RNS Number:8789I
Cantono PLC
30 November 2007
CANTONO PLC
Results for the year ended 31 May 2007
Chairman's Statement
I joined the board of Cantono plc as an executive director on 9
March 2007 following the acquisition of CSF Managed Services plc in early
January 2007, bringing with me over 25 years of senior management experience in
the IT industry.
In the short time I have been with the Group your Board has already
made significant changes as the Group redefines its business strategy and
operations.
The Group has re-branded itself as Cantono plc and transformed into
a managed services company offering outsourced services and products to a broad
range of markets, moving away from software development and distribution. The
re-branding has also given the opportunity for all the newly acquired entities,
along with the Group's existing managed services operation, to unify and
consolidate under a single name. As part of this consolidation process the
Company's shareholding in its non-core activity, Panopticon Software AB, was
sold to its principal founders in May 2007. As part of the disposal the Group
negotiated a debt for equity swap and removed approximately #4.1m of long term
debt.
Turnover for the 12 month period ending 31 May 2007 was #5,144,268
compared to #7,919,931 in the previous period to 31 May 2006. The operating loss
in the period to 31 May 2007 was #6,830,931 compared to #6,343,764 in the
previous 13 month trading period to 31 May 2006.
The reorganisation of the managed services businesses faced many
challenges: commercial, logistical and operational as well as financial. To
carry this through has placed great pressures on all our employees and I would
like to take this opportunity to thank them for their flexibility, determination
and support.
Change continues unabated in the market in which the Group operates
and your Board continues to review its operations and to look for further
improvements and opportunities. As part of this on-going process we were pleased
to successfully complete a further round of fundraising in early August 2007.
The Group raised approximately #10m, net of expenses, to provide additional
working capital for the existing businesses along with new capital to broaden
the Group's business activities into the data centre market. We were also
pleased to report that this fundraising was supported not only by several of our
existing, major shareholders, but also by a number of new, institutional
shareholders, thereby broadening our shareholder base.
The data centre market is one I am familiar with having built a
similar operation within my previous group. This is a very exciting market space
which your Board believes has considerable opportunities for growth for the
foreseeable future and one which your Board is committed to develop.
In summary, your Board has changed the direction of the Group and
continues to seek every opportunity to improve its operational efficiency in the
managed services business and exploit further opportunities as they arise.
Mike Northall
Chairman
29 November 2007
Consolidated Profit and Loss Account for the Year Ended 31 May 2007
Note Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Turnover 2
- continuing operations 3 2,505,847 7,919,931
- acquisitions 3 2,638,421 -
5,144,268 7,919,931
Cost of sales (1,571,739) (3,477,627)
Gross profit 3,572,529 4,442,304
Administrative expenses (10,403,460) (10,786,068)
including exceptional items of
#1,106,956 (31 May 2006: #0)
Operating loss:
Excluding exceptional items (5,723,975) (6,343,764)
Exceptional costs 5 (1,106,956) -
Operating loss 4
- continuing operations 3 (5,061,272) (6,343,764)
- acquisitions 3 (1,769,659) -
(6,830,931) (6,343,764)
Loss on sale of subsidiary 5 (1,752,983) -
Other interest receivable and 6,674 8,780
similar income
Interest payable and similar 9 (346,365) (677,248)
charges
Loss on ordinary activities before (8,923,605) (7,012,232)
taxation
Tax on loss on ordinary activities 10 (8,158) (135,291)
Loss on ordinary activities after (8,931,763) (7,147,523)
taxation
Minority interests
Equity 23 729,287 (346,301)
Loss for the financial year 22 (8,202,476) (7,493,824)
Basic and diluted loss per ordinary 11 (28.28)p (25.83)p
share
Consolidated Statement of Total Recognised Gains and Losses for the Year Ended 31 May 2007
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Net loss for the year (8,202,476) (7,493,824)
Foreign currency translation differences (19,399) 12,791
Total losses for the year (8,221,875) (7,481,033)
Consolidated Balance Sheet as at 31 May 2007
31 May 2007 31 May 2006
Note # # # #
Fixed assets
Intangible assets 12 6,721,851 4,936,303
Tangible assets 13 1,302,522 302,468
8,024,373 5,238,771
Current assets
Stocks 15 7,214 -
Debtors 16 950,056 1,861,286
Cash at bank and in hand 109,243 456,256
1,066,513 2,317,542
Creditors: Amounts falling due 17(6,363,746) (8,298,988)
within one year
Net current liabilities (5,297,233) (5,981,446)
Total assets less current 2,727,140 (742,675)
liabilities
Creditors: Amounts falling due 18 (61,063) (468,106)
after more than one year
Net assets/(liabilities) 2,666,077 (1,210,781)
Capital and reserves
Called up share capital 21 7,758,136 4,134,116
Share premium reserve 22 10,957,455 1,789,835
Profit and loss reserve 22 (16,049,514) (7,827,639)
Equity shareholders' funds/ 24 2,666,077 (1,903,688)
(deficit)
Minority interests 23 - 692,907
Total funds/(deficit) 2,666,077 (1,210,781)
Consolidated Cash Flow Statement for the Year Ended 31 May 2007
31 May 2007 31 May 2006
Note # # # #
Net cash flow from operating 27 (1,986,596) (1,782,825)
activities
Returns on investment and 28 (339,691) (182,209)
servicing of finance
Taxation 28 (8,158) -
Capital expenditure and
financial investment
Purchase of tangible fixed (190,103) (274,369)
assets
Sale of tangible fixed assets 750,778 -
560,675 (274,369)
Acquisitions and disposals
Acquisition of subsidiary (441,705) -
undertaking
Net cash acquired with (17,626) (52,497)
subsidiary
(459,331) (52,497)
Cash outflow before management (2,233,101) (2,291,900)
of liquid resources and
financing
Financing
Increase in loans and borrowings - (194,782)
Repayment of loans and (126,411) -
borrowings
Issue of equity shares net of 2,121,351 2,480,863
costs
Capital element of hire purchase (14,452) -
payments
1,980,488 2,286,081
Net cash flow (252,613) (5,819)
Reconciliation of net cash flow to movement in net debt
31 May 2007 31 May 2006
Note # #
Decrease in cash in the year 29 (252,613) (5,819)
Cash outflow from decrease in debt and lease financing 233,023 -
Cash inflow from increase in debt - (300,000)
Change in net debt resulting from cash flows (19,590) (305,819)
Loans and finance leases acquired with subsidiary (404,816) (3,937,733)
New finance leases (82,524) -
Conversion of debt to equity 4,112,733 -
Movement in net debt in the period 3,605,803 (4,243,552)
Net debt at the start of the year 29 (4,243,552) -
Net debt at the end of the year 29 (637,749) (4,243,552)
Notes to the Financial Statements for the Year Ended 31 May 2007
1 Accounting policies
Basis of preparation
The financial statements have been prepared under the historical
cost convention and in accordance with applicable accounting standards.
