TIDMRGO
RNS Number : 9615C
2 ergo Group plc
24 November 2009
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| Embargoed until 7.00 | 24 November 2009 |
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2ergo Group plc
("2ergo" or "the Group")
Preliminary Results for the Year Ended 31 August 2009
2ergo is a leading provider of mobile enabling technologies in four key areas:
business, entertainment, media and marketing. The Group's technological
expertise and innovative approach has led it to partner with some of the world's
most respected brands, across a broad range of sectors.
The 2ergo Multiserve Platform continues to benefit from many years' research and
development. Its unique set of technologies form the intelligence and billing
layer between mobile network operators, the internet and customer facing
applications. It integrates voice, data, text, email, video and mobile internet
channels, flexibly and seamlessly, to form a powerful yet agile nucleus from
which new and innovative mobile solutions can be developed.
The Group is pleased to announce its preliminary results for the year ended 31
August 2009.
+--------------------------------------+---------------+---------------+--------------+
| | 2009 | 2008 | % change |
| | GBP000 | GBP000 | |
+--------------------------------------+---------------+---------------+--------------+
| | | | |
+--------------------------------------+---------------+---------------+--------------+
| Revenue | 22,693 | 32,565 | -30% |
+--------------------------------------+---------------+---------------+--------------+
| Gross profit | 10,887 | 9,769 | +11% |
+--------------------------------------+---------------+---------------+--------------+
| Pre-tax profit (1) | 3,813 | 3,446 | +11% |
+--------------------------------------+---------------+---------------+--------------+
| EBITDA (1) | 4,968 | 4,104 | +21% |
+--------------------------------------+---------------+---------------+--------------+
| Basic earnings per share (1) | 9.87p | 8.54p | +16% |
| | | | |
+--------------------------------------+---------------+---------------+--------------+
(1) figures stated before GBP3.2 million impairment charge in respect of initial
investment in Broca plc
Highlights
* Gross profit from direct sales and enhanced Business Partner Programme up 26% to
GBP10.1 million, increasing overall gross margin from 30% to 48%, ahead of
expectations.
* Strategy to reduce exposure to high-volume low-margin wholesale distribution
business seeing continuing success.
* EBITDA, before impairment of initial investment in Broca plc, up 21% from GBP4.1
million to GBP5.0 million.
* Americas region reports first profits.
* Expansion into Asia and Australia and broadening of product set through
acquisitions.
* Growing number of global clients.
* Market leading product set starting to be rolled out across all regions.
* Completed buy-back of 1 million 2ergo shares into treasury, at a cost of GBP1.4
million.
* Cash reserves of GBP6.4 million at the year end and debt free.
* Ideally positioned to reap significant benefits from investment in additional
sales, marketing and support resources in order to drive turnover growth across
all geographies.
Neale Graham, Joint Chief Executive of 2ergo, commented:
"It is pleasing to deliver yet another set of strong results, particularly over
a period of global economic uncertainty. In addition to achieving organic
growth, the management team has made great strides globalising and scaling the
business by developing 2ergo's services in targeted geographies, together with
the completion of three strategic acquisitions.
"It is also exciting that this year, more than any other, has seen technology
start to revolutionise the use of mobile communications; commercial awareness of
this has never been higher. With mobile hardware penetration reaching record
levels of over 4 billion subscribers worldwide, it is clear that the demand for
mobile services over the next few years will undoubtedly follow, and with the
broadening of those services and applications the mobile handset is destined to
become the "Life-Style and Business Remote Control".
"The evolution of mobile technology mirrors our original strategy and it is
rewarding to see the 2ergo technology, which has been 10 years in the making,
really come alive. Now is the time to build on our success, invest in the
future, and maximise these global opportunities. There has never been a more
exciting time to be in mobile".
CHAIRMAN'S STATEMENT
I am pleased to report another very strong year for 2ergo. The strategy to focus
on direct sales and the enhanced Business Partner Programme is paying dividends
and the Group's gross profit margin has increased from 30% to 48% as a result of
the move away from the wholesale reseller business. Earnings before interest,
tax, depreciation, amortisation and impairment charges for the year
have increased from GBP4.1 million to GBP5.0 million, a rise of some 21%.
2ergo has continued to enjoy organic growth and, despite the global economic
downturn, during the period the Group has completed three key strategic
acquisitions adding new products, new technological innovations and an extended
pool of quality people with significant expertise in the industry. Crucially,
the Board believes that these acquisitions will provide the Group with extensive
geographical reach into some of the fastest growing world markets.
In April 2009, 2ergo completed the acquisition of Broca plc, with patented
technology for end-to-end security over multiple mobile communication protocols.
In May 2009, the Group acquired Australian-based Wapfly Technologies, whilst
July 2009 saw 2ergo's expansion into India following the acquisition of
Activemedia Technologies, leading providers of mobile ticketing and couponing
with offices in New Delhi, Mumbai and London.
The Group chose these technology-rich acquisitions in strategically important
regions as part of its plan to expand the business globally and to better serve
its blue chip clients who are increasingly eager to reach the whole addressable
mobile market on a global scale. These three key businesses have a strong future
and 2ergo is committed to helping them realise their full growth potential. This
year, the Group will make substantial further investment in, people, technology
and operations to complete the integration of the acquisitions and globalise its
products and solutions.
Over the past 10 years, 2ergo has delivered impressive growth which has put the
business in a market leading position. To further accelerate the Group's growth,
the management team has been strengthened by the appointment of high-quality
people who have proven and wide-ranging experience in building successful
businesses and in integrating acquisitions. I am confident that we have the best
team, with the right skills, to execute our plans and take the business to the
next level.
