Final Results

RNS Number : 7968Q

Synchronica PLC

20 April 2009

 



20 April 2009

Synchronica PLC

("Synchronica" or "the Company")

Unaudited Preliminary Results for the Year Ended 31 December 2008

Synchronica plc (AIM:SYNC), a leading global provider of mobile email and synchronisation software and services, reports preliminary results for the year ended 31 December 2008.

Financial Highlights

• Results in line with market expectations

• Revenues increase 61% to £3.7m (2007: £2.3m)

• Cash used in operating activities reduced by 18.7% to £2.6m (07: £3.2m)

• Cash and cash equivalents increased by 35% to £3.5m (07: £2.6m) 

Operational Highlights

• Significant increase in contract wins, with 13 new customers in 12 countries validating the strategy to focus on mobile email in emerging markets

• Available pool of potential subscribers at Synchronica´s operator customers increased to approx. 300m

• Acquisition and integration of former competitor AxisMobile completed with technology and customers transferred to Synchronica and cost reduced to prior levels.

• New version of Mobile Gateway 4.0 launched enabling mobile email for 100% of mobile phones in the market.

• Raised £5.1m to fund acquisition and further expansion of sales and marketing activities.

• Most significant deal to date secured post year end in global reseller agreement with Nokia Siemens Networks, the world's second largest Network Equipment Provider 

Carsten Brinkschulte, CEO of Synchronica, commented, "Synchronica has shown substantial progress in 2008. This is due to our continual focus on sales and marketing, our investment in product development, and the successful acquisition and integration of competitor AxisMobile. The acquisition broadened the Company's product offering allowing us to offer mobile email to every mobile phone on the planet. On top, we have been able to fulfil outstanding customer deliveries of AxisMobile and further expanded our customer portfolio. We have had a strong start to 2009 with revenues for the first quarter exceeding the level of revenues generated in the entire first half of last year and we are very pleased to have secured of a global reseller agreement with Nokia Siemens Networks, the second largest network equipment provide worldwide, establishing a scalable channel to mobile operators worldwide. The latest version of our core product, Mobile Gateway 4.0, has been very well received by existing and prospective customers. With market demand strengthening and an improved competitive position, the management are focused upon the execution of the Company's growth strategy and view the future with confidence."

For further enquiries, please contact:

Synchronica plc	Tel. On the day:     020 7651 8688 Thereafter:    [phone]
Carsten Brinkschulte, CEO
Angus Dent, CFO
Nicole Meissner, COO
ICIS	Tel.    [phone]
Tom Moriarty
Caroline Evans-Jones
FinnCap	Tel. [phone]
Charles Cunningham
Geoff Nash

About Synchronica

Synchronica plc develops and markets mobile email and synchronization solutions for mobile operators and device manufacturers. Products include the award-winning push email and synchronization solution Mobile Gateway, and the device backup solution Mobile Backup. Based on industry-standards, Synchronica can reach the built-in email and synchronization clients of more than 2 billion mobile devices on the market today. The new email-to-SMS conversion brings email to every mobile phone on the market. Service providers in emerging and developed markets use Synchronica products to offer mobile email, PIM synchronization, and backup and restore services to consumer and business subscribers. 

Headquartered in England, Synchronica has a development centre in Germany and presences in the USA, Hong Kong and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.LN). More information is available at www.synchronica.com.

Chairman's Statement

We continue to make significant progress towards becoming the leading provider of push mobile email solutions with a strong footprint in emerging markets. 2008 was a landmark year for the Company and I am pleased to report that we reached all the milestones we set out to meet, and more. Key amongst our achievements was the acquisition and integration of Axis Mobile Ltd ("AxisMobile") in September last year. The new, now integrated technology, that stemmed from this acquisition, has allowed us to penetrate new markets and geographies, previously locked to us. We believe we are now one of very few providers in the world, which can provide a comprehensive mobile email and synchronization solution to the entire market, from the consumer with the most basic of handsets to the professional business user with a Smartphone.

Financial Performance

Our financial performance has improved, as we once more increased revenue in line with market expectations. Given the current climate, we have been conscious of keeping our ongoing operating costs under control and have achieved this. After adding back one off costs associated with the acquisition of AxisMobile the Loss for the Year is in line with expectations. During the year the company raised £5.1 million, net of costs, which was supported by our existing as well as new investors. The funds were used primarily to integrate our competitor AxisMobile in a timely manner, which was achieved by the end of the year. These fund raisings also provided us with working capital to accelerate our marketing and sales capabilities, and we have quickly seen the reward of this investment with our strengthening sales pipeline.

