Interim Results

Lo-Q PLC 25 June 2003 LO-Q PLC Interim Results for the six months ended 31 March 2003 Chairman's Statement The results for the 6 months ended 31st March 2003 are for the closed season and hence little rental income is earned against the fixed cost base. We announced on 4th February 2003 the successful sale of 5 installations to a leasing company during the period under review and included in revenue for the 6 months ended 31st March 2003 is £1m in respect of this. The 2003 season has now started and the system is fully operational in the 6 installed Six Flags parks in the United States. It is still too early in the season to be able to reasonably forecast the end of year results and after a number of weekends of very poor weather in the northern parks the season has started slowly. The Atlanta, Georgia park is now operating for its third season and demand for Q-bots is somewhat higher than at this point last year, however revenue is consistent year on year due to significant discounting. This discounting is part of a major initiative to increase overall awareness of the system and is expected to have a positive effect later in the season. The other parks also have a number of marketing initiatives to increase user awareness and the outcome for the year will significantly depend on the success of these activities. During the closed season period we have continued to invest significant effort in product development activity. The work was required to address issues that became apparent as we reached volume usage of Q-bots in multiple parks and has resulted in a much more robust Q-bot, a more reliable and extendable software base, and simpler support and upgrade technology. This development work is now drawing to a close and we will be able to reduce our expenditure in this area. Our new 'eLine' entry-level solution has just been announced. It is a limited functionality version of the main product facilitating faster deployment at much reduced cost and will substantially reduce the barriers to entry, especially when combined with wireless networking. While prospective customers remain cautious as they await solid information about this year's attendances and continue their restrictions on capital spend, opportunities do exist and the feedback for the eLine solution has been encouraging. The award of the patent in the US earlier this year confirms the company's assessment of the value of its intellectual property. We are exploring relationships with a number of organisations based on leveraging this IP and our market position. The Directors have identified the need to introduce further funds into the company to protect the company's intellectual property and to take advantage of the opportunities offered both by eLine and the original Lo-Q solution, and are investigating a number of alternatives. Jeff McManus Chairman Consolidated profit and loss account Restated Six months to Six months to Year to 31 March 31 March 30 September 2002 2003 2002 £ £ £ Turnover 1,194,235 36,814 886,484 Cost of sales 922,093 51,718 704,706 ________ ________ _______ Gross profit/(loss) 272,142 (14,904) 181,778 Administrative expenses 995,397 737,324 1,914,285 ________ ________ _______ Operating loss (723,255) (752,228) (1,732,507) Interest receivable 1,215 10,072 30,022 Interest payable and similar charges - (4) (2,487) ________ ________ _______ Loss on ordinary activities before taxation (722,040) (742,160) (1,704,972) Taxation on loss on ordinary activities (64,000) (31,600) (110,000) ________ ________ _______ Loss on ordinary activities after taxation (658,040) (710,560) (1,594,972) Earnings (loss) per share Basic (and diluted) (0.05)p (0.07)p (0.13)p All amounts relate to continuing activities There are no recognised gains or losses other than those within the profit and loss account Consolidated balance sheet Restated 31 March 31 March 30 September 2003 2002 2002 £ £ £ Fixed assets Tangible assets 261,565 398,419 336,876 Current assets Stocks 277,220 136,799 1,826,758 Debtors falling due within one year 583,775 151,470 657,684 Debtors falling due after one year - accrued income 589,980 - - - corporation tax 64,000 139,389 - Cash at bank and in hand 171,804 10,461 160,060 ________ ________ _______ 1,686,779 438,119 2,644,502 Creditors: amounts falling due within one year 179,338 547,175 554,332 ________ ________ _______ Net current assets/(liabilities) 1,507,441 (109,056) 2,090,170 ________ ________ _______ Total assets less current liabilities 1,769,006 289,363 2,427,046 Called up share capital 143,478 106,818 143,478 Share premium account 4,971,617 1,952,394 4,971,617 Capital reserve 12,473 12,473 12,473 Profit and loss account (3,358,562) (1,782,322) (2,700,522) ________ ________ _______ Equity