
IAS 27 |
Consolidated and Separate Financial Statements - Amendments, cost of an investment in a subsidiary, jointly controlled entity or associate |
|
IAS 28 |
Investment in Associates - Consequential amendments arising from IFRS 3 |
|
IAS 39 |
Financial Instruments: Recognition and Measurement - Amendment; Reclassification of Financial Assets |
|
IAS 39 |
Financial Instruments: Recognition and Measurement - Amendment; Eligible hedged items |
The directors anticipate that the adoption of these Standards and Interpretations in future years will have no material impact on the financial statements of the Group.
Basis of consolidation
The Group financial statements consolidate the financial statements of Earthport plc and all of its subsidiaries for the year ended 30 June 2009. The results of subsidiaries acquired or sold are included in the Group financial statements from the date control passes, until control ceases. Profits and balances arising on trading between Group companies are excluded from the financial statements. All companies in the Group make up their financial statements to the same date.
Revenue recognition
Revenue on the sale of software licences and from the service agreements is recognised upon delivery to the customer providing that there is evidence of a contract, the fee is fixed or determinable, no significant customer obligations remain and collection of the resulting receivable is probable. In circumstances where a significant vendor obligation exists (such as the installation and acceptance of the software), revenue recognition is delayed until the obligation has been satisfied. Revenue from client transaction volume is billed monthly in arrears. Revenue from software implementation, consultancy and training is recognised as the services are performed.
Foreign currency translation
The functional and presentational currency of the parent Company and its subsidiaries is the UK Pound Sterling. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date and exchange differences taken to the income statement.
Share-based payments
The Company offers executive and employee share schemes. For all grants of share options, the fair value as at the date of grant is calculated using an option pricing model and the corresponding expense is recognised over the vesting period. The expense is recognised as a staff cost and the associated credit is made against equity and included in the share-based payment reserve.
Current and deferred income tax
Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.
Deferred tax expected to be payable or recoverable on differences at the balance sheet date between the tax bases and liabilities and their carrying amounts for financial reporting purposes is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible differences can be utilised.
Deferred tax is calculated at the rates of taxation which are expected to apply when the deferred tax asset or liability is realised or settled, based on the rates of taxation enacted or substantially enacted at the balance sheet date.
Impairment of non-financial assets
The carrying amounts of the Group's property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the asset's recoverable amount is estimated and compared to its carrying value. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the carrying value exceeds the recoverable amount, a provision for the impairment loss is established with a charge being made to the income statement.
Intangible assets
a) Development expenditure
Development expenditure is only recognised as an intangible asset if each of the following conditions have been met:
It is technically feasible to complete the asset so that it will be available for use
It is reasonably expected that the asset is likely to generate net future economic benefits
Development costs in relation to the asset can be reliably measured
Management intends to complete the asset and use or sell it
Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight line basis over the estimated useful life of the asset.
Where no intangible asset can be recognised, development expenditure is treated as expenditure in the period in which it is incurred.
b) Goodwill
Goodwill on consolidation, being the excess of the purchase price over the fair value of the net assets of subsidiary undertakings at the date of acquisition, is capitalised in accordance with IFRS3 Business combinations. Goodwill is tested annually for impairment, or more frequently when there is an indication that goodwill may be impaired. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in a subsequent period.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost less depreciation and provision for impairment. Depreciation is provided at rates calculated to write down assets to their estimated residual values over their expected useful life, as follows:
|
Leasehold improvements: short lease Fixture, fittings and equipment Computer equipment |
straight line per annum over lease term 20% - 33% straight line per annum 33% straight line per annum |
The carrying values of property, plant and equipment are reviewed for impairment annually and when events or changes in circumstances indicate that the carrying value may be impaired. Any impairment is taken direct to the income statement.
Available- for- sale investments
Available for sale investments are non-derivative financial assets that are designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. The investments are held at fair value, with gains and losses taken to equity. The gains and losses taken to equity are recycled through the income statement on realisation. If there is objective evidence that the asset is impaired, the cumulative loss that has been recognised is removed from equity and recognised in the income statement.
Leasing
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals payable under operating leases are charged against income on a straight-line basis over the lease term.
Pensions
The Group offers a stakeholder pension scheme to all employees and has started making contributions to the scheme since July 2008. These contributions are charged to the income statement as they are incurred.
Financial risk management and financial instruments
Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.
The Group's principal financial instruments comprise secured and unsecured short-term creditors, finance leases, cash, short-term deposits and loans. The main purpose of these financial instruments is to finance the Group's operations, including any acquisitions where relevant. The Group has various other financial instruments, such as trade receivables and trade payables that arise directly from its operations.
It is the Group's policy that no trading in financial instruments shall be undertaken. The Group borrows at both fixed and floating rates of interest. The Group's policy in relation to the finance is to ensure that sufficient liquid funds are maintained for operations.
Trade receivables are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method, if material. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is evidence that the asset is impaired.