Commercialising a state of the art mobile email solution requires continuous investment in product development. Customers expect new versions of the product to be introduced on a regular basis to keep up with the rapidly developing mobile market. To further control these costs Synchronica has introduced a complex time and work tracking system for product and project development. 

Operational Performance

We reached a number of milestone deals during the year, substantially increasing the number of operators using Mobile Gateway. This gives us a total accessible target market of more than 300 million users within our current customer base. Our strategy remains the same: to target those countries where the mobile handset is the primary route to Internet access and email distribution, and where PC penetration numbers are still minimal. 

Our addressable market is huge and growing rapidly. Industry analyst, Informa, estimates there will be close to 5 billion mobile phone subscribers by 2012, with almost all of the growth in the next few years coming from new users in emerging regions, the heart of Synchronica's target base. We are confident of signing up many more operators during 2009 and increasing our position as a premier provider of mobile email.

Amongst our new client wins, we have now entered the markets of South America, India, the Middle East, and Russia/CIS. Where possible, we are trying to work with more than one operator in each country to ensure maximum penetration. For example in Russia we work with two of the largest network operators, with in aggregate over 120 million subscribers.

One deal in particular with a Tier 1 operator, with over 100 million subscribers worldwide, has confirmed our position as a leading player in the industry. The significance of this contract is twofold. Firstly, it reduces the sales-cycle with the operator's subsidiaries as the price and legal framework has already been agreed, and secondly, it gives us access to an extremely large subscriber base in markets where we were previously not established. We believe we have now created a brand presence within our industry which will allow us to complete similar deals with other Tier 1 operators in the future.

Post Year End Activity

Since the end of the year, Q1 2009 has seen strong operational performance, including the launch of Mobile Gateway 4.0. We have also closed our most significant reseller agreement to date with the world's second largest network equipment provider, Nokia Siemens Networks. Synchronica was selected during a competitive vendor process, because its Mobile Gateway provides carrier-grade scalability, is based on industry standards, supports mass-market handsets and is suitable for both businesses and consumers alike. 

Product Development

Just after the close of the reporting year, we launched our latest version of Mobile Gateway. The new major version, 4.0, integrates the acquired technology, and substantially improves the competitive position of our mobile email product. Synchronica Mobile Gateway 4.0 extends mobile email and data synchronisation to virtually any mobile phone on the market. With inbuilt email-to-SMS and email-to-MMS gateways and Push-to-WAP/xHTML browser access the solution is ideal for emerging markets, where PC-based access is limited and entry-level devices dominate. A document transcoding engine allows a variety of attachments to be displayed on mass-market phones.

The new Mobile Backup 1.7, launched at the Mobile World Congress in February, provides an automated and scheduled backup facility for handsets supporting the OMA DS (SyncML) Push standard. This facility enables mobile devices to automatically back up over-the-air at scheduled intervals, without users needing to remember to backup manually. As an attractive value-added service, Synchronica Mobile Backup can generate additional revenues for mobile operators and service providers.

Management and Staff

Once again, our progress would not have been possible without the hard work and total dedication of the management team and all our staff. In a few short years we have established Synchronica as a key player in the market, witnessed by a number of industry awards being presented to the Company as well as a highly successful attendance at the World Mobile Congress, recently held in Barcelona. 

Outlook

We believe the growth prospects for Synchronica are excellent. Given continued access to resources and with an expanding target market, a growing reputation for excellence and a strong pipeline of potential new clients, the Board is confident of a successful future. I would like to thank all our shareholders for their continued support.

David A Mason

Chairman

19 April 2009

  Unaudited consolidated income statement for the year ended 31 December 2008

	Note	2008		2007
		£'000		£'000
Revenue		3,708		2,285
Cost of sales		(1,675)		-
		________		________
Gross profit		2,033		2,285
Administrative costs
Reorganisation costs	5	(1,956)		(492)
Other administrative expenses		(6,564)		(4,951)
Total administrative costs		(8,520)		(5,443)
		________		________
Operating Loss		(6,487)		(3,158)
Finance income		518		87
Finance costs		(495)		(12)
		________		________
Loss before taxation		(6,464)		(3,083)
Taxation	6	258		113
		________		________
Loss for the year after tax attributable to the equity holders of the parent company		(6,206) ________		(2,970) ________
Loss per ordinary share from continuing operations  Basic and Diluted loss per share	7	(3.0)p   _____ ___		(4.4)p ________