shareholders' funds 1,769,006 289,363 2,427,046 Consolidated cash flow statement Restated 31 March 31 March 30 September 2003 2002 2002 £ £ £ Net cash outflow from operating activities 67,916 (450,176) (3,363,186) ________ ________ _______ Returns on investments and servicing of finance Interest received 1,215 10,072 30,022 Interest paid - (4) (2,487) ________ ________ _______ Net cash inflow from returns on investments and servicing of finance 1,215 10,068 27,535 ________ ________ _______ Taxation US corporation tax paid - (3,444) (757) ________ ________ _______ Capital expenditure and financial investments Purchase of tangible fixed assets (57,387) (132,133) (145,561) ________ ________ _______ Cash outflow before use of liquid resources and financing 11,744 (575,685) (3,481,969) Financing Net cash inflow from shares issue - - 3,055,883 ________ ________ _______ Increase/(decrease) in cash 11,744 (575,685) (426,086) Notes to the consolidated cash flow statement Reconciliation of operating loss to net cash inflow from operating activities Restated 31 March 31 March 30 September 2003 2002 2002 £ £ £ Operating loss (723,255) (752,228) (1,732,507) Depreciation charges 132,698 64,068 139,039 Decrease/(increase) in stock 1,549,538 (82,631) (1,772,589) Decrease/(increase) in debtors 73,909 (77,908) (402,781) (Increase) in deferred income (589,980) - - (Decrease)/increase in creditors (374,994) 398,523 405,652 ________ ________ _______ Net cash movement from operating activities 67,916 (450,176) 3,363,186 Reconciliation of net cash outflow to movement in net debt Restated 31 March 31 March 30 September 2003 2002 2002 £ £ £ Increase/(decrease) in cash for the period 11,744 (575,685) (426,086) ________ ________ _______ Movement in net funds 11,744 (575,685) (426,086) Net funds at beginning of period 160,060 586,146 586,146 ________ ________ _______ Net funds at end of period 171,804 10,461 160,060 Notes forming part of the financial statements 1 Accounting policies The interim figures for the six months ended 31 March 2003 have been prepared on the basis of the accounting policies set out in the annual report and accounts for the year ended 30 September 2002. In the accounts for the year ended 30 September 2002 the company changed its accounting policy so that development costs are charged to the profit and loss account in the year of expenditure. The results for the period ended 31 March 2002 have been restated to reflect this change in accounting policy and the effect of this change in accounting policy is that the operating loss for the six months ended 31 March 2002 has been increased by £131,668. Since the year end the company has entered into a number of lease obligations and has adopted the accounting policy given below. The results for the year ended 30 September 2002 are extracted from the published accounts for that period on which the auditors gave an unqualified opinion and which have been filed with the Registrar of Companies. The results for the six months ended 31 March 2003 and 2002 are unaudited, but have been reviewed in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. During the period the group sold five park installation infrastructures to a leasing company and entered leases for the use of the assets, which were immediately sub leased to the end-user theme parks. The substance of the transaction is that the parks have purchased the installation via a finance lease with leasing payments paid directly by the parks to the leasing company. The turnover and stock released to cost of sales matches the proportion of the total income as it is realised. The remainder of the stock in relation to the installations has been transferred to debtors, as it is contingent upon future cash flows arising from the parks. No unrealised profit is included and the debtor has not been discounted. 2 Turnover Turnover for the group arises solely within the United States and Europe. 3 Taxation In the interim results for the 6 months ended 31 March 2002 the company implemented FRS19 - Deferred Tax for the first time whereby deferred tax assets are recognised if they are regarded as recoverable. In light of the losses incurred in the year ended 30 September 2002 the company concluded that recovery of the asset is sufficiently distant so as to no longer merit recognition. The company has recognised tax assets in respect of Research and Development tax claims. 4 Earnings (loss) per share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders (£658,040) by the weighted average number of shares (14,347,837). 5. Copies of the interim report can be obtained, free of charge, from the registered office at New Close, Greenlands, Henley-On-Thames, Oxfordshire, RG9 3AL. 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