The consolidated financial statements include the financial
statements of the Company and its subsidiary undertakings made up to 31 May
2007. The acquisitions method of accounting has been adopted. Under this method,
the results of the subsidiary undertakings acquired or disposed of in the year
are included in the consolidated profit and loss account from the date of
acquisition or up to the date of disposal.
An associate is an undertaking in which the Group has a long term
interest, usually from 20% to 50% of the equity voting rights, and over which it
exercises significant influence. A joint venture is an undertaking in which the
Group has a long term interest and over which it exercises joint control. The
Group's share of the profits less losses of associates and of joint ventures is
included in the consolidated profit and loss account and its interest in their
net assets, other than goodwill, is included in investments in the consolidated
balance sheet.
Where a group company is party to a joint arrangement which is not
an entity, that company accounts directly for its part of the income and
expenditure, assets, liabilities and cash flows. Such arrangements are reported
in the consolidated financial statements on the same basis.
Under section 230(4) of the Companies Act 1985 the Company is
exempt from the requirement to present its own profit and loss account. Its loss
for the financial year was #11,326,065 (2006 - #582,939).
Going concern
These financial statements have been prepared on a going concern
basis as the Directors consider there to be sufficient capital available to meet
the Group's requirements for the foreseeable future.
Turnover
Turnover represents the amounts derived from the provision of goods
and services to third party customers during the period and is exclusive of
value added tax.
The Group has three main income streams: software sales and
associated maintenance income, managed services and professional services.
Software sales of standard products are recognised when and to the
extent that the Group has obtained the right to consideration through its
performance. Revenue from support and maintenance is recognised on a
straight-line basis over the period to which the maintenance agreement relates.
Revenue from managed services is recognised on a straight-line basis over the
period of the contract. Professional services income is recognised at the point
of completion.
Depreciation
Depreciation is provided on tangible fixed assets so as to write
off the cost or valuation, less any estimated residual value, over their
expected useful economic life as follows:
Plant and machinery 3 - 7 years straight line
Fixtures and fittings 3 - 5 years straight line
Goodwill
Goodwill is the difference between the fair value of consideration
paid for an acquired entity and the aggregate of the fair value of that entity's
identifiable assets and liabilities.
Positive goodwill is capitalised, classified as an asset on the
balance sheet and amortised on a straight line basis over its useful economic
life. It is reviewed for impairment at the end of the first full financial year
following the acquisition and in other periods if events or changes in
circumstances indicate that the carrying value may not be recoverable.
Amortisation
Amortisation is provided on intangible fixed assets so as to write
off the cost or valuation, less any estimated residual value, over their
expected useful economic life.
Investment
Fixed asset investments are stated at cost less provision for
diminution in value.
Research and development expenditure
Research and development expenditure is written off as incurred,
except that development expenditure incurred on an individual project is carried
forward when its future recoverability can reasonably be regarded as assured.
Any expenditure carried forward is amortised in line with the expected future
sales from the related project.
Stock
Stock is valued at the lower of cost and net realisable value,
after due regard for obsolete and slow moving stocks. Net realisable value is
based on selling price less anticipated costs to completion and selling costs.
Foreign currencies
Profit and loss account transactions in foreign currencies are
translated into sterling at the exchange rate ruling at the date of the
transaction. Assets and liabilities denominated in foreign currencies are
translated into sterling at the closing rates at the balance sheet date and the
exchange differences are included in the profit and loss account.
The results of overseas operations are translated at the average rates of
exchange during the period and their balance sheets translated into sterling at
the rates of exchange ruling on the balance sheet date. Exchange differences
which arise from translation of the opening net assets and results of foreign
subsidiary undertakings and from translating the profit and loss account at an
average rate are taken to reserves.
Hire purchase and finance lease contracts
Assets held under finance leases, which are leases where
substantially all the risks and rewards of ownership of the asset have passed to
the company, are capitalised in the balance sheet and are depreciated over their
useful lives. The capital elements of future obligations under the leases are
included as liabilities in the balance sheet. The interest element of the rental
obligation is charged to the profit and loss account over the period of the
lease and represents a constant proportion of the balance of capital repayments
outstanding.
Assets acquired under instalment finance agreements are treated as
tangible fixed assets and depreciation is provided accordingly. The capital
element of future finance payments is included within creditors. Finance charges
are allocated to accounting periods over the length of the contract.
Operating leases
Rentals payable under operating leases are charged in the profit
and loss account on a straight line basis over the lease term.
Pensions
The Group operates a defined contribution pension scheme.
Contributions are charged in the profit and loss account as they become payable
in accordance with the rules of the scheme.