Cash and cash equivalents: comprise cash in hand, demand deposits and other short-term highly liquid investments that are readily converted into a known amount of cash and are subject to insignificant changes in value.
Trade payables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method, if material.
Compound financial instruments: The fair value of the liability portion of a convertible loan is determined using a market interest rate for an equivalent non-convertible loan. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders' equity.
Borrowings: Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Equity instruments issued by the Company are recognised at the proceeds received net of direct issue costs.
4. REVENUE
Revenue, loss and net assets/liabilities are all attributable to one business segment operating from the United Kingdom. The segmental analysis by location of customers is as follows:
|
2009 |
2008 |
|
|
£'000 |
£'000 |
|
|
United Kingdom |
1,224 |
1,582 |
|
Rest of Europe |
56 |
182 |
|
North America |
288 |
151 |
|
|
|
|
|
1,568 |
1,915 |
|
|
|
|
|
5. EMPLOYEES
|
2009 No. |
2008 No. |
||
|
The average monthly number of persons (including directors) employed by the group during the year was: |
|||
|
Directors |
4 |
3 |
|
|
Administration and technical |
33 |
27 |
|
|
|
|
||
|
37 |
30 |
||
|
|
|
||
|
2009 £'000 |
2008 £'000 |
||
|
Staff costs for the above persons: |
|||
|
Wages, salaries and commission |
2,422 |
1,938 |
|
|
Social security costs |
273 |
213 |
|
|
Share-based payment |
2,162 |
539 |
|
|
Other pension costs |
31 |
4 |
|
|
|
|
||
|
4,888 |
2,694 |
||
|
|
|
||
6. FINANCE COSTS
|
2009 £'000 |
2008 £'000 |
|
|
Interest payable on secured loans |
152 |
325 |
|
|
|
|
7. LOSS BEFORE TAXATION
|
2009 £'000 |
2008 £'000 |
|
|
Loss before taxation is stated after charging: |
||
|
Depreciation of property, plant and equipment |
89 |
104 |
|
Development costs (included in administrative expenses in the income |
771 |
607 |
|
statement) |
||
|
Operating leases: |
||
|
- Property |
134 |
105 |
|
Fees payable to the Company's auditors: |
|
|
|
- For the audit of the Company's annual financial statements |
39 |
45 |
|
Fees payable to associates of the Company's auditors: |
||
|
- For tax compliance and advisory services - non-audit work |
7 |
8 |
|
|
|
|
8. ADMINISTRATIVE EXPENSES
|
2009 |
2008 |
|
|
£'000 |
£'000 |
|
|
Staff costs |
2,666 |
2,067 |
|
IT development and support costs |
1,013 |
773 |
|
Facilities, travel and other costs |
1,046 |
833 |
|
Legal and professional costs |
585 |
392 |
|
Depreciation and amortisation |
89 |
104 |
|
Bad debts |
135 |
65 |
|
|
|
|
|
5,534 |
4,234 |
|
|
|
|
|
Cost of sales includes bank transaction charges and sales commission.
9. TAXATION
|
2009 £'000 |
2008 £'000 |
|
|
Deferred tax charge/(credit) |
280 |
(280) |
|
|
|
|
|
Factors affecting the tax charge/(credit) for the year: |
||
|
Loss before taxation |
(7,015) |
(3,661) |
|
Loss before tax multiplied by standard rate of corporation tax in the |
||
|
UK of 28% (2008: 29.5%) |
(1,964) |
(1,080) |
|
Deferred tax charge/(credit) |
(280) |
280 |
|
|
|
|
|
(2,244) |
(800) |
|
|
Expenses not deductible for tax purposes |
36 |
12 |
|
Timing differences not recognised for deferred tax purposes |
82 |
28 |
|
Share-based payment costs not recognised for deferred tax purposes |
653 |
131 |
|
Different tax rate applied for deferred tax purposes |
44 |
15 |
|
Losses not recognised for deferred tax purposes |
1,429 |
614 |
|
De-recognition/recognition of tax losses carried forward |
(280) |
280 |
|
|
|
|
|
Tax (charge)/credit for the year |
(280) |
280 |
|
|
|
|
Tax trading losses carried forward of £53m (2008: £48m) have not been recognised due to uncertainty over the timing of their reversal.
The movement on the deferred tax asset is as follows:
|
2009 £'000 |
2008 £'000 |
|||
|
At 1 July |
280 |
- |
||
|
Income statement - (de-recognition)/recognition of tax losses |
(280) |
280 |
||
|
|
|
|||
|
At 30 June |
- |
280 |
||
|
|
|
|||
10. LOSS PER SHARE
The loss per share is calculated by dividing the loss attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.
|
2009 £'000 |
2008 £'000 |
|
|
Loss attributable to equity shareholders of the company |
(7,295) |
(3,381) |
|
|
|
|
|
2009 |
2008 |
|
|
Number |
Number |
|
|
Weighted average number of ordinary shares in issue (thousands) |
81,950 |
65,804 |
|
|
|
|
|
2009 |
2008 |
|
|
Basic and fully diluted loss per share (pence) |
(8.90p) |
(5.14p) |
|
|
|
|
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of IAS33.