The Group's innovative technology and services have been developed to scale with
the business. The mobile market is growing beyond the early predictions, and
with continued investment and sound leadership, 2ergo looks forward to executing
its very exciting strategy.
KEITH SEELEY
CHAIRMAN
MANAGEMENT REVIEW
Financial Performance
The strategy announced by the Board last year to focus on higher-margin direct
sales and the enhanced Business Partner Programme and reduce the Group's
exposure to low-margin wholesaler-introduced business has continued to pay
dividends, as follows:
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| | Revenue | | Gross Profit |
+--------------------------+---------------------------+--+--------------------------+
| | 2009 | 2008 | % | | 2009 | 2008 | % |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| | GBP000 | GBP000 | Change | | GBP000 | GBP000 | Change |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| | | | | | | | |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| Direct/Business Partner | 11,720 | 9,071 | +29% | | 10,058 | 8,013 | +26% |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| Wholesale Reseller | 10,973 | 23,494 | -53% | | 829 | 1,756 | -53% |
| Channel | | | | | | | |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
| | 22,693 | 32,565 | -30% | | 10,887 | 9,769 | +11% |
+--------------------------+---------+--------+--------+--+--------+--------+--------+
Total revenue for the year was GBP22.7 million, compared to GBP32.6 million in
2008. This reflects the Group's strategy of reducing business from its wholesale
reseller clients, with revenue from this area now GBP11.0 million (2008: GBP23.5
million). Gross profit from these wholesale services was GBP0.8 million (2008:
GBP1.7m), a reduction of just GBP0.9 million. Conversely, gross profit generated
by the redeployment of resources from the delivery of wholesale services into
the delivery of direct and Business Partner Programme sales increased by
GBP2.1 million in the year, validating this strategy.
Revenues generated through direct sales and Business Partners increased from
GBP9.1 million to GBP11.7 million, a rise of 29%, whilst gross profit grew by
26%, up from GBP8.0 million in 2008 to GBP10.1 million this year. Gross margins
in this area remained consistently high at 86%, (2008: 88%). Total Group gross
profit for the year rose from GBP9.8 million to GBP10.9 million, with overall
Group gross margins growing from 30% to 48%.
The focus on selling direct to customers or through sophisticated business
partners means that by understanding the needs of its customers better, 2ergo is
well positioned to generate significant increases in revenue. Also, crucially,
the Group's increased reach offers the opportunity to sell its products and
services to existing customers in new regions.
Group overheads for the year, before impairment charges, were GBP7.3 million
(2008: GBP6.8 million). The increase in overheads reflects the investment made
by the Group during the year in strengthening the management team and product
set to capitalise on the growing global opportunities for 2ergo. This
investment, together with investment in the recent acquisitions, will continue
into the coming year as the Board seizes the vast opportunities for the growth
of 2ergo.
Group operating profit, before impairment charges, rose to GBP3.6 million
(2008: GBP3.0 million), an increase of 19%. The impairment charge of
GBP3.2 million arose in the first half of the financial year, when 2ergo held a
19.2% interest in Broca plc which was accounted for as an available for sale
investment. In accordance with the principles of IAS 39, the carrying value of
the asset was required to be written down to the quoted share price of Broca
plc, giving rise to the impairment charge of GBP3.2 million through the income
statement for the 6 months to February 2009.
Subsequent to the half year, 2ergo completed the acquisition of the remaining
share capital of Broca plc. The goodwill arising on the acquisition of the
entire 100% interest in Broca plc is GBP6.8 million (including GBP3.2 million in
relation to the initial 19.2% holding). This is supported by its value in use
and is not considered to be impaired.
In terms of overall net asset values, the impairment charge arising in the first
half of the year has been reversed in the second half, but IAS 39 requires that
the reversal of the original charge is not put through the income statement. The
overall impact is that while the income statement includes an impairment of
GBP3.2 million in respect of the previously held available for sale investment,
the subsequent acquisition accounting is such that the impairment is reversed
within the balance sheet and reinstated within goodwill.
EBITDA before impairment charges grew by 21% from GBP4.1 million to GBP5.0
million. Of the amortisation charge for the year, GBP0.1 million was in respect
of acquisitions made by the Group. Profit before tax and impairment charges was
GBP3.8 million compared to GBP3.4 million in 2008, an increase of 11%. After the
goodwill impairment charge of GBP3.2 million, the profit before tax was GBP0.6
million (2008: GBP3.4 million).
The effective tax rate for the year, based on profit before the impairment
charge, was 21% (2008: 26%), and basic earnings per share, before goodwill
impairment, was 9.87p, compared to 8.54p in 2008, an increase of 16%.
Net assets at the year end stood at GBP23.5 million (2008: GBP16.1 million).
Cash of GBP3.5 million was generated from operating activities, compared to
GBP1.2 million in 2008. Following the purchase of 1 million 2ergo shares into
treasury, together with continued investment into technology and product
development and the completion of the acquisitions, cash balances at the year
end were GBP6.4 million (2008: GBP9.1 million). The Group will consider
opportunities to buy back further shares as and when appropriate.
The Group has continued its progress in the Americas region during the year,
with revenue growth to $3.7 million (2008: $2.5 million) an increase of 48%. The
Board is delighted that 2ergo Americas reports a profit for the first time this
year, with $365k being generated, compared to a loss of $955k in 2008. This
represents a turnaround of some $1.3 million. Now that the Group's model in the
Americas has been proven, the Board is fuelling growth in that region, with
investment since the year end which includes a new regional managing director
and senior sales staff. The Board believes that over the coming years this
investment will allow 2ergo Americas to grow significantly.