Equity shares and capital instruments
Shares are included in shareholders' funds. Other instruments are
classified as liabilities if they contain an obligation to transfer economic
benefits and if not they are included in shareholders' funds. The finance cost
recognised in the profit and loss account in respect of capital instruments
other than equity shares is allocated to periods over the term of the instrument
at a constant rate on the carrying amount.
Taxation
Current tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in the
future or a right to pay less tax in the future have occurred at the balance
sheet date. Timing differences are differences between the group's taxable
profits and its results as stated in the financial statements that arise from
the inclusion of gains and losses in tax assessments in the periods different
from those in which they are recognised in the financial statements.
A net deferred tax asset is recognised only when, on the basis of
all available evidence, it can be regarded as more likely than not there will be
suitable profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected to reverse
based on tax rates and laws that have been enacted or substantively enacted by
the balance sheet date. Deferred tax is measured on a non-discounted basis.
Share based payments
The Group has adopted Financial Reporting Standard 20 'Share based
payment' for the first time this year. No entries have been recorded in the
accounts for the value of the options as the valuation is considered to be
immaterial.
2 Turnover
13.1% of the Group's turnover related to exports (31 May 2006 - 38.7%).
An analysis of turnover by geographical market is given below:
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
UK 4,469,278 4,856,544
Europe 674,990 2,510,812
Rest of world - 552,575
5,144,268 7,919,931
Operating loss by origin Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
UK (4,890,745) (7,211,079)
Europe (1,940,186) 867,315
Rest of world - -
Total (6,830,931) (6,343,764)
Net Assets/(Liabilities) 31 May 2007 31 May 2006
# #
UK 2,723,103 (2,728,319)
Europe (57,026) 1,517,538
Rest of world - -
Total 2,666,077 (1,210,781)
3 Analysis of cost of sales and net operating expenses
Continuing Acquisitions Total
operations
# # #
Year ended 31 May 2007
Turnover 2,505,847 2,638,421 5,144,268
Cost of sales (537,155) (1,034,584) (1,571,739)
Gross profit 1,968,692 1,603,837 3,572,529
Administrative expenses (7,029,964) (3,373,496) (10,403,460)
Operating loss (5,061,272) (1,769,659) (6,830,931)
Period ended 31 May 2006
Turnover 7,919,931 - 7,919,931
Cost of sales (3,477,627) - (3,477,627)
Gross profit 4,442,304 - 4,442,304
Administrative expenses (10,786,068) - (10,786,068)
Operating loss (6,343,764) - (6,343,764)
4 Operating loss
Operating loss is stated after charging:
Year ended 31 May 2007 7 February 2005 to 31 May 2006
# # # #
Research and development expenditure 1,007,489 1,651,404
Hire of other assets (Operating 248,329 258,419
leases)
Auditors' remuneration and amounts
receivable by auditors and their
associates in respect of:
The audit of these financial 10,000 10,000
statements
The audit of subsidiaries' financial 65,000 55,000
statements
Tax services 18,735 10,000
Review of interim statement 15,000 15,000
108,735 90,000
Foreign currency losses 14,193 3,987
Depreciation of owned tangible fixed 411,798 39,602
assets
Amortisation and impairment of 1,124,190 2,189,284
goodwill
Amortisation of development costs 154,965 53,590
5 Exceptional items
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Reorganisation and restructuring costs 1,106,956 -
Exceptional loss on sale of subsidiary 1,752,983 -
The reorganisation costs relates to the restructuring and
integration costs following the acquisitions of Blue River Systems Limited, NSA
Solutions Limited, Vox Technology Limited and CSF Managed Services plc.
On 5 May 2007 the Group sold its 54% interest in Panopticon
Software AB, via its holding in Hamsard Holdings Limited, to Edenmore
Investments Limited, a company incorporated in Cyprus and controlled by Mr
Giertz, the Vice President of Sales in Panopticon Software AB. The transfer of
ownership was part of a debt repayment of a deep discounted loan of #2,427,753,
and also involved the Company issuing 36,363,636 Ordinary shares of 1p at 5.5p.
The accounts for the period ended 30 April 2007 show that Panopticon had lost
#827,107, and its net liabilities excluding goodwill as at the 30 April 2007
were #609,899. The loss on disposal was made up as follows:
# #
Fixed assets (279,078)
Current assets (657,326)
Creditors 1,582,683
Net liabilities 646,279
Minority interest (36,380)
609,899
Goodwill balance outstanding at the date of sale (2,790,635)
Net loss on disposal (1,752,983)
427,753
Satisfied by
Loan waiver 427,753
6 Particulars of employees
The average number of persons employed by the group (including
directors) during the year, analysed by category, was as follows:
Year ended 7 February 2005 to
31 May 2007 31 May 2006
No. No.
Technical 86 72
Sales and Marketing 6 17
Management and Administration 16 15
108 104
The aggregate payroll costs of these persons were as follows:
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Wages and salaries 3,679,415 4,518,263
Social security 518,277 668,931
Other pension costs 33,334 155,166
4,231,026 5,342,360
7 Share based payments
The Company's share based payment scheme consists of various share
option schemes designed to reward and motivate the Group's employees. The
company has applied the provisions of Financial Reporting Standard 20 for the
first time in the year ended 31 May 2007, calculations performed under the Black
Scholes Merton valuation model show that there was no charge for last year, and
this years charge was immaterial. Details of the movement for the year are
disclosed below.