11. INTANGIBLE ASSETS
Group and Company
|
Acquired software £'000 |
||||
|
Cost |
||||
|
At 30 June 2007, 30 June 2008 and 30 June 2009 |
8,252 |
|||
|
|
||||
|
Amortisation and impairment |
||||
|
At 30 June 2007, 30 June 2008 and 30 June 2009 |
8,252 |
|||
|
|
||||
|
Net book value |
||||
|
At 30 June 2007, 30 June 2008 and 30 June 2009 |
- |
|||
|
|
||||
12. PROPERTY, PLANT AND EQUIPMENT
Group and Company
|
Computer equipment and software £'000 |
Fixtures fittings and equipment £'000 |
Short leasehold improvement £'000 |
Total £'000 |
|
|
Cost |
||||
|
At 1 July 2007 |
6,300 |
393 |
147 |
6,840 |
|
Additions |
83 |
2 |
59 |
144 |
|
|
|
|
|
|
|
At 1 July 2008 |
6,383 |
395 |
206 |
6,984 |
|
Additions |
36 |
4 |
- |
40 |
|
|
|
|
|
|
|
At 30 June 2009 |
6,419 |
399 |
206 |
7,024 |
|
|
|
|
|
|
|
Depreciation |
||||
|
At 1 July 2007 |
6,210 |
384 |
147 |
6,741 |
|
Charge for the year |
83 |
2 |
19 |
104 |
|
|
|
|
|
|
|
At 1 July 2008 |
6,293 |
386 |
166 |
6,845 |
|
Charge for the year |
62 |
1 |
26 |
89 |
|
|
|
|
|
|
|
At 30 June 2009 |
6,355 |
387 |
192 |
6,934 |
|
|
|
|
|
|
|
Net book value |
||||
|
At 30 June 2009 |
64 |
12 |
14 |
90 |
|
|
|
|
|
|
|
At 30 June 2008 |
90 |
9 |
40 |
139 |
|
|
|
|
|
|
|
At 30 June 2007 |
90 |
9 |
- |
99 |
|
|
|
|
|
|
Depreciation for all years is included in administrative expenses in the income statement.
13. INVESTMENTS
Group and Company
|
|
2009 £'000 |
2008 £'000 |
||
|
Available-for-sale investment |
- |
160 |
||
|
|
|
|||
Altair Financial Services International plc has been taken into administration and thus the investment has been fully provided against.
|
Company |
£'000 |
||
|
Investment in subsidiaries: |
|||
|
Cost at 30 June 2007, 30 June 2008 and 30 June 2009 |
11,073 |
||
|
Provision for impairment at 30 June 2007, 30 June 2008 and 30 June 2009 |
(11,072) |
||
|
|
|||
|
Net book value at 30 June 2007, 30 June 2008 and 30 June 2009 |
1 |
||
|
|
|||
|
The Company's subsidiaries are: |
Country of incorporation |
Nature of business |
Holding |
|
EnsurePay Limited |
England and Wales |
Dormant |
100% |
|
Earthport Enterprises Limited |
England and Wales |
Dormant |
100% |
|
Earthport Newco Limited |
England and Wales |
Dormant |
100% |
|
Travelpay Limited |
England and Wales |
Dormant |
100% |
|
Mobilepay Limited |
England and Wales |
Dormant |
100% |
|
Earthport Solutions Limited |
England and Wales |
Dormant |
100% |
|
Earthport Asiapac Limited |
England and Wales |
Dormant |
100% |
|
Zabadoo.com Limited |
England and Wales |
Dormant |
100% |
|
Epal Limited |
England and Wales |
Dormant |
100% |
|
Earthport USA Limited |
England and Wales |
Dormant |
100% |
14. TRADE AND OTHER RECEIVABLES
|
2009 £'000 |
Group 2008 £'000 |
2009 £'000 |
Company 2008 £'000 |
|
|
Trade receivables |
159 |
1,059 |
159 |
910 |
|
Other receivables |
864 |
1,240 |
1,018 |
1,239 |
|
Amount due from subsidiary undertakings |
- |
- |
53 |
53 |
|
Prepayments |
94 |
137 |
94 |
137 |
|
|
|
|
|
|
|
1,117 |
2,436 |
1,324 |
2,339 |
|
|
|
|
|
|
|
Trade receivables amounted to £159,000 (2008: £1,059,000), net of a provision of £Nil (2008: £65,000) for impairment. Movement on the group provisions for impairment were as follows:
|
2009 |
2008 |
|||
|
£'000 |
£'000 |
|||
|
At 1 July |
65 |
142 |
||
|
Provision for receivable impairment |
135 |
65 |
||
|
Receivables written off during the year |
(200) |
(142) |
||
|
|
|
|||
|
At 30 June |
- |
65 |
||
|
|
|
|||
The average credit period taken on sales of services is 40 days (2008: 154 days). No interest is charged on overdue balances. The directors consider that the carrying amount of trade receivables approximates their fair value.