During the year 2ergo completed the acquisition of Broca plc, Wapfly
Technologies Pty Limited and Activemedia Technologies Limited (AMT). All of
these acquisitions are technology-rich companies, who are either pre-revenue or
in early stages of revenue generation. The contribution of these acquisitions to
both revenue and profitability this year has been minimal but, with continued
investment during the new financial year, all are expected to contribute to
profitability by the end of 2009/10. It is the Board's intention to develop
these businesses in a similar manner to 2ergo Americas, which is now
demonstrating significant underlying value following its successful turnaround.
At the year end, these acquisitions were valued within intangible assets at
GBP17.1 million, with deferred consideration estimated at GBP7.0 million. The
deferred consideration in respect of AMT is an estimate based on management
forecasts, calculated as 4 times AMT India profit after tax and 2.8 times AMT UK
operating profit for the year to 31 August 2012, which will be payable between
November 2009 and November 2013, dependent on AMT achieving agreed levels of
financial performance and subject to an overall consideration cap. Consideration
will be settled, at the discretion of 2ergo, by the issue of new 2ergo ordinary
shares or loan notes.
Consideration for the acquisition of Broca plc was satisfied by the issue of
0.0909 of a 2ergo share in exchange for each Broca share, whilst the Wapfly
consideration was settled in cash after the year end. Details of the values
attributable to each acquisition in terms of asset value and deferred
consideration are shown in note 4 to these preliminary results.
The Group's cash position, its debt free status, its increased global footprint
in high-growth geographies and its award winning product set mean 2ergo is
ideally positioned to enter its next growth phase with confidence.
Operational Review
During the year, the Group has continued its strategy of increasing its global
footprint to capitalise on the boom in mobile services in some of the fastest
growing regions in the world. In early 2009, 2ergo relocated its global
headquarters to the centre of MediaCity UK in Manchester. MediaCity UK is fast
becoming a significant international hub for the media and creative industries
with the UK's leading broadcast, media and technology companies at its heart.
Following its recent acquisitions, the Group now has offices in Manchester,
London, Washington, New York, New Delhi, Mumbai, Sydney and Buenos Aires and
employee numbers have increased from 82 to over 150 during the year.
In April 2009, 2ergo acquired Broca plc and its patented technology for
end-to-end security over multiple mobile communication protocols. This
technology provides secure data transfer solutions for mobile phone and wireless
networks and has particularly strong potential in emerging markets such as Asia,
Africa and South America to facilitate secure mobile payments, money transfers
and banking solutions. The Board is pleased with the progress made since
acquisition in integrating the Broca technology into 2ergo's product set, and
with the opportunities developing in the sales pipeline.
The acquisition of Australian-based Wapfly Technologies Pty Limited, in May
2009, is part of a move to extend the Group's reach into the Asia-Pacific
region. 2ergo is now making great headway in the mobile marketing and broadcast
sectors in Australia, and once the migration of its full product range into the
region has been completed in 2009/10, the Group will become active in other core
sectors. 2ergo now serves, amongst others, media giant ABC (Australian
Broadcasting Corporation) with its mobile internet and smartphone applications.
In July 2009, the Group expanded into India following the acquisition of
Activemedia Technologies Limited, with offices in New Delhi, Mumbai and London.
2ergo now provides mobile value added services and solutions in India, and is a
leading supplier of mobile ticketing and couponing, delivering the couponing
redemption technology behind the highly successful 'Orange Wednesdays' campaign
in Europe. This acquisition holds vast potential and gives 2ergo access to one
of the world's fastest growing mobile markets. There were 472 million mobile
subscribers in India as at 30 September 2009, and with subscriber numbers
increasing by 15 million in September 2009 alone (source: Telecom Regulatory
Authority of India), the acquisition opens up a vast audience to 2ergo and its
clients.
In addition to the increased geographical reach afforded to 2ergo as a result of
these acquisitions, each brought to the Group experienced staff and management,
together with significant additions to the Group's product suite. Since the
acquisitions were completed, 2ergo has invested significantly in incorporating
these new products into its existing award winning product set, and in readying
them for the roll out of all products across all regions throughout the coming
year. Global product consolidation will enable organisations to seamlessly move
between 2ergo products thus enhancing their mobile offering and increasing sales
and customer loyalty. This investment will continue into 2009/10 and is expected
to generate significant revenues during the latter part of that year and
subsequent years.
An example of the success the Group has had in the year following this
investment in its technology has been with its mobile internet and Smartphone
applications product lines, enabling organisations to launch engaging
interactive services across Smartphone platforms such as Apple iPhone, Google
Android, Blackberry and Windows. Some key projects undertaken during the year
include the Rightmove application, the FOX Business Smartphone application in
the US and the ABC application in Australia.
Customer retention rates continue to run close to 100% and established clients
such as O2, AT&T and leading media brands are increasingly helped by 2ergo to
grow their mobile services, once again proving the strength of 2ergo's product
set. In addition to numerous high profile client wins, the Group has secured
relationships with Business Partners such as Ogilvy, McCann Erickson and BBH in
the UK and Group M and Kantar Operations (part of WPP group) globally.
2ergo also made pleasing progress in the Americas region during the year,
reporting its first profit and expanding its network operator and media
relationships by delivering new services for customers such as AT&T and National
Geographic Channel and adding MetroPCS to its customer base. The Group's
relationships with leading household names such as Proctor and Gamble also
continued to grow and 2ergo now provides solutions for them in India as well as
Latin America, as a direct result of the Group's increased geographic presence.
Recent services have included mobile loyalty campaigns for leading brands such
as Gillette and Pampers utilising 2ergo's mobile couponing services. To support
this growth, the Group has appointed a new Managing Director of 2ergo Americas
who is a recognised and well-respected figure in the mobile communications
industry.