Options at Granted Exercised Lapsed Options Exercise Grant Date from Expiry
beginning of during during during the at end of Price date when date
the year the the year year the year exercisable
year
1,637,557 - - (560,903) 1,076,654 31.39p 27 27 April 08 27
April April
05 15
495,750 - - (471,750) 24,000 37.06p 27 27 April 08 27
April April
05 15
2,133,307 - - (1,032,653) 1,100,654
Following the capital reorganisation on 3 August 2007, as disclosed
in Note 31, Post Balance Sheet Events, the option exercise prices of 31.39p and
37.06p become #6.28 and #7.41 respectively.
8 Directors' emoluments
The Directors' emoluments for the year are as follows:
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Directors' emoluments (including benefits in kind) 678,819 669,250
Pension contributions paid on behalf of former directors 21,667 56,667
Compensation for loss of office 159,000 -
859,486 725,917
The aggregate of emoluments and amounts receivable under long term
incentive schemes of the highest paid director was #270,479.
The preceeding year's highest paid director relates to an ex-Director. His
emoluments for the period ended 31 May 2006 were #229,272.
9 Interest payable and similar charges
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Bank interest payable 39,430 228,869
Loan interest 104,718 448,379
Other interest payable 200,238 -
Hire purchase interest 1,979 -
346,365 677,248
10 Taxation
Analysis of current period tax charge
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Current tax
UK corporation tax charge 8,158 2,778
Foreign corporation tax - 132,513
Total current tax 8,158 135,291
Factors affecting current period tax charge
The tax assessed on the loss on ordinary activities for the year is
higher than (7 February 2005 to 31 May 2006 - higher than) the standard rate of
corporation tax in the UK of 30.0% (7 February 2005 to 31 May 2006 - 30.0%).
The differences are reconciled below:
Year ended 7 February 2005 to
31 May 2007 31 May 2006
# #
Loss on ordinary activities before taxation (8,923,605) (7,012,232)
Standard rate corporation tax credit (2,677,082) (2,103,670)
Depreciation in excess of capital allowances (241,615) (668,504)
Loss on disposal of subsidiary (510,857) -
Tax losses carried forward 1,573,195 2,774,952
Foreign tax adjustments - 132,513
Items not deductible for tax purposes 1,864,517 -
Total current tax charge for the year 8,158 135,291
Factors which may affect future tax charges
Current tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date. The Group has estimated tax losses of
#21,753,509 available for carry forward against future trading profits. A
deferred tax asset of #6,526,053 has not been recognised as its future recovery
is uncertain or not currently anticipated.
11 Earnings per share
Following the capital reorganisation on 3 August 2007, details of
which are disclosed in the post balance sheet Note 31, the loss per share for
the year is based on the 29,005,666 ordinary shares of 20p each, the total
number of shares in issue following the reorganisation on 3 August 2007. Last
year's earning per share, for comparative purposes, is also restated on the
basis of the capital reorganisation of 3 August 2007.
12 Intangible fixed assets
Group
Goodwill Development Total
# # #
Cost
As at 1 June 2006 6,704,261 474,916 7,179,177
Additions 6,121,699 - 6,121,699
Disposals (3,981,856) (474,916) (4,456,772)
As at 31 May 2007 8,844,104 - 8,844,104
Amortisation
As at 1 June 2006 2,189,284 53,590 2,242,874
Eliminated on disposals (1,191,221) (208,555) (1,399,776)
Charge for the year 1,124,190 154,965 1,279,155
As at 31 May 2007 2,122,253 - 2,122,253
Net book value
As at 31 May 2007 6,721,851 - 6,721,851
As at 31 May 2006 4,514,977 421,326 4,936,303
The Group made three acquisitions during the year. Details of the
acquisitions are shown in Note 20 to these financial statements.
The disposal made during the year relates to the sale of the
holding in Panopticon Software AB, details of which are disclosed under the
exceptional item Note 5.
13 Tangible fixed assets
Group
Fixtures, fittings Motor vehicles Total
and equipment
# # #
Cost
As at 1 June 2006 342,070 - 342,070
Additions 272,627 - 272,627
Acquisitions 1,873,346 29,374 1,902,720
Disposals (791,771) - (791,771)
As at 31 May 2007 1,696,272 29,374 1,725,646
Depreciation
As at 1 June 2006 39,602 - 39,602
Eliminated on disposals (28,276) - (28,276)
Charge for the year 405,331 6,467 411,798
As at 31 May 2007 416,657 6,467 423,124
Net book value
As at 31 May 2007 1,279,615 22,907 1,302,522
As at 31 May 2006 302,468 - 302,468
Hire purchase agreements
Included within the total net book value of tangible fixed assets
is #71,062 (31 May 2006 - #nil) in respect of assets held under finance leases
and similar hire purchase contracts. Depreciation for the year on these assets
was #11,462 (31 May 2006 - #nil).
The Company had no tangible fixed assets at the beginning or end of the year.
14 Investments held as fixed assets
Company
Investments in
subsidiaries
#
Cost
As at 1 June 2006 6,935,400
Additions 5,841,705
As at 31 May 2007 12,777,105
Provision
Charge for the year 6,935,400
Net book value
As at 31 May 2007 5,841,705
As at 31 May 2006 6,935,400
The Directors have written down the value of its investment in
Hamsard Holdings Limited, following a review of the business, details of which
are disclosed in the Directors report.
The Company made 3 acquisitions during the year, Blue River Systems
Limited, NSA Solutions Limited and CSF Managed Services plc, details of which
are included in Note 20 to these financial statements.
TWS Limited and Hamsard 2601 (Netherlands) BV are 100% owned
subsidiary companies of Synartra Limited and the Group's interest in these
companies is by virtue of Synartra Limited's shareholdings.
Integration Limited and iFuel Limited are 100% owned subsidiary
companies of iRevolution Limited and the Group's interest in these companies is
by virtue of iRevolution Limited's shareholdings.
Vox Technology Limited is 100% owned by NSA Solutions Limited and
the Group's interest in this company is by way of NSA Solutions Limited's
shareholdings.