15. CASH AND CASH EQUIVALENTS
|
2009 £'000 |
Group 2008 £'000 |
2009 £'000 |
Company 2008 £'000 |
|
|
Cash at bank and in hand |
885 |
3,655 |
832 |
3,654 |
|
|
|
|
|
|
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.
16. TRADE AND OTHER PAYABLES
|
2009 £'000 |
Group 2008 £'000 |
2009 £'000 |
Company 2008 £'000 |
|
|
Trade payables |
704 |
805 |
524 |
623 |
|
Other payables |
168 |
754 |
17 |
605 |
|
Amount due to subsidiary undertakings |
- |
- |
751 |
751 |
|
Other taxation and social security |
179 |
836 |
179 |
836 |
|
Accruals and deferred income |
199 |
859 |
199 |
859 |
|
|
|
|
|
|
|
1,250 |
3,254 |
1,670 |
3,674 |
|
|
|
|
|
|
|
Trade payables and accruals principally comprise amounts outstanding in respect of operating costs. The average credit period taken for trade purchases is 35 days (2008: 38 days). The directors consider that the carrying amounts for trade and other payables approximate their fair value.
Other payable includes £Nil (2008: £557,000) in respect of amounts due to R Cunningham, a former director of the Company.
17. BORROWINGS
|
2009 £'000 |
2008 £'000 |
|||
|
Current liabilities |
||||
|
Secured loans |
407 |
340 |
||
|
|
|
|||
|
407 |
340 |
|||
|
|
|
|
|
2009 £'000 |
2008 £'000 |
||
|
Non-current liabilities |
||||
|
Secured loans |
297 |
761 |
||
|
|
|
Loan facilities are provided by General Capital Venture Finance Limited and Michael Gerson Finance Plc. The facility is repayable over 5 years at a fixed interest rate of 15%, secured by means of an all-monies mortgage debenture over the Company's assets.
18. SHARE CAPITAL
|
2009 £'000 |
2008 £'000 |
|
|
Authorised |
||
|
At 1 July (169,412,642 ordinary shares of 10p each) |
16,941 |
6,941 |
|
Increase in authorised share capital in the year |
- |
10,000 |
|
|
|
|
|
At 30 June (169,412,642 ordinary shares of 10p each) |
16,941 |
16,941 |
|
Deferred shares of 7.5p each: 307,449,810 (2008: 307,449,810) |
23,059 |
23,059 |
|
|
|
|
|
At 30 June |
40,000 |
40,000 |
|
|
|
|
|
Issued |
||
|
At 1 July (79,088,009 ordinary shares of 10p each) |
7,909 |
5,194 |
|
Shares issued in the year |
842 |
2,715 |
|
|
|
|
|
At 30 June (87,511,340 ordinary shares of 10p each) |
8,751 |
7,909 |
|
Deferred shares of 7.5p each: 307,449,792 (2008: 307,449,792) |
23,059 |
23,059 |
|
|
|
|
|
At 30 June |
31,810 |
30,968 |
|
|
|
|
Deferred shares carry no rights to receive any dividend or other distribution. The holders of the deferred shares have no rights to receive notice, attend, speak or vote at any general meeting of the Company. On a return of capital on liquidation or otherwise, the holders of the deferred shares are entitled to receive the nominal amount paid up on the deferred shares after the repayment of £10,000,000 per ordinary share.
During the year to 30 June 2009 a total of 8,423,331 ordinary shares of 10p each were allotted for cash consideration of £2,884,159.
The following share issues were completed during the year:
|
2009 |
No of shares issued |
Average premium in pence |
Total premium £ |
|
|
July 2008 |
1,729,036 |
21.50 |
371,743 |
|
|
August 2008 |
21,163 |
25.00 |
5,291 |
|
|
September 2008 |
183,280 |
25.00 |
45,820 |
|
|
December 2008 |
494,687 |
25.00 |
123,672 |
|
|
January 2009 |
323,250 |
25.00 |
80,813 |
|
|
April 2009 |
500,000 |
25.00 |
125,000 |
|
|
May 2009 |
3,560,000 |
25.00 |
890,000 |
|
|
June 2009 |
1,611,915 |
24.78 |
399,433 |
|
2008 |
No of shares issued |
Average premium in pence |
Total Premium £ |
|
September 2007 |
9,677,419 |
21.00 |
2,032,258 |
|
October 2007 |
3,332,968 |
30.57 |
1,018,820 |
|
November 2007 |
3,487,160 |
21.19 |
738,784 |
|
December 2007 |
48,532 |
25.00 |
12,133 |
|
February 2008 |
90,651 |
25.00 |
22,663 |
|
March 2008 |
213,000 |
25.00 |
53,250 |
|
April 2008 |
6,200,792 |
53.23 |
3,300,513 |
|
May 2008 |
1,460,572 |
25.00 |
365,143 |
|
June 2008 |
2,631,238 |
24.69 |
649,711 |
Transaction costs amounting to £Nil (2008: £262,000) were charged against the share premium account.