  Unaudited statement of recognised income and expense

For the year ended 31 December 2008

	The Group		The Company
	2008	2007	2008	2007
	£'000	£'000	£'000	£'000
Exchange difference on translation of foreign operations	(92)	7	-	-
	_______	_______	_______	_______
Net (expense)/income recognised directly in equity	(92)	7	-	-
Loss for the year	(6,206)	(2,970)	(10,652)	(3,107)
	_______	_______	_______	_______
Total recognised expenses in the year attributable to equity holders of the parent	(6,298)	(2,963)	(10,652)	(3,107)
	_______	_______	_______	_______

Unaudited balance sheet at 31 December 2008

		The Group		The Company
		2008	2007	2008	2007
	Note	£'000	£'000	£'000	£'000
Assets Non Current assets
Intangible assets		3,328	579	460	557
Property, plant and equipment		192	133	124	105
Investments in subsidiaries		-	-	1,401	77
Derivative financial assets		465	-	465	-
		_______	_______	_______	_______
Total non current assets		3,985	712	2,450	739
		_______	_______	_______	_______
Current assets
Trade and other receivables		1,718	1,517	1,350	1,509
Corporation tax		104	107	104	121
Cash and cash equivalents		3,494	757	2,647	643
		_______	_______	_______	_______
Total current assets		5,316	2,381	4,101	2,273
		_______	_______	_______	_______
Total assets		9,301	3,093	6,551	3,012
		_______	_______	_______	_______
Liabilities
Current liabilities
Trade and other payables		2,603	1,006	2,978	1,072
Corporation tax		21	-	-	-
Provisions		1,135	187	68	187
		_______	_______	_______	_______
Total current liabilities		3,759	1,193	3,046	1,259
		_______	_______	_______	_______
Non current liabilities
Provisions		411	349	411	349
		_______	_______	_______	_______
Total non current liabilities		411	349	411	349
		_______	_______	_______	_______
Total Liabilities		4,170	1,542	3,457	1,608
		_______	_______	_______	_______
Equity and reserves
Ordinary shares	8	3,785	840	3,785	840
Share premium	8	19,361	13,167	19,361	13,167
Capital to be issued	8	532	-	532	-
Accumulated losses	8	(18,462)	(12,463)	(20,584)	(12,603)
Translation reserve	8	(85)	7	-	-
		_______	_______	_______	_______
Equity attributable to shareholders of the parent company		5,131	1,551	3,094	1,404
		_______	_______	_______	_______
TOTAL EQUITY AND LIABILITIES		9,301	3,093	6,551	3,012
		_______	_______	_______	_______

Unaudited cash flow statement for the year ended 31 December 2008

		The Group		The Company
		2008	2007	2008	2007
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Loss before taxation		(6,464)	(3,083)	(8,444)	(3,228)
Adjusted for:
Depreciation		218	62	86	51
Amortisation of intangibles		297	160	235	151
Impairments of intangibles		415	-	1,707	-
(Profit) on disposal of property, plant and equipment		-	(5)	-	(4)
Finance income		(518)	(87)	(426)	(87)
Finance costs		495	12	493	12
Equity settled share based payment expense/(credit)		207	(40)	207	(40)
		______	______	______	______
Cash flows from operating activities before changes in working capital and provisions		(5,350)	(2,981)	(6,142)	(3,145)
- Decrease in assets held for resale		1,675	-	-	-
- Decrease/(increase) in receivables		476	(1,016)	640	(1,049)
- Increase/(Decrease) in payables		209	(659)	2,104	(605)
- Increase/(Decrease) in provisions		79	317	(106)	317
		______	______	______	______
Cash utilised from operations		(2,911)	(4,339)	(3,504)	(4,482)
Tax received		282	-	273	-
Interest paid		(2)	-	-	-
		______	______	______	______
Net cash used in operating activities		(2,631)	(4,339)	(3,231)	(4,482)
		______	______	______	______
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired		(171)	-	-	-
Investment in subsidiary		-	-	(372)	-
Purchase of intangible assets		(145)	(243)	(138)	(215)
Purchase of property, plant and equipment		(166)	(103)	(105)	(80)
Proceeds from sale of property, plant and equipment		-	4	-	4
Proceeds on disposal of investment		-	-	-	12
Interest received		31	87	28	87
		______	______	______	______
Net cash used in investing activities		(451)	(255)	(587)	(192)
		______	______	______	______
Cash flows from financing activities
Net proceeds from issue of ordinary shares		5,128	3,277	5,128	3,277
Proceeds from derivative instruments		357	-	357	-
		______	______	______	______
Net cash generated from financing activities		5,485	3,277	5,485	3,277
		______	______	______	______
Net increase / (decrease) in cash and cash equivalents		2,403	(1,317)	1,667	(1,397)
Cash and cash equivalents at 1 January 2008		757	2,086	643	2,052
Effects of exchange rate changes on cash and cash equivalents		334	(12)	337	(12)
		______	______	______	______
Cash and cash equivalents at 31 December 2008		3,494	757	2,647	643
		______	______	______	______