At the balance sheet date, the Company holds 100% of the shares in
Hamsard Holdings Limited and either directly or through investments held by
Hamsard Holdings Limited the Company held more than 20% of the share capital of
the following companies:
Subsidiary undertakings Country of Principal activity Class %
incorporation
Blue River Systems Limited England Secure internet managed Ordinary 100
services
CSF Managed Services plc England Secure internet managed Ordinary 100
services
Hamsard 2601 (Netherlands) BV (2) Netherlands Marketing of group software Ordinary 100
products
Hamsard Holdings Limited England Distribution and marketing of Ordinary 100
software products
iFuel Limited (3) England Dormant Ordinary 100
Integration Limited (3) England Dormant Ordinary 100
iRevolution Limited (1) England Secure internet managed Ordinary 100
services
Mainmark Limited England Dormant Ordinary 100
NSA Solutions Limited England Secure internet managed Ordinary 100
services
Cantono Group Limited (formerly England Dormant Ordinary 100
Sam-Soft Limited) (1)
Symbiotic Information Services England Software development services Ordinary 100
Limited (1)
Symbiotic-IS Limited (1) England Dormant Ordinary 100
Synartra Limited (1) England Development and marketing of Ordinary 100
software security products
The Hamsard Group Inc (1) USA Dormant Ordinary 100
TWS Limited (2) Cyprus Dormant Ordinary 100
Vox Technology Limited (4) England Secure internet managed Ordinary 100
services
1) Company held indirectly via Hamsard Holdings Limited.
2) Company held indirectly via Synartra Limited.
3) Company held indirectly via iRevolution Limited.
4) Company held indirectly via NSA Solutions Limited.
On the 1 June 2007, Hamsard Holdings Limited transferred the ownership of
iRevolution Limited to Cantono plc.
15 Stocks and work in progress
Group Company
Year ended 7 February 2005 to Year ended 7 February 2005 to
31 May 2007 31 May 2006 31 May 2007 31 May 2006
# # # #
Stocks 7,214 - - -
The difference between purchase price or production cost of stocks
and their replacement cost is not material.
16 Debtors
Group Company
Year ended 7 February 2005 to Year ended 7 February 2005 to
31 May 2007 31 May 2006 31 May 2007 31 May 2006
# # # #
Trade debtors 718,448 887,220 - -
Amounts owed by group undertakings - - 1,729,222 2,386,045
Other debtors 43,929 58,180 16,552 302,553
Prepayments and accrued income 187,679 915,886 - 15,601
950,056 1,861,286 1,745,774 2,704,199
Included within trade debtors is #119,311 secured by a factoring
agreement with Royal Bank of Scotland Invoice Finance Limited. The total amount
advanced against this at 31 May 2007 was #95,449. In August 2007, following a
change in bankers, the factoring arrangement was terminated.
17 Creditors: Amounts falling due within one year
Group Company
Year ended 7 February 2005 to Year ended 7 February 2005 to
31 May 2007 31 May 2006 31 May 2007 31 May 2006
# # # #
Bank loans and overdrafts 435,373 462,075 17,875 -
Other loans 215,449 4,083,623 - 4,083,623
Obligations under finance leases and 35,107 - - -
hire purchase contracts
Trade creditors 1,803,835 1,018,829 268,269 111,422
Social security and other taxes 860,150 668,683 - -
Other creditors 68,430 944,579 36,024 -
Accruals and deferred income 2,945,402 1,121,199 458,724 241,547
6,363,746 8,298,988 780,892 4,436,592
The bank overdraft was part of an unsecured facility with National
Westminster Bank plc at the year end at an interest rate of base plus 3%. In
August 2007, the Company changed its principal bankers to Barclays Bank plc.
Included in other loans is an advance of #95,449 from Royal Bank of
Scotland Invoice Finance Limited relating to a subsidiary undertaking's
factoring arrangement over its trade debtors amounting to #119,311. The advance
following a change of bankers, has been repaid.
Included on other loans outstanding at 31 May 2006 was #3,783,623
of deep discount bonds owed to Brunswick Investment Holdings Limited and
#150,000 each owed to Ex-directors James Metcalf and Michael Sharples. Details
of the repayment of these liabilities are disclosed in Note 31.
On 29 April 2005 the Company issued to Brunswick Investment
Holdings Limited deep discount bonds to the value of #4,191,198 with an
aggregate discount of #701,839. The bonds were unsecured and to be redeemed over
a period commencing May 2006 to June 2007 in variable instalments. In the event
of default all the deeply discounted bonds became immediately repayable. On 24
July 2006 Brunswick Investment Holdings Limited agreed to defer the repayment,
interest free, of #4,191,198 aggregate nominal value deep discount bonds owed to
it until January 2008. Details of how these liabilities were satisfied are
disclosed in Note 21.
Other creditors at 31 May 2006 includes two loans, totalling #300,000
outstanding of #150,000 each, made by James Metcalf and Michael Sharples. The
loans accrued interest at a rate of 6% per annum and are repayable in full on or
before 31st July 2006. #125,000 plus accrued interest was repaid in cash during
the year and #175,000 in ordinary shares, full details of which are disclosed in
Note 21.
18 Creditors: Amounts falling due after more than one year
Group Company
Year ended 7 February 2005 to Year ended 7 February 2005 to
31 May 2007 31 May 2006 31 May 2007 31 May 2006
# # # #
Obligations under finance leases and 61,063 - - -
hire purchase contracts
Other creditors - 313,996 - -
Other loans due between one and two - 154,110 - 154,110
yrs
61,063 468,106 - 154,110
19 Maturation of borrowings
The Group's funding policy aims to ensure the availability of an
appropriate amount of funding to meet current and future requirements. It does
this through a mixture of equity, cash and debt facilities. The Group's
borrowings are now based on floating rates, being interest set at a margin over
the relevant base rate.