Other than the employee share options set out in note 31, further warrants have been granted under the terms of the Company's fund-raising activities with exercise prices and dates shown in the table below.
|
Last date when exercisable |
Exercise price |
No. of Options outstanding at 1 July 2008 |
Granted No. |
Extended /( lapsed) No. |
Exercised No. |
No. of Options outstanding at 30 June 2009 |
|
31 July 2008 |
0.35 |
1,729,036 |
- |
- |
(1,729,036) |
- |
|
31 October 2008 |
0.35 |
1,071,427 |
- |
- |
(1,071,427) |
- |
|
31 December 2008 |
0.35 |
1,488,362 |
- |
(611,085) |
(877,277) |
- |
|
15 September 2009 |
0.58 |
- |
250,000 |
- |
- |
250,000 |
|
31 October 2009 |
0.35 |
- |
190,000 |
- |
(190,000) |
- |
|
12 December 2009 |
0.35 |
- |
4,000,000 |
- |
(4,000,000) |
- |
|
31 December 2009 |
0.23 |
2,075,000 |
- |
- |
- |
2,075,000 |
|
11 June 2017 |
0.29 |
250,000 |
- |
(250,000) |
- |
- |
|
27 March 2018 |
0.65 |
650,000 |
- |
(650,000) |
- |
- |
|
|
|
|
|
|
||
|
|
||||||
|
7,263,825 |
4,440,000 |
(1,511,085) |
(7,867,740) |
2,325,000 |
||
|
|
|
|
|
|
||
The fair value of options in the year was £511,000(2008: £344,000).
The fully diluted share capital at 30 June 2009 may be analysed as follows:
|
No. of Ordinary 10p shares |
||
|
2009 |
2008 |
|
|
Shares in issue at 30 June |
87,511,340 |
79,088,009 |
|
Employee share options (see note 30) |
22,762,593 |
16,039,080 |
|
Warrants |
2,325,000 |
7,263,825 |
|
|
|
|
|
Fully diluted number of shares |
112,598,933 |
102,390,914 |
|
|
|
|
19. SHARE PREMIUM
Group and Company
|
2009 £'000 |
2008 £'000 |
||
|
At 1 July |
44,732 |
36,801 |
|
|
Premium on shares issued |
2,042 |
8,193 |
|
|
Expenses of share issues |
- |
(262) |
|
|
|
|
||
|
At 30 June |
46,774 |
44,732 |
|
|
|
|
||
The share premium is the excess of consideration received for shares issued above their nominal value.
20. EMPLOYEE BENEFIT TRUST RESERVE
Group
|
2009 £'000 |
2008 £'000 |
|
|
At 30 June |
101 |
- |
|
|
|
|
During the year, an employee benefit trust (EBT) was set up. Loans of £80,000 were made to various employees and the EBT invested £101,000 in the share capital of the Company, representing 180,000 shares.
21. MERGER RESERVE
|
Group and Company |
2009 £'000 |
2008 £'000 |
|
At 1 July and 30 June |
9,200 |
9,200 |
|
|
|
|
The merger reserve represents the premium attributable to shares issued in consideration of the costs of acquisition of subsidiaries in prior years.
22. EQUITY RESERVE
Group and Company
|
2009 £'000 |
2008 £'000 |
|
|
At 1 July |
- |
1,136 |
|
Conversion of loan notes |
- |
(1,136) |
|
|
|
|
|
At 30 June |
- |
- |
|
|
|
|
The equity reserve represents the equity component of convertible loan notes.
23. SHARE-BASED PAYMENT RESERVE
Group and Company
|
2009 £'000 |
2008 £'000 |
|
|
At 1 July |
1,354 |
868 |
|
Equity settled share-based payments |
2,162 |
539 |
|
Options exercised during the year |
(76) |
(53) |
|
|
|
|
|
At 30 June |
3,440 |
1,354 |
|
|
|
|
The share-based payment reserve represents the cumulative charge to date in respect of unexercised share options at the balance sheet date.
24. WARRANT RESERVE
Group and Company
|
2009 £'000 |
2008 £'000 |
|
|
At 1 July |
816 |
1,204 |
|
Equity settled share-based payments - warrants |
173 |
88 |
|
Warrants exercised during the year |
(756) |
(476) |
|
|
|
|
|
At 30 June |
233 |
816 |
|
|
|
|
The warrant reserve (share warrants granted under the terms of the Company's funding activities in relation to new debt, broking fee and follow on funding strategies) represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet.