Following the Group's launch into India, 2ergo is quickly establishing itself in
that region, being selected by one of India's largest network operators as their
mobile couponing partner. Similar progress is being made in Australia, where
investment has been made in expanding the sales, technical and operational
support teams, the benefits of which are already starting to be seen as a
healthy pipeline continues to develop in that region.
The Group is also benefiting from reduced operating costs and improved
efficiencies as a result of migrating certain development functions to India and
South America.
Markets and Opportunity for Growth
As global awareness and consumer appetite for mobile services continues to rise,
the opportunity for significant growth for 2ergo is excellent. There are now
over 4 billion mobile subscribers in the world, equating to a global market
penetration of 61.1% (source: International Telecommunication Union), and the
pace of growth is faster than any other technological development in history.
Of these subscribers, 2 billion are capable of accessing the mobile web from
their handset. This compares with only 1 billion PC/laptop users being able to
access the internet, 1.5 billion TV subscribers and 1.2 billion fixed line
telephone users (source: Google In Mobile 2009). Moreover, with fixed line
internet access in developing countries being limited and, if available, often
slow and expensive, the growth of global mobile services, mobile banking and
mobile commerce is assured. The Group's proven technology means that it is
ideally placed to exploit this demand.
Investment Strategy
As the penetration of high-tech handsets increases, the growth of mobile
services and use of 2ergo's services follows. The Board therefore believes that
the time is right to make significant investment in the Group's ability to
deliver these services on a larger scale. The Board has considered a range of
potential capital acquisitions of established businesses in order to gain
greater scale. It now believes that investment in the Group's existing
operations, including its recently acquired businesses, is the best means by
which to achieve the operational scale required to fully capitalise on the
opportunity for significant growth.
Investment will be made in the following:
* additional sales and marketing staff in order to drive growth in revenue across
all geographies;
* technical support staff in order to ensure consistency of service across a
larger customer base through standardisation and globalisation of 2ergo's
products and services;
* corporate processes and structures in order to ensure the effective operation of
the enlarged multi-geographical Group; and
* technology in order to ensure robust global delivery of services.
This investment and the ramp-up of the scale of the Group's operations will
predominantly take place during the first half of 2009/2010 and will result in a
materially increased overhead to be supported by the Group. It is anticipated
that the investment will be funded out of existing cash reserves. Staff numbers
are expected to increase from 152 at the end of August 2009 to 240 during the
year to August 2010, resulting in an expected increase in the annual overhead
charge for the year to 31 August 2010 as follows:
+------------------------------------------------------------+------------------+
| Description | GBPm |
+------------------------------------------------------------+------------------+
| Additional sales and marketing staff costs | 2.1 |
+------------------------------------------------------------+------------------+
| Full year staff costs within Wapfly, AMT and Broca | 1.4 |
+------------------------------------------------------------+------------------+
| Additional technical staff costs | 1.0 |
| Additional staff costs to support enlarged group | 0.3 |
+------------------------------------------------------------+------------------+
| Other staff cost increases | 0.4 |
+------------------------------------------------------------+------------------+
| Total staff cost increases | 5.2 |
+------------------------------------------------------------+------------------+
| | |
+------------------------------------------------------------+------------------+
| Non-staff overheads from acquisitions | 0.8 |
+------------------------------------------------------------+------------------+
| Incremental operating costs arising from capital | 0.5 |
| investment | |
+------------------------------------------------------------+------------------+
| Additional operating costs for enlarged group | 0.6 |
+------------------------------------------------------------+------------------+
| Total other cost increases | 1.9 |
+------------------------------------------------------------+------------------+
| | |
+------------------------------------------------------------+------------------+
| Total forecast increase in overhead for the year to 31 | 7.1 |
| August 2010 | |
+------------------------------------------------------------+------------------+
Future Trading
2ergo has already started to see growth from the migration of its existing
products into all geographies with sales of its services into new and existing
customers. The Group's pipeline of potential new business from blue chip
companies has never been stronger, and 2ergo's existing well proven revenue
model of charging upfront development fees, monthly service annuity fees and
transactional fees is now being successfully established in all geographies.
Following the investment to be made in scaling the business, the Board expects a
considerable increase in long term annuity revenue to be seen in the latter part
of 2009/10. This should lead to significantly increased revenues, gross profits
and operating profits across all territories in the financial year 2010/11.
Outlook
The market-size statistics alone confirm that well-established and proven
companies within the mobile market are set to benefit from the inevitable
commercial growth of the mobile industry and, in particular, data services. The
Board believes that 2ergo is best placed to lead the market with its unique
full-service solution. Proven and used by an ever increasing number of world
leading organisations, the Group's suite of self-service products gives its blue
chip customers the holistic approach to mobile marketing, customer relationship
management and the mobile entertainment and media they demand.
It is against this backdrop of a rapidly growing market, coupled with strong
management, a clear strategy, an established global footprint and a healthy new
business pipeline that 2ergo's outlook has never been stronger.