Group
Amounts repayable:
Bank loans & Other Loans Obligations under Total
overdrafts finance leases and
# HP contracts #
#
#
As at 31 May 2007
In one year or less on demand 435,373 215,449 35,107 685,929
Between one and two years - - 61,063 61,063
435,373 215,449 96,170 746,992
As at 31 May 2006
In one year or less on demand 462,075 4,083,623 - 4,545,698
Between one and two years - 154,110 - 154,110
462,075 4,237,733 - 4,699,808
Company
Amounts repayable:
Bank loans & Other Loans Total
overdrafts
# #
#
As at 31 May 2007
In one year or less on demand 17,875 - 17,875
17,875 - 17,875
As at 31 May 2006
In one year or less on demand - 4,083,623 4,083,623
Between one and two years - 154,110 154,110
- 4,237,733 4,237,733
20 Acquisitions
On 20 November 2006 the Company acquired the whole of the share
capital of Blue River Systems Limited. Its accounts for the year ended 31 March
2006 show a profit before tax of #33,849. The management accounts for the eight
months ended 30 November 2006 show a loss of #110,600. The fair value
adjustments relate to a mark down in tangible assets and a review of the
recoverability of debtors.
Book Value Fair Value Total
Adjustments
# # #
Tangible Fixed Assets 168,540 (87,449) 81,091
Debtors 276,496 (86,709) 189,787
Cash (2,691) - (2,691)
Creditors (404,058) - (404,058)
Loans (20,378) - (20,378)
Net Assets/(Liabilities) 17,909 (174,158) (156,249)
Goodwill 1,892,483
1,736,234
Purchase consideration #
Shares allotted 1,500,000
Cash 220,000
Acquisition costs 16,234
1,736,234
On 20 November 2006 the Company acquired the whole of the share
capital of NSA Solutions Limited and its subsidiary, Vox Technology Limited. The
accounts for the year ended 30 September 2006 show a loss before tax of #130,067
and #7,790 for NSA Solutions Limited and Vox Technology Limited respectively.
The management accounts for the two months ended 30 November 2006 show a loss of
#19,173 and #16,998 for NSA Solutions Limited and Vox Technology Limited
respectively. The fair value adjustments relate to a mark down in tangible
assets and a review of the recoverability of debtors.
Book Fair Value Total
Value Adjustments
# # #
Tangible Fixed Assets 48,542 (17,739) 30,803
Debtors 252,035 (184,065) 67,970
Cash (73,578) - (73,578)
Creditors (264,758) - (264,758)
Finance leases (28,098) - (28,098)
Loans (168,730) - (168,730)
Net Liabilities (234,587) (201,804) (436,391)
Goodwill 1,052,640
616,249
Purchase consideration #
Shares allotted 600,000
Acquisition costs 16,249
616,249
On 4 January 2007 the Company acquired the whole of the share
capital of CSF Managed Services plc. Its audited accounts for the year ended 31
December 2006 show a loss before tax of #3,642,602 and a net liability of
#8,763,427. The fair value adjustments relate to a mark down in tangible assets,
stock and a review of the recoverability of debtors. As part of the sale
agreement Computer Solutions and Finance Group plc, its ultimate holding company
at the date of sale, agreed that an inter-company loan would be written back to
#750,000 prior to acquisition, which resulted in the Net Assets on 4 January
2007 being #1,179,766.
Book value Fair Value Total
Adjustments
# # #
Tangible Fixed Assets 2,522,971 (732,145) 1,790,826
Stock 106,642 (100,000) 6,642
Debtors 451,657 (34,975) 416,682
Cash 58,643 - 58,643
Creditors (1,960,147) - (1,960,147)
Net Assets/(Liabilities) 1,179,766 (867,120) 312,646
Goodwill 3,176,576
3,489,222
Purchase consideration #
Shares allotted 3,300,000
Acquisition costs 189,222
3,489,222
21 Share capital
Authorised 31 May 31 May
2007 2006
# #
Equity
100,000,000 Ordinary shares of 10p each - 10,000,000
850,000,000 Ordinary shares of 1p each 8,500,000 -
100,000,000 Ordinary deferred shares of 9p each 9,000,000 -
Total 17,500,000 10,000,000
Allotted, called up and fully paid 31 May 31 May 31 May 2007 31 May
2007 2006 2006
Issued share capital # # Number of Number of
Shares Shares
Ordinary shares of 10p each - 4,134,116 - 41,341,160
Ordinary shares of 1p each 3,677,432 - 367,743,173 -
Ordinary deferred shares of 9p each 4,080,704 - 45,341,160 -
Total 7,758,136 4,134,116 424,976,585 41,341,160
Share capital during the year New New Ordinary Total
Ordinary Ordinary 10p shares
9p 1p shares
deferred
shares
# # # #
Shares in issue as at 1 June 2006 - - 4,134,116 4,134,116
Shares issued on 5 July 2006 - - 400,000 400,000
Share conversion on 16 November 2006 4,080,704 453,412 (4,534,116) -
Shares issued on 20 November 2006 - 420,000 - 420,000
Shares issued on 22 November 2006 - 1,522,602 - 1,522,602
Shares issued on 4 January 2007 - 660,000 - 660,000
Shares issued on 3 April 2007 - 12,728 - 12,728
Shares issued on 30 May 2007 - 608,690 - 608,690
Shares issued as at 31 May 2007 4,080,704 3,677,432 - 7,758,136
On 5 July 2006 the Company raised #300,000 of additional capital
via the placing of 3,000,000 10p Ordinary shares at 10p per share. In addition,
#50,000 of the ex-Directors loans owed to each of Michael Sharples and James
Metcalf were converted into a total of 1,000,000 ordinary shares at the placing
price of 10p.