25. RETAINED EARNINGS
Group
|
|
2009 £'000 |
2008 £'000 |
|
At 1 July |
(84,755) |
(81,903) |
|
Loss for the year attributable to equity shareholders of the Company |
(7,295) |
(3,381) |
|
Options exercised during the year |
76 |
53 |
|
Warrants exercised during the year |
756 |
476 |
|
|
|
|
|
At 30 June |
(91,218) |
(84,755) |
|
|
|
|
26. RETAINED EARNINGS
Company
|
|
2009 £'000 |
2008 £'000 |
|
At 1 July |
(85,272) |
(82,380) |
|
Loss for the year attributable to equity shareholders of the Company |
(7,144) |
(3,421) |
|
Options exercised during the year |
76 |
53 |
|
Warrants exercised during the year |
756 |
476 |
|
|
|
|
|
At 30 June |
(91,584) |
(85,272) |
|
|
|
|
As permitted by Section 408 Companies Act 2006, a separate income statement has not been presented in respect of the Company.
27. COMMITMENTS UNDER OPERATING LEASES
|
2009 £'000 |
2008 £'000 |
|
|
Minimum lease payments under operating leases recognised as an expense in the year |
90 |
105 |
|
|
|
|
At 30 June 2009 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
|
2009 £'000 |
2008 £'000 |
|
|
Within one year |
90 |
90 |
|
In the second to third year |
180 |
180 |
|
In the third to fifth year |
23 |
113 |
|
|
|
|
|
293 |
383 |
|
|
|
|
|
28. PENSION COMMITMENTS
The Group offers a stakeholder pension scheme to all employees and has started making contributions to the scheme since July 2008. These contributions are charged to the income statement as they are incurred and amounted to £103,000 (2008: £91,000).
29. RELATED PARTY TRANSACTIONS
During the year the Company entered into transactions, in the ordinary course of business, with related parties as set out below:
The Company has a related party relationship with its subsidiaries.
|
2009 £'000 |
2008 £'000 |
|
|
Inter-company receivables |
||
|
Earthport Enterprises Limited |
2 |
2 |
|
Travelpay Limited |
5 |
5 |
|
Mobilepay Limited |
20 |
20 |
|
Earthport Asiapac Limited |
26 |
26 |
|
|
|
|
|
53 |
53 |
|
|
|
|
|
|
Inter-company payables |
2009 |
2008 |
|
£'000 |
£'000 |
|
|
Earthport Enterprises Limited |
750 |
750 |
|
Travelpay Limited |
1 |
1 |
|
|
|
|
|
751 |
751 |
|
|
|
|
|
There were no movements on these balances in the year ended 30 June 2009 or 30 June 2008.
Included in other receivables in note 14 is £20,000 due from J Bergman relating to unpaid share capital. Since the balance sheet date this amount has been paid by J Bergman.
30. EVENTS SINCE THE BALANCE SHEET DATE
Since the balance sheet date, the Company has raised additional finance through the issue of equity of £0.41m. In addition a £1m Loan Note dated 5 October 2009 has been fully subscribed to.
31. SHARE-BASED PAYMENTS
The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the averaged quoted market price on the three days prior to the date of grant. Vesting conditions are set by the Remuneration Committee, with a minimum of 50 per cent of options granted vesting after three years from the date of grant. In addition specific performance criteria may be set. Options qualify for EMI relief where appropriate. If the options remain unexercised after a period of 7 years from the date of vesting, the options expire. Options lapse if the employee leaves the Group before the options vest.
Details of the share options outstanding during the year are as follows:
|
Number of share options |
Weighted average exercise price (£) |
Number of share options |
Weightedaverage exercise price (£) |
|
|
2009 |
2008 |
|||
|
Options at beginning of the year |
16,039,080 |
0.545 |
7,156,808 |
0.333 |
|
Granted during the year |
7,625,000 |
0.426 |
9,890,000 |
0.633 |
|
Lapsed during the year |
(551,000) |
0.537 |
(683,228) |
0.350 |
|
Exercised during the year |
(350,487) |
0.753 |
(324,500) |
0.865 |
|
|
|
|
|
|
|
Outstanding at the end of the year |
22,762,593 |
0.565 |
16,039,080 |
0.545 |
|
|
|
|
|
|
Of the 22,762,593 outstanding options at 30 June 2009 (2008: 16,039,080), 4,821,800 were exercisable (2008: 2,816,500). The options outstanding at 30 June 2009 had a weighted average exercise price of 56p (2008: 55p) and a weighted average remaining contractual life of 6 years (2008: 6 years). The total expense in respect of employees share-based payments recognised during the year was £2,162,000 (2008: £539,000). For options exercised in the year ended 30 June 2008, the weighted average share price at the date of exercise was 75p (2008:87p)
The fair value of the options has been calculated using the Black-Scholes Model. The model takes into account the following factors in determining the fair value of an option:
|
2009 |
2008 |
|
|
Weighted average share price |
41.2p |
68.5p |
|
Weighted average exercise price |
40.1p |
63.3p |
|
Expected volatility |
73.8% |
91.5% |
|
Expected life |
65 months |
60 months |
|
Risk free rate |
2.83 |
4.7 |
|
Expected dividend yield |
0% |
0% |
Expected volatility was determined by calculating the historical volatility of the Company's share price over the 60 months prior to the date of grant. The expected life used in the model has been based on management's best estimates for the effects of transferability, exercise restrictions and behavioural considerations.