-ends-
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| For further information, please contact: | |
| | |
+------------------------------------------------+--------------------------------+
| 2ergo Group plc | +44 (0)161 874 4222 |
| Neale Graham, Joint CEO | |
| Barry Sharples, Joint CEO | |
| Jill Collighan, Finance Director | |
| | |
+------------------------------------------------+--------------------------------+
| Tavistock Communications | +44 (0)20 7920 3150 |
| Lulu Bridges / Andrew Dunn | |
| | |
+------------------------------------------------+--------------------------------+
| Numis Securities Limited | +44 (0)20 7260 1000 |
| Stuart Skinner as Nominated Advisor | |
| David Poutney as Corporate Broker | |
+------------------------------------------------+--------------------------------+
Consolidated income statement
for the year ended 31 August 2009
+--------------------------+--------+-------------+--------------+--------------+
| | | | 2009 | 2008 |
+--------------------------+--------+-------------+--------------+--------------+
| | Note | | GBP000 | GBP000 |
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Revenue | | | 22,693 | 32,565 |
+--------------------------+--------+-------------+--------------+--------------+
| Cost of sales | | | (11,806) | (22,796) |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Gross profit | | | 10,887 | 9,769 |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Administrative costs | | | (10,502) | (6,761) |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Operating profit before | | | 3,579 | 3,008 |
| impairment of available | | | | |
| for sale investment | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Impairment of available | 2 | | (3,194) | - |
| for sale investment | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Operating profit | | | 385 | 3,008 |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Finance income | | | 234 | 438 |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Profit before taxation | | | 619 | 3,446 |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Taxation | | | (803) | (911) |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| (Loss)/profit for the | | | (184) | 2,535 |
| financial year | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Earnings per share | | | | |
+--------------------------+--------+-------------+--------------+--------------+
| Basic | 3 | | (0.60)p | 8.54p |
+--------------------------+--------+-------------+--------------+--------------+
| Diluted | 3 | | (0.60)p | 8.27p |
+--------------------------+--------+-------------+--------------+--------------+
All activities relate to continuing operations.
Consolidated balance sheet
as at 31 August 2009
+--------------------------+--------+-------------+-------------+--------------+
| | Note | | 2009 | 2008 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | GBP000 | GBP000 |
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Non-current assets | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Intangible assets | 4 | | 21,273 | 2,937 |
+--------------------------+--------+-------------+-------------+--------------+
| Property, plant and | | | 823 | 362 |
| equipment | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Available for sale | | | - | 1,610 |
| investments | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Loan to related party | | | - | 500 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | 22,096 | 5,409 |
+--------------------------+--------+-------------+-------------+--------------+
| Current assets | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Trade and other | | | 6,068 | 6,817 |
| receivables | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Cash and cash | | | 6,434 | 9,120 |
| equivalents | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | 12,502 | 15,937 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Total assets | | | 34,598 | 21,346 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Current liabilities | | | (3,878) | (4,742) |
| Trade and other payables | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Current income tax | | | (267) | (498) |
| payable | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | (4,145) | (5,240) |
+--------------------------+--------+-------------+-------------+--------------+
| Non-current liabilities | | | (6,736) | - |
| Other payables | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Deferred income tax | | | (225) | - |
| liability | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| | | | (6,961) | - |
+--------------------------+--------+-------------+-------------+--------------+
| Total liabilities | | | (11,106) | (5,240) |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Net assets | | | 23,492 | 16,106 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Capital and reserves | | | | |
| attributable to equity | | | | |
| holders of the parent | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Share capital | | | 335 | 306 |
+--------------------------+--------+-------------+-------------+--------------+
| Share premium | | | 7,724 | 7,724 |
+--------------------------+--------+-------------+-------------+--------------+
| Investment in own shares | | | (1,373) | - |
+--------------------------+--------+-------------+-------------+--------------+
| Merger relief reserve | | | 3,375 | - |
+--------------------------+--------+-------------+-------------+--------------+
| Merger reserve | | | 1,512 | 1,512 |
+--------------------------+--------+-------------+-------------+--------------+
| Other reserve | | | (338) | (338) |
+--------------------------+--------+-------------+-------------+--------------+
| Share option reserve | | | 914 | 813 |
+--------------------------+--------+-------------+-------------+--------------+
| Retained earnings | | | 11,343 | 6,089 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
| Total equity | | | 23,492 | 16,106 |
+--------------------------+--------+-------------+-------------+--------------+
| | | | | |
+--------------------------+--------+-------------+-------------+--------------+
Consolidated statement of changes in equity
for the year ended 31 August 2009
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | Share | Share | Investment | Merger | Merger | Other | Share | Retained | Total |
| | capital | premium | in own | relief | reserve | reserve | option | earnings | |
| | | account | shares | reserve | | | reserve | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Balance at 31 | 301 | 7,141 | - | - | 1,512 | (413) | 605 | 6,170 | 15,316 |
| August 2007 | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Valuation loss on | - | - | - | - | - | - | - | (2,995) | (2,995) |
| available for sale | | | | | | | | | |
| investment taken | | | | | | | | | |
| to equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Tax on items taken | - | - | - | - | - | - | - | 320 | 320 |
| directly to or | | | | | | | | | |
| transferred from | | | | | | | | | |
| equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Net loss | - | - | - | - | - | - | - | (2,675) | |
| recognised | | | | | | | | | (2,675) |
| directly in equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Profit for the | - | - | - | - | - | - | - | 2,535 | 2,535 |
| year | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Total recognised | - | - | - | - | - | - | - | (140) | |
| income and expense | | | | | | | | | (140) |
| for the year | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Issue of share | 5 | 583 | - | - | - | - | - | - | 588 |
| capital | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| IFRS 2 share based | - | - | - | - | - | - | 267 | - | 267 |