On 16 November 2006 the Company converted each 10p ordinary share
into one new Ordinary share of 1p and one non-voting deferred share of 9p.
On 20 November 2006 the Company completed the acquisitions of Blue
River Systems Limited and NSA Solutions Limited. Blue River Systems Limited was
acquired for a consideration of #1,720,000 satisfied by a payment of #220,000 in
cash on completion and by the issue of 30,000,000 new Ordinary shares of 1p at a
price of 5p. NSA Solutions Limited was acquired for a consideration of #600,000
satisfied by the issue of 12,000,000 new Ordinary shares of 1p at a price of 5p.
On 22 November 2006, the Company successfully completed the placing
of 81,880,000 new Ordinary shares of 1p at a price of 2.5p per share raising
#2,047,000 before expenses, for working capital purposes. In addition, Brunswick
Investment Holdings Limited converted a #1,500,000 loan together with other
liabilities of #129,340 to 65,173,600 new ordinary shares of 1p at the placing
price of 2.5p. Ex-Directors Michael Sharples and James Metcalf each converted a
further #37,500 of their loans outstanding to 1,500,000 new Ordinary shares of
1p each at the placing price of 2.5p. W H Ireland converted #55,164 of fees
outstanding to 2,206,550 Ordinary shares of 1p at the placing price of 2.5p.
On 4 January 2007 the Company acquired CSF Managed Services plc for
a consideration of #3,300,000 satisfied by the issue of 66,000,000 new Ordinary
shares of 1p at a price of 5p.
On 3 April 2007 1,272,727 Ordinary 1p shares were issued at 4.95p
to Appel M and A International in lieu of fees in connection with the
acquisition of CSF Managed Services plc.
On 30 May 2007 the Company issued 24,505,400 Ordinary shares of 1p
at a placing price of 5.5p in order to repay a deep discounted bond of
#1,509,995 that was owed to Brunswick Investment Holdings Limited . Also on 30
May 2007 36,363,636 Ordinary shares were issued at 5.5p to Edenmore Investments
Limited as part of the sale of Panopticon and the repayment of deep discounted
bonds owed to Brunswick Investments Holdings Limited. Details of the sale are
disclosed in Note 5.
On 3 August 2007 the Company consolidated the share capital by
converting every 20 issued and un-issued Ordinary shares into 1 New Ordinary 20p
share. In order to deal with fractional entitlements, #2.47 of the sum standing
to the credit of the Company's share premium was capitalised.
On 7 August 2007 the Company issued 10,618,500 New Ordinary 20p
shares at a placing price of #1.00 per share. The net proceeds of approximately
#10,000,000 were to be used for additional working capital and to allow the
Company to make capital investments into its new business strategy, details of
which are disclosed in the Directors' Report
Following the allotments on 7 August 2007, the current authorised
share capital is #17,500,000 divided into 42,500,000 ordinary shares of 20p each
of which 29,005,666 ordinary 20p shares are in issue and 100,000,000 deferred
shares of 9p of which 45,341,160 deferred shares of 9p are in issue.
Holders of ordinary shares are entitled to attend and vote at
general meetings and, on a poll, each holder will have one vote per share.
Ordinary shares rank pari passu with each other in respect of dividends and on a
return of capital or a winding up.
Holders of deferred shares are not entitled to receive notice of or attend or
vote at any general meeting. They are not entitled to receive any dividend or
other distribution, nor receive any part of the assets of the Company on a
return of capital or a winding up. They are not entitled to receive a share
certificate. At the forthcoming Annual General Meeting, a resolution will be
proposed to amend the rights attaching to the deferred shares so that they are
no longer classed as redeemable.
22 Reserves
Group
Share premium Profit and loss
reserve reserve
# #
Balance at 1 June 2006 1,789,835 (7,827,639)
Premium on issue of shares 9,167,620 -
Transfer from profit and loss account for the year - (8,202,476)
Foreign currency translation differences - (19,399)
Balance at 31 May 2007 10,957,455 (16,049,514)
Company
Share premium Profit and loss
reserve reserve
# #
Balance at 1 June 2006 1,789,835 (582,939)
Premium on issue of shares 9,167,620 -
Transfer from profit and loss account for the year - (11,326,065)
Balance at 31 May 2007 10,957,455 (11,909,004)
23 Minority interests
31 May 2007 31 May 2006
# #
Opening balance 692,907 -
Retained (share of loss)/profit for the year (729,287) 346,301
Capital contribution to minority interest - 346,606
Disposal of subsidiary undertaking 36,380 -
Closing balance - 692,907
Equity - 692,907
- 692,907
Details of the minority interest share on disposal of subsidiary
undertaking are shown under the exceptional item Note 5.
24 Reconciliation of movements in shareholders' funds
Group Company
31 May 2007 31 May 2006 31 May 2007 31 May 2006
# # # #
Loss attributable to members of the (8,202,476) (7,493,824) (11,326,065) (582,939)
Group / Company
Other recognised losses for the (19,399) (333,815) - -
period
New share capital subscribed 12,791,640 5,923,951 12,791,640 5,923,951
Net addition/(reduction) to 4,569,765 (1,903,688) 1,465,575 5,341,012
shareholders' funds
Opening equity shareholders' funds (1,903,688) - 5,341,012 -
Closing equity shareholders' funds 2,666,077 (1,903,688) 6,806,587 5,341,012
25 Operating lease commitments
Group
As at 31 May 2007 the Group had annual commitments under
non-cancellable operating leases as follows:
Land and Buildings
31 May 2007 31 May 2006
# #
Within two and five years 80,000 80,000
26 Pension schemes
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The
pension cost charge for the period represents contributions payable by the Group
to the scheme and amounted to #11,667 (31 May 2006 - #98,499).