32. RECONCILIATION OF LOSS BEFORE TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Group
|
2009 £'000 |
2008 £'000 |
|
|
Loss before tax |
(7,015) |
(3,661) |
|
Depreciation of property, plant and equipment |
89 |
105 |
|
Share-based payment expense |
2,335 |
627 |
|
Finance costs |
152 |
324 |
|
Loss on available-for-sale investment |
160 |
- |
|
|
|
|
|
Operating cash out flow before movements in working capital |
(4,279) |
(2,605) |
|
Decrease/(increase) in receivables |
1,319 |
(1,352) |
|
Decrease in payables |
(2,004) |
(743) |
|
|
|
|
|
Cash used by operations |
(4,964) |
(4,700) |
|
Interest paid |
(152) |
(151) |
|
|
|
|
|
Net cash used in operating activities |
(5,166) |
(4,851) |
|
|
|
|
RECONCILIATION OF LOSS BEFORE TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Company
|
2009 £'000 |
2008 £'000 |
|
|
Loss before tax |
(6,864) |
(3,699) |
|
Depreciation of property, plant and equipment |
89 |
105 |
|
Share-based payment expense |
2,335 |
627 |
|
Finance costs |
152 |
327 |
|
Loss on available-for-sale investment |
160 |
- |
|
|
|
|
|
Operating cash out flow before movements in working capital |
(4,128) |
(2,640) |
|
Decrease/(increase) in receivables |
1,116 |
(1,300) |
|
Decrease in payables |
(2,004) |
(744) |
|
|
|
|
|
Cash used by operations |
(5,016) |
(4,684) |
|
Interest paid |
(152) |
(155) |
|
|
|
|
|
Net cash used in operating activities |
(5,168) |
(4,839) |
|
|
|
|
33. FINANCIAL INSTRUMENTS
The Group's financial instruments comprise cash and various items arising directly from its operations, such as trade receivables and trade payables. The main purpose of these financial instruments is to provide working capital for the Group. The Group's policy is to obtain the highest rate of return on its cash balances, subject to having sufficient resources to manage the business on a day to day basis and not exposing the Group to unnecessary risk of default.
Risk management policies
The Group's finance function is responsible for procuring the Group's capital resources and maintaining an efficient capital structure, together with managing the Group's liquidity, foreign exchange and interest exposures.
All treasury operations are conducted within strict policies and guidelines that have been approved by the directors.
The Group's portfolio of cash and cash equivalents is managed such that there is no significant concentration of credit risk in any one bank or other financial institution. Management monitors closely the credit quality of the institutions with which it holds deposits.
Credit risk
Credit risk is the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Maximum credit risk at 30 June 2009 was as follows:
|
Group |
Company |
|||
|
2009 |
2008 |
2009 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Trade and other receivables |
1,023 |
2,299 |
1,230 |
2,202 |
|
Cash and cash equivalents |
885 |
3,655 |
832 |
3,654 |
|
|
|
|
|
|
|
1,908 |
5,954 |
2,062 |
5,856 |
|
|
|
|
|
|
|
Before accepting a new customer, the Group assesses each potential customer's credit quality and risk. Customer contracts are drafted to reduce any potential credit risk to the Group. Where appropriate the customer's recent financial statements are reviewed.
The amount of trade receivables is presented in the balance sheet net of allowances for doubtful receivables. An allowance for impairment is made where a review of overdue accounts indicates circumstances, based on previous experience, where there might be a reduction in the recoverability of the cash flows.
£159,000 of trade receivables was past due for payment as at 30 June 2009, by four months or less, of which £112,000 had been collected by 19 October 2009. The directors are confident as to the recoverability of the remaining balance and thus no further impairment of the amount has been recognised in the financial statements at 30 June 2009.
There are no significant credit risks arising from financial assets that are neither past due nor impaired.
Cash and cash equivalents are held at banks with high credit ratings assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk and the exposures are spread over numerous counter parties and customers.
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group closely monitors its cash position to ensure that it has sufficient funds to meet the obligations of the Group as they fall due. The Group's treasury maintains flexibility in funding by maintaining availability under committed credit lines.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
|
Group 2009 |
Less than 1 year £'000 |
Between 1 and 5 years £'000 |
Total £'000 |
|
Trade payables |
704 |
- |
704 |
|
Other payables |
168 |
- |
168 |
|
Accruals and deferred income |
199 |
- |
199 |
|
Borrowings |
407 |
297 |
704 |
|
|
|
|
|
|
Total |
1,478 |
297 |
1,775 |
|
|
|
|
|
|
2008 |
|||
|
Trade payables |
805 |
- |
805 |
|
Other payables |
754 |
- |
754 |
|
Accruals and deferred income |
859 |
- |
859 |
|
Borrowings |
340 |
761 |
1,101 |
|
|
|
|
|
|
Total |
2,758 |
761 |
3,519 |
|
|
|
|
|
|
Company 2009 |
Less than 1 year £'000 |
Between 1 and 5 years £'000 |
Total £'000 |
|
Trade payables |
524 |
- |
524 |
|
Other payables |
17 |
- |
17 |
|
Accruals and deferred income |
199 |
- |
199 |
|
Borrowings |
407 |
297 |
704 |
|
|
|
|
|
|
Total |
1,147 |
297 |
1,444 |
|
|
|
|
|
|
2008 |
|||
|
Trade payables |
623 |
- |
623 |
|
Other payables |
1,356 |
- |
1,356 |
|
Accruals and deferred income |
859 |
- |
859 |
|
Borrowings |
340 |
761 |
1,101 |
|
|
|
|
|
|
Total |
3,178 |
761 |
3,939 |
|
|
|
|
|
Interest rate risk
The Group's interest rate exposure arises mainly from its interest bearing deposits. All cash is held in variable rate accounts. Based on the balance sheet value of cash and cash equivalents, a 1% change in interest base rates would lead to an increase or decrease in income and equity of £8,300 (2008: £36,500). No hedging is undertaken given the amounts involved.