| payment expense | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Fair value of | - | - | - | - | - | - | (59) | 59 | - |
| options exercised | | | | | | | | | |
| in the period | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Exercise of | - | - | - | - | - | 75 | - | - | 75 |
| options over | | | | | | | | | |
| shares in EBT | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Balance at 31 | 306 | 7,724 | - | - | 1,512 | (338) | 813 | 6,089 | 16,106 |
| August 2008 | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Recycling of | - | - | - | - | - | - | - | 2,394 | 2,394 |
| valuation loss on | | | | | | | | | |
| available for sale | | | | | | | | | |
| investment taken | | | | | | | | | |
| to equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Reinstatement of | - | - | - | - | - | - | - | 3,194 | 3,194 |
| cost of previously | | | | | | | | | |
| impaired available | | | | | | | | | |
| for sale | | | | | | | | | |
| investment | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Tax on items taken | - | - | - | - | - | - | - | (150) | (150) |
| directly to or | | | | | | | | | |
| transferred from | | | | | | | | | |
| equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Net gain | - | - | - | - | - | - | - | 5,438 | 5,438 |
| recognised | | | | | | | | | |
| directly in equity | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Loss for the year | - | - | - | - | - | - | - | (184) | (184) |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Total recognised | - | - | - | - | - | - | - | 5,254 | 5,254 |
| income and expense | | | | | | | | | |
| for the year | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Issue of share | 29 | - | - | 3,375 | - | - | - | - | 3,404 |
| capital | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Purchase of shares | - | - | (1,373) | - | - | - | - | - | (1,373) |
| into treasury | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| IFRS 2 share based | - | - | - | - | - | - | 101 | - | 101 |
| payment expense | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
| Balance at 31 | 335 | 7,724 | (1,373) | 3,375 | 1,512 | (338) | 914 | 11,343 | 23,492 |
| August 2009 | | | | | | | | | |
+--------------------+----------+----------+-------------+----------+----------+-----------+-----------+-----------+----------+
Consolidated cash flow statement
for the year ended 31 August 2009
+-----+-----------------------------+-------------+-------------+--------------+
| | | 2009 | 2008 |
+-----------------------------------+-------------+-------------+--------------+
| | | GBP000 | GBP000 |
| | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash flows from operating | | | |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| Profit before taxation | | 619 | 3,446 |
+-----------------------------------+-------------+-------------+--------------+
| Adjustments for: | | | |
+-----------------------------------+-------------+-------------+--------------+
| | Impairment of available for sale | 3,194 | - |
| | investment | | |
+-----+-------------------------------------------+-------------+--------------+
| | Depreciation | | 250 | 148 |
+-----+-----------------------------+-------------+-------------+--------------+
| | Amortisation | | 1,139 | 948 |
+-----+-----------------------------+-------------+-------------+--------------+
| | Share based payment expense | | 101 | 267 |
+-----+-----------------------------+-------------+-------------+--------------+
| | Finance income | | (234) | (438) |
+-----+-----------------------------+-------------+-------------+--------------+
| Decrease/(increase) in trade and other | 959 | (949) |
| receivables | | |
+-------------------------------------------------+-------------+--------------+
| Decrease in trade and other | | (1,711) | (2,006) |
| payables | | | |
+-----------------------------------+-------------+-------------+--------------+
| Income tax paid | | (778) | (244) |
+-----------------------------------+-------------+-------------+--------------+
| Net cash flows from operating | | 3,539 | 1,172 |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash flows from investing | | | |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| Payments to acquire property, | | (614) | (255) |
| plant and equipment | | | |
+-----------------------------------+-------------+-------------+--------------+
| Payments to acquire intangible | | (2,411) | (1,162) |
| assets | | | |
+-----------------------------------+-------------+-------------+--------------+
| Loan granted to related party | | (1,133) | (500) |
+-----------------------------------+-------------+-------------+--------------+
| Purchase of subsidiary | | (1,024) | - |
| undertakings | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash acquired with subsidiaries | | 96 | - |
+-----------------------------------+-------------+-------------+--------------+
| Interest received | | 234 | 438 |
+-----------------------------------+-------------+-------------+--------------+
| Net cash flows from investing | | (4,852) | (1,479) |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash flows from financing | | | |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| Net proceeds from share issue | | - | 101 |
+-----------------------------------+-------------+-------------+--------------+
| Purchase of shares into treasury | | (1,373) | - |
+-----------------------------------+-------------+-------------+--------------+
| Proceeds from exercise of options | | - | 75 |
| over shares held in EBT | | | |
+-----------------------------------+-------------+-------------+--------------+
| Net cash flows from financing | | (1,373) | 176 |
| activities | | | |
+-----------------------------------+-------------+-------------+--------------+
| | | | |
+-----------------------------------+-------------+-------------+--------------+
| Net decrease in cash and cash | | (2,686) | (131) |
| equivalents in the year | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash and cash equivalents at | | 9,120 | 9,251 |
| beginning of year | | | |
+-----------------------------------+-------------+-------------+--------------+
| Cash and cash equivalents at end | | 6,434 | 9,120 |
| of year | | | |
+-----+-----------------------------+-------------+-------------+--------------+
Notes to the consolidated preliminary financial statements
for the year ended 31 August 2009
1. Basis of Preparation
The financial information set out herein does not constitute statutory accounts
as defined in Section 434 of the Companies Act 2006. The financial information
for the year ended 31 August 2009 has been extracted from the statutory accounts
of 2ergo Group plc for that year which, if adopted by the members at the Annual
General Meeting, will be filed with the Registrar of Companies. The results for
the year ended 31 August 2008 are extracted from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The auditors
reported on those accounts; their report was unqualified and did not contain a
statement under either section 237 (2) or section 237 (3) of the Companies Act
1985.
The preliminary financial information has been prepared in accordance with the
accounting policies set out in the Group's statutory accounts for the year ended
31 August 2008.
2. Impairment of available for sale investment
An impairment charge of GBP3.2 million arose in the first half of the financial
year, when 2ergo held a 19.2% interest in Broca plc which was accounted for as
an available for sale investment. In accordance with the principles of IAS 39,
the carrying value of the asset was required to be written down to the quoted
share price of Broca plc, giving rise to the impairment charge of GBP3.2 million
through the income statement for the 6 months to February 2009.