1. General information

Synchronica plc is incorporated in the United Kingdom under the Companies Act 1985. The address of its registered office is Mount Pleasant House, Lonsdale Gardens, Royal Tunbridge Wells, Kent, TN1 1NY.

These consolidated financial statements are presented in pounds sterling, which represented the functional currency of the Group. Foreign operations are consolidated in accordance with the policies set out in note 2 below.

2. Basis of Preparation

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group's published full financial statements will comply with IFRSs and be available in due course. The Company's financial statements have been prepared on the same basis and as permitted by Section 230(3) of the Companies Act 1985, no income statement is presented for the Company.

3. Accounting Policies 

The Group's detailed accounting policies are consistent with those applied in the financial statements for the year ended 31 December 2007.

4. Going Concern

These financial statements have been prepared on the going concern basis which is supported by forecasts and projections covering the period to 31 December 2010.

The company made a loss of £6.206 million for the year to 31 December 2008 and had cash of £3.494 million at that time. Since 31 December 2008 the company has twice raised additional funds from shareholders totalling £0.3m (See note 10). The projections and forecasts, which include cash flows, suggest that provided the company trades in line with expectations that it has sufficient funds to meet its liabilities as they fall due. There is however an obvious risk that the company may not meet its revenue expectations and / or that while it may meet these revenue expectations it might meet them more slowly than anticipated; either or both of these could test the company's cash flow. The forecasts are reliant on signing new deals with new customers which are expected but not guaranteed, negotiations are ongoing.

In addition the company operates in a highly specialised and fast moving environment in which in order to generate revenue it is necessary that the products are and remain up to date, to ensure this it may be necessary to increase costs.

Given the above the directors acknowledge that there is a material uncertainty related to these events, that may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

Management have however taken the relevant steps to ensure that further funding has been raised from existing and new investors. Based on forecasts and projections and additional funding raised since the balance sheet date, management expect the company to continue as a going concern. 

  5. Reorganisation costs

	2008 £'000	2007 £'000
Costs on closure of site	1,956	-
Provision for onerous contracts	-	492
	_______	_______
	1,956	492
	_______	_______

6. Taxation

    Income tax (credit) / expense                        

	2008 £'000	2007 £'000
UK research & development tax credit	(266)	(121)
Adjustment to provision for previous periods	10	-
Overseas corporation tax charge/(credit)	3	8
Overseas - Adjustment to provision in previous periods	(5)	-
	_______	_______
	(258)	(113)
	_______	_______

The UK research and development tax credit received represents the refund of tax due from research carried out in the years ended 31 December 2006 and 2007 (2007:  31 December 2005). 

The group's loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to results of the consolidated entities as follows:

	2008 £'000	2007 £'000
Loss on ordinary activities before taxation	(6,464)	(3,083)
	_______	_______
Theoretical tax at UK corporation tax rate 28.5% (2007: 30%)	(1,842)	(925)
Effects of:
- unrelieved tax losses	1,199	943
- impairment of intangible assets	486	-
- expenditure that is not tax deductible	10	12
- capital allowances in excess of depreciation	91	(18)
-  adjustments in respect of prior periods	5	-
- higher tax rates on overseas earnings	-	8
- research and development tax credit	(266)	(121)
- share based payments	59	(12)
	_______	_______
Actual current taxation credit	(258)	(113)
	_______	_______

A potential deferred tax asset of £5,740,000 (2007: £4,374,000) in relation to unrelieved losses of £20,500,000 (2007: £15,620,000) has not been recognised due to the uncertainty of recoverability of this amount.  

7. Loss per ordinary share

Basic loss per ordinary share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

	2008 £'000	2007 £'000
Numerator
Losses used for calculation of basic and diluted EPS	6,206	2,970
	_________	_________
	Number	Number
Denominator
Weighted average number of ordinary shares used in basic EPS	207,780,284	68,197,584
	_________	_________
Basic and diluted loss per share (pence)	(3.0)p	(4.4)p
	_________	_________

19,813,205 (2007: 4,959,075) shares, being the weighted average number of dilutive securities (options and warrants) have been excluded from the calculation of diluted loss per share because they would reduce loss per share.