Foreign currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises on financial assets and liabilities that are denominated in a currency other than the functional currency of the entity by which they are held. No hedging is undertaken given the amounts involved. The Group and Company's exposure to currency risk was as follows:
Included in the Group cash and cash equivalents at 30 June 2009 was £85,159 in US Dollars (2008: £29,041) and £143,900 in Euros (2008: £52,625).
Based on the balance sheet value of cash and cash equivalents, as shown above, a 10% change in the currency exchange rate would lead to an increase or decrease in the income and equity of £22,906 (2008: £8,000).
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Financial instruments recognised in the balance sheet
|
Group 2009 |
Loans and receivables £'000 |
||
|
Current assets |
|||
|
Trade receivables |
159 |
||
|
Other receivables |
864 |
||
|
Cash and cash equivalents |
885 |
||
|
|
|||
|
Total current assets |
1,908 |
||
|
|
|
Other financial liabilities £'000 |
|||
|
Current liabilities |
|||
|
Trade payables |
704 |
||
|
Other payables |
168 |
||
|
Accruals |
199 |
||
|
Borrowings |
704 |
||
|
|
|||
|
1,775 |
|||
|
|
|||
|
2008 |
Loans and receivables £'000 |
Available-for-sale £'000 |
Total £'000 |
|
Current assets |
|||
|
Investments |
- |
160 |
160 |
|
Trade receivables |
1,059 |
- |
1,059 |
|
Other receivables |
1,240 |
- |
1,240 |
|
Cash and cash equivalents |
3,655 |
- |
3,655 |
|
|
|
|
|
|
Total current assets |
5,954 |
160 |
6,114 |
|
|
|
|
|
|
Other |
|||||||||||
|
financial |
|||||||||||
|
liabilities |
|||||||||||
|
£'000 |
|||||||||||
|
Current liabilities |
|||||||||||
|
Trade payables |
805 |
||||||||||
|
Other payables |
754 |
||||||||||
|
Accruals |
259 |
||||||||||
|
Borrowings |
340 |
||||||||||
|
|
|||||||||||
|
2,158 |
|||||||||||
|
|
|||||||||||
|
Company |
Loans |
||||||||||
|
and |
|||||||||||
|
2009 |
receivables |
||||||||||
|
£'000 |
|||||||||||
|
Current assets |
|||||||||||
|
Trade receivables |
159 |
||||||||||
|
Other receivables |
1,018 |
||||||||||
|
Cash and cash equivalents |
832 |
||||||||||
|
|
|||||||||||
|
Total current assets |
2,009 |
||||||||||
|
|
|||||||||||
|
Other |
|||||||||||
|
Financial |
|||||||||||
|
Liabilities |
|||||||||||
|
£'000 |
|||||||||||
|
Current liabilities |
|||||||||||
|
Trade payables |
524 |
||||||||||
|
Other payables |
768 |
||||||||||
|
Accruals |
199 |
||||||||||
|
Borrowings |
704 |
||||||||||
|
|
|||||||||||
|
2,195 |
|||||||||||
|
|
|||||||||||
|
2008 |
Loans |
||
|
and |
|||
|
receivables |
Available-for-sale |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
Current assets |
|||
|
Investments |
- |
160 |
160 |
|
Trade receivables |
910 |
- |
910 |
|
Other receivables |
1,292 |
- |
1,292 |
|
Cash and cash equivalents |
3,654 |
- |
3,654 |
|
|
|
|
|
|
Total current assets |
5,856 |
160 |
6,016 |
|
|
|
|
|
|
Other |
|||
|
financial |
|||
|
liabilities |
|||
|
£'000 |
|||
|
Current liabilities |
|||
|
Trade payables |
623 |
||
|
Other payables |
1,356 |
||
|
Accruals |
259 |
||
|
Borrowings |
1,101 |
||
|
|
|||
|
3,339 |
|||
|
|
|||
The carrying values of all financial instruments above approximate to their fair values.
Related Shares:
Earthport