Subsequent to the half year, 2ergo completed the acquisition of the remaining
share capital of Broca plc. The goodwill arising on the acquisition of the
entire 100% interest in Broca plc is GBP6.8 million (including GBP3.2 million in
relation to the initial 19.2% holding). This is supported by its value in use
and is not considered to be impaired.
In terms of overall net asset values, the impairment charge arising in the first
half of the year has been reversed in the second half, but IAS 39 requires that
the reversal of the original charge is not through the income statement. The
overall impact is that while the income statement includes an impairment of
GBP3.2 million in respect of the previously held available for sale investment,
the subsequent acquisition accounting is such that the impairment is reversed
within the balance sheet and reinstated within goodwill.
3. Earnings per share
The calculation of basic earnings per share is based on profit attributable to
ordinary shareholders divided by the weighted average number of ordinary shares
in issue during the year. The calculation of diluted earnings per share is based
on the basic earnings per share adjusted to allow for the assumed conversion of
all dilutive options. In 2009, the weighted average number of shares for the
purpose of calculating diluted earnings per share is the same as for the basic
earnings per share calculation. This is because the outstanding share options
would have the effect of reducing the loss per ordinary share and therefore
would be anti-dilutive. In 2008, 644,149 options were not included in the
calculation as they would have been anti-dilutive due to their exercise price
being greater than the market price of an ordinary share.
+------------+-----------+---------+---------------+-------------+----------+---------------+
| | Earnings | Loss | 2009 | Earningsper | Earnings | 2008 |
| | per | GBP000 | Weighted | share | GBP000 | Weighted |
| | share | | average | pence | | average |
| | pence | | number of | | | number of |
| | | | ordinary | | | ordinary |
| | | | shares | | | shares |
+------------+-----------+---------+---------------+-------------+----------+---------------+
| | | | | | | |
+------------+-----------+---------+---------------+-------------+----------+---------------+
| Basic | (0.60) | (184) | 30,485,339 | 8.54 | 2,535 | 29,669,451 |
| earnings | | | | | | |
| per share | | | | | | |
+------------+-----------+---------+---------------+-------------+----------+---------------+
| Dilutive | | | - | | | 980,077 |
| effect of | | | | | | |
| share | | | | | | |
| options | | | | | | |
+------------+-----------+---------+---------------+-------------+----------+---------------+
| Diluted | (0.60) | (184) | 30,485,339 | 8.27 | 2,535 | 30,649,528 |
| earnings | | | | | | |
| per share | | | | | | |
+------------+-----------+---------+---------------+-------------+----------+---------------+
An adjusted earnings per share, before the impairment of the investment in
Broca, has been presented in addition to the earnings per share as defined in
IAS 33, since in the opinion of the directors, this provides a more meaningful
indicator for investors. The weighted average number of shares for adjusted
basic earnings per share and adjusted diluted earnings per share is the same as
for basic earnings per share and diluted earnings per share respectively.
Adjusted earnings per share can be reconciled from the basic earnings per share
as follows:
+------------+-----------+-----------+----------------+----------+----------+--------------+
| | Earnings | Earnings | 2009 | Earnings | Earnings | 2008 |
| | per | GBP000 | Weighted | per | GBP000 | Weighted |
| | share | | average number | share | | average |
| | pence | | of | pence | | number of |
| | | | ordinary | | | ordinary |
| | | | shares | | | shares |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| Basic | (0.60) | (184) | 30,485,339 | 8.54 | 2,535 | 29,669,451 |
| earnings | | | | | | |
| per share | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| Impairment | | 3,194 | - | | - | - |
| charge | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| Adjusted | 9.87 | 3,010 | 30,485,339 | 8.54 | 2,535 | 29,669,451 |
| basic | | | | | | |
| earnings | | | | | | |
| per share | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| Dilutive | | | - | | | 980,077 |
| effect of | | | | | | |
| share | | | | | | |
| options | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
| Adjusted | 9.87 | 3,010 | 30,485,339 | 8.27 | 2,535 | 30,649,528 |
| diluted | | | | | | |
| earnings | | | | | | |
| per share | | | | | | |
+------------+-----------+-----------+----------------+----------+----------+--------------+
4. Goodwill on acquisitions
Intangible assets includes GBP14.1 million of goodwill in respect of the
acquisitions of Broca plc, Wapfly Technologies Pty Limited and Activemedia
Technologies Limited made during the year, and arises as set out below. The
value of goodwill together with the fair value of the assets and liabilities
acquired may be adjusted for circumstances that are revealed within 12 months of
the date of acquisition.