Contributions totalling #2,316 (31 May 2006 - #nil) were payable to
the scheme at the end of the period and are included in creditors.
27 Reconciliation of operating loss to operating cash flows
31 May 2007 31 May 2006
# #
Operating loss (6,830,931) (6,343,764)
Depreciation, amortisation and impairment charges 1,690,953 2,282,476
Increase in stocks (572) -
Decrease in debtors 928,344 1,368,537
Increase in creditors 2,269,644 1,198,026
Capitalised costs (44,034) (288,100)
Net cash outflow from operating activities (1,986,596) (1,782,825)
28 Analysis of cash flows
31 May 2007 31 May 2006
# #
Returns on investment and servicing of finance
HP interest paid (1,979) -
Other interest paid (344,386) (190,989)
Interest received 6,674 8,780
(339,691) (182,209)
Taxation
Taxation paid (8,158) -
29 Analysis of net debt
At start of Cash flow Acquisition Other non-cash At end of period
period (excluding cash changes
and overdrafts)
# # # # #
Cash at bank and in 456,256 (405,656) 58,643 - 109,243
hand
Bank overdraft (462,075) 170,669 (76,269) - (367,675)
Cash and bank net debt (5,819) (234,987) (17,626) - (258,432)
Debt due within one (4,083,623) 218,571 (376,718) 3,958,623 (283,147)
year
Debt due after one year (154,110) - - 154,110 -
Finance leases - 14,452 (28,098) (82,524) (96,170)
Change in debt (4,237,733) 233,023 (404,816) 4,030,209 (379,317)
Net debt (4,243,552) (1,964) (422,442) 4,030,209 (637,749)
30 Non cash transactions and items
Other non-cash changes include the issue of equity relating to the
conversion of #3,987,333 of deep discount bonds owed to Brunswick Investment
Holdings Limited and #175,000 of loans owed to Ex-Directors James Metcalf and
Michael Sharples, details of which are disclosed in Note 21.
During the year the Group issued new equity before expenses of #5,463,000 for
the purpose of acquisitions and #5,207,000 relating to the conversion of loans
and sale of Panopticon Software AB. Details of which are disclosed in Note 21.
31 Post balance sheet events
On 1 June 2007, Hamsard Holdings Limited transferred the ownership
of iRevolution Limited to Cantono plc.
On 3 August 2007 the Company consolidated the share capital by converting every
20 issued and un-issued Ordinary shares into 1 New Ordinary 20p share.
On 7 August 2007 the Company issued 10,618,500 Ordinary 20p shares
at a placing price of #1.00 per share. The net proceeds of approximately
#10,000,000 were to be used for additional working capital and to allow the
Company to make capital investments into its new business strategy, details of
which are disclosed in the Directors' Report.
In August 2007 the Group changed its bankers from National
Westminster Bank plc to Barclays Bank plc, who now act as the Group's principal
bankers.
32 Related parties
Related party transactions
The Group have entered into various transactions during the year
with some if its shareholders, details of which are disclosed below:
Brunswick Investment Holdings Limited is a shareholder in the
Company and was involved in the following transactions:
In July 2006 it provided additional loan capital of #1,500,000, for
working capital purposes, and agreed to defer repayment of its deep discount
bond of #4,191,198 until January 2008. On 22 November 2006 the #1,500,000 loan
was converted into new Ordinary shares of 1p each.
On 30 May 2007 the Company issued 24,505,400 Ordinary shares of 1p
at a placing price of 5.5p in order to repay a deep discounted bond of
#1,509,995 that was owed to Brunswick Investment Holdings Limited; the shortfall
#162,198 being written off as a gesture of goodwill. Also on the 30 May
36,363,636 Ordinary shares were issued at 5.5p to Edenmore Investments Limited
as part of the sale of Panopticon and the repayment of deep discounted bonds
owed to Brunswick Investments Holdings Limited. Details of the sale are
disclosed in the exceptional item Note 5.
Panopticon Software AB, a subsidiary of Cantono plc was sold to
Edenmore Investments Limited, a company that is controlled by Sam Giertz, Vice
President of Sales of Panopticon Software AB. The sale proceeds were linked to
the repayment of the deep discount bonds owed to Brunswick Investments Holdings
Limited, and the issuing of 36,363,636 Ordinary 1p shares at 5.5p.
Ex-Directors James Metcalf and Michael Sharples, who resigned on 17
July 2006, had outstanding loans due to them at the beginning of the year of
#300,000. In July 2006 these loans were partially repaid by converting #50,000
of each loan into Ordinary 1p shares at 10p per share. In August 2006, a further
repayment to each in cash of #25,000 was made. On 22 November 2006 each
converted #37,500 of his loan into Ordinary shares of 1p at 2.5p per share with
the remaining #37,500 outstanding of each loan account being repaid in cash on
24 November 2006.
Mike Northall has interests in Computer Solutions and Finance Group
plc ("CSF Group plc"), and retained his position as a director of CSF Managed
Services plc when CSF Group plc sold it to Cantono plc in January 2007. CSF
Group plc continued to provide various support services, following the
acquisition. The total value of these services was #406,956 which is also the
net amount outstanding at 31 May 2007.
Paul Webb is the 90% owner of Blue River Systems Wales Limited,
which has an office in Wales that Blue River Systems Limited has used for
helpdesk support staff. The total charge for the six month period was #6,688,
and the amount outstanding at 31 May was #6,688.
33 Availability of Report
Copies of the report have been dispatched to shareholders today.
Further copies are available from the company's website, www.cantono.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ILFVLLDLIVID
Cantono (LSE:CTNO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cantono (LSE:CTNO)
Historical Stock Chart
From Apr 2023 to Apr 2024