8. Statement of changes in shareholders' equity

The Group	Ordinary shares	Share premium	Capital to be issued	(Accumu- lated loss)	Trans-lation Reserve	Total
	£'000	£'000	£'000	£'000		£'000
At 1 January 2007	364	10,066	-	(9,453)	-	977
Accumulated loss for the year	-	-	-	(2,970)	-	(2,970)
Adjustment for share based payment				(40)	-	(40)
Proceeds from placing	437	2,840	-	-	-	3,277
Acquisition of company	39	261	-	-	-	300
Currency translation difference	-	-	-	-	7	7
	_______	_______	_______	_______	_______	_______
At 31 December 2007	840	13,167	-	(12,463)	7	1,551
Accumulated loss for the year	-	-	-	(6,206)	-	(6,423)
Adjustment for share based payment	-	-	-	207	-	424
Proceeds from placing	1,681	3,447	-	-	-	5,128
Shares issued in exchange for derivative financial assets	517	1,169	-	-	-	1,686
Acquisition of subsidiary	747	1,578	532	-	-	2,857
Currency translation difference	-	-	-	-	(92)	(92)
	_______	_______	_______	_______	_______	_______
At 31 December 2008	3,785	19,361	532	(18,462)	(85)	5,131
	_______	_______	_______	_______	_______	_______

9. Acquisition of Axis Mobile Limited

On 10 September 2008 the group completed the acquisition of Axis Mobile Limited, for consideration of £2.8m (inclusive of £0.1m of related costs).Total goodwill arising on the acquisition is £2.4m. In the purchase 100% of the voting shares were acquired. All intangibles were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill. Details of the net assets acquired and goodwill are as follows:

Purchase consideration:	£000s
Cash paid	83
Direct costs relating to the acquisition	105
Share consideration	2,127
Share consideration - deferred	532
	_______
Total Purchase consideration	2,847
Fair Value of net identifiable assets	(493)
	_______
Goodwill	2,354 _______

The value of goodwill represents anticipated synergies to result from integration of operations into our existing business. This acquisition allows integration of products into one comprehensive mobile email and synchronization product that includes push email with calendar contacts and attachments.

Axis Acquisition	`	Carrying Values   Pre-Acquisition	Fair Value
		£'000s	£'000s
Intangible Assets		12	2,637
Property, Plant and Equipment		111	111
Receivables		628	196
Cash and Cash Equivalents		17	17
Payables		(1,338)	(1,338)
Grants Recoverable		(882)	(882)
Deferred Income		(248)	(248)
		_______	_______
Net Assets Acquired Goodwill		(1,700)	493
Goodwill			2,354 _______
Consideration			2,847
			_______

Consideration satisfied by:
			£'000s
Cash			188
Share Consideration			2,659
			_______
Consideration			2,847
			_______

10. Events after the balance sheet date  

On 22 January 2009 the company raised £90,000 before expenses of additional share capital. The company placed 3,000,000 ordinary shares of 1p each at a price of 3p per share.

On 6 February 2009 the company raised £209,500 before expenses of additional share capital. The company placed 6,983,333 ordinary shares of 1p each at a price of 3p per share.

11. Publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute the Group's financial statements for the year ended 31 December 2008 and the year ended 31 December 2007.

The financial statements for the year ended 31 December 2007 were prepared in accordance with applicable International Financial Reporting Standards as adopted by the European Union and have been delivered to the Registrar of Companies. The financial statements for the year ended 31 December 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The audit report for the year ended 31 December 2007 was unqualified but did contain an emphasis of matter paragraph. This was due to the Group making a loss for the year ended 31 December 2007 of £2,970,000 and was reliant on its ability to generate sufficient cash inflows from its trading activities and to successfully raise further funding from existing and new investors in order to continue as a going concern. This condition indicated the existence of material uncertainties which cast significant doubt about the Group's ability to continue as a going concern.  The report for financial statements for the year ended 31 December 2007 did not contain statements under sections 237 (2) or (3) of the Companies Act 1985.

The preliminary financial information for the year ended 31 December 2008 is unaudited and do not constitute accounts within the meaning of section 240 of the Companies Act 1985.  An audit report will be issued in relation to the financial statements for the year ended 31 December 2008 and will contain an emphasis of matter paragraph similar to the paragraph issued in the financial statements for the year ended 31 December 2007, described above. 

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