Broca acquisition
Until 7 April 2009 the Group held 19.2% of the ordinary share capital of Broca
plc. On 8 April 2009, the Group acquired the balance of the entire issued share
capital of Broca plc and its subsidiary undertakings, Broca Communications
Limited and Sure on Sight Limited for consideration of the issue of 2,872,856
ordinary shares in 2ergo Group plc. The fair value of the shares issued was
determined with reference to market price on the date of acquisition. The
provisional impact of the acquisition on the Group's assets and liabilities is
set out below:
+----+-------+-----------------------------+-------------+--------------+--------------+
| | Book value | Adjustments | Provisional |
| | | | fair |
| | | | value |
+------------------------------------------+-------------+--------------+--------------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------------+-------------+--------------+--------------+
| | | | |
+------------------------------------------+-------------+--------------+--------------+
| Intangible assets | 2,671 | (40) | 2,631 |
+------------------------------------------+-------------+--------------+--------------+
| Property, plant and equipment | 41 | - | 41 |
+------------------------------------------+-------------+--------------+--------------+
| Deferred tax asset | - | 131 | 131 |
+------------------------------------------+-------------+--------------+--------------+
| Trade and other receivables | 58 | 146 | 204 |
+------------------------------------------+-------------+--------------+--------------+
| Cash and cash equivalents | 12 | - | 12 |
+------------------------------------------+-------------+--------------+--------------+
| Trade and other payables | (2,006) | (64) | (2,070) |
+------------------------------------------+-------------+--------------+--------------+
| | | | |
+------------------------------------------+-------------+--------------+--------------+
| Net assets acquired | 776 | 173 | 949 |
+------------------------------------------+-------------+--------------+--------------+
| | | | |
+------------------------------------------+-------------+--------------+--------------+
| Goodwill | | | 6,786 |
+------------------------------------------+-------------+--------------+--------------+
| | | | |
+------------------------------------------+-------------+--------------+--------------+
| Total purchase consideration | | | 7,735 |
+------------------------------------------+-------------+--------------+--------------+
| made up as follows: | | | |
+------------------------------------------+-------------+--------------+--------------+
| | reclassification from available for sale | | 810 |
| | investment | | |
+------------+-------------------------------------------+--------------+--------------+
| | reinstatement of cost of previously impaired available for sale | 3,194 |
| | investment (note 2) | |
+----+------------------------------------------------------------------+--------------+
| | satisfied by issue of | | | 3,404 |
| | ordinary shares | | | |
+------------+-----------------------------+-------------+--------------+--------------+
| | direct costs relating to | | | 327 |
| | the acquisition | | | |
+------------+-----------------------------+-------------+--------------+--------------+
| | | | 7,735 |
+------------------------------------------+-------------+--------------+--------------+
| | | | |
+----+-------+-----------------------------+-------------+--------------+--------------+
Wapfly acquisition
On 14 May 2009, the Group acquired the entire issued share capital of Wapfly
Technologies Pty Limited (now renamed 2ergo Australia Pty Limited) for
consideration of GBP172,000. The provisional impact of the acquisition on the
Group's assets and liabilities is set out below:
+---+-------------------------------+-------------+--------------+--------------+
| | Book value | Adjustments | Provisional |
| | | | fair |
| | | | value |
+-----------------------------------+-------------+--------------+--------------+
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Intangible assets | - | 31 | 31 |
+-----------------------------------+-------------+--------------+--------------+
| Property, plant and equipment | 7 | - | 7 |
+-----------------------------------+-------------+--------------+--------------+
| Cash and cash equivalents | 19 | - | 19 |
+-----------------------------------+-------------+--------------+--------------+
| Trade and other payables | (56) | (9) | (65) |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Net liabilities acquired | (30) | 22 | (8) |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Goodwill | | | 205 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Total purchase consideration | | | 197 |
+-----------------------------------+-------------+--------------+--------------+
| made up as follows: | | | |
+-----------------------------------+-------------+--------------+--------------+
| | cash | | | 63 |
+---+-------------------------------+-------------+--------------+--------------+
| | deferred consideration | | | 109 |
+---+-------------------------------+-------------+--------------+--------------+
| | direct costs relating to the | | | 25 |
| | acquisition | | | |
+---+-------------------------------+-------------+--------------+--------------+
| | | | 197 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+---+-------------------------------+-------------+--------------+--------------+
Activemedia Technologies acquisition
On 24 July 2009, the Group acquired the entire issued share capital of
Activemedia Technologies Limited and its Indian subsidiary undertaking Active
Media Technologies Private Limited for initial cash consideration of
GBP179,000 with further estimated consideration payable of GBP6,890,000. The
provisional impact of the acquisition on the Group's assets and liabilities is
set out below:
+---+-------------------------------+-------------+--------------+--------------+
| | Book value | Adjustments | Provisional |
| | | | fair |
| | | | value |
+-----------------------------------+-------------+--------------+--------------+
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Intangible assets | - | 315 | 315 |
+-----------------------------------+-------------+--------------+--------------+
| Property, plant and equipment | 49 | - | 49 |
+-----------------------------------+-------------+--------------+--------------+
| Trade and other receivables | 177 | - | 177 |
+-----------------------------------+-------------+--------------+--------------+
| Cash and cash equivalents | 65 | - | 65 |
+-----------------------------------+-------------+--------------+--------------+
| Trade and other payables | (31) | (88) | (119) |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Net assets acquired | 260 | 227 | 487 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Goodwill | | | 7,096 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+-----------------------------------+-------------+--------------+--------------+
| Total purchase consideration | | | 7,583 |
+-----------------------------------+-------------+--------------+--------------+
| made up as follows: | | | |
+-----------------------------------+-------------+--------------+--------------+
| | cash | | | 179 |
+---+-------------------------------+-------------+--------------+--------------+
| | deferred contingent | | | 6,890 |
| | consideration* | | | |
+---+-------------------------------+-------------+--------------+--------------+
| | direct costs relating to the | | | 514 |
| | acquisition | | | |
+---+-------------------------------+-------------+--------------+--------------+
| | | | 7,583 |
+-----------------------------------+-------------+--------------+--------------+
| | | | |
+---+-------------------------------+-------------+--------------+--------------+
* The deferred contingent consideration, which is payable in tranches, is
discounted and calculated as 4 times Indian profit after tax and 2.8 times UK
operating profit for the year to 31 August 2012 based on management projections
and is dependent on the acquired business achieving agreed levels of financial
performance and is subject to an overall cap related to Group
performance. Consideration is payable between November 2009 and November 2013
and will be settled, at the discretion of the Group, by the issue of new
ordinary shares in the Company or loan notes.
5. Report and Accounts
A copy of the Annual Report and Accounts will be sent to all shareholders with
notice of the Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANFDAELNFFE
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