Preliminary Results
8 June 2010
Synchronica plc
('Synchronica' or 'the Company')
Preliminary Results for the year ended 31 December 2009
Synchronica plc, the AIM listed mobile email, instant messaging and data synchronisation provider, announces Unaudited Preliminary Results for the year ended 31 December 2009.
Synchronica plc's award-winning product portfolio includes the flagship product Mobile Gateway which provides push email, synchronization, instant messaging, backup & restore and mobile connectivity to social networks. Synchronica's white-label products are sold to mobile operators in emerging and developed markets.
Financial Highlights
· Revenues increased slightly to £3.83m (2008: £3.71m).
· Gross profits up 80% to £3.67m (2008: £2.03m).
· Administrative costs down to £6.91m (2008: £8.5m)
· Loss before tax halved at £3.22m (2008: £6.49m loss).
· Loss per share of 0.6p (2008: loss per share of 2.9p).
· Cash position of £2.63m (2008: £3.49m), before £2.79m (gross) placing post period end.
Operational Highlights
· Announced a record of 13 new contract wins with mobile operators during 2009.
· Mobile Gateway related revenues increased by 175% to £3.1m (2008: £1.16m).
· Launched flagship Mobile Gateway 4 which provides mobile email to 100% of mobile phones in use.
· Raised £4.7m to fund the collaboration agreement to build, market and sell MessagePhone™, a family of low cost mobile devices, optimised for use with Mobile Gateway.
· MessagePhone™ launched in February 2010 and the first two purchase orders received from operators in Africa and Latin America - sales expected to accelerate in the second half of 2010.
· Extended global reseller network to include Nokia Siemens Networks and an unnamed top-5 Asian Network Equipment Provider.
Post-Year End Highlights
· Mobile Gateway 5 launched in February introducing Instant Messaging and to Social Networking.
· Acquisition of the Instant Messaging business of Colibria AS completed in April, adding a further 13 operator contracts and accelerating entry into the mobile IM market.
Trading Update
Thanks to the Company's reseller network and the MessagePhone™, 2010 has started positively building the sales pipeline to a higher level than ever before. However to date the conversion of this pipeline to revenue has been slower than expected. The Directors believe that the sales pipeline is sufficient to meet market expectations for the year, provided there is an accelerated rate of conversion to revenue in the remainder of the year. The slower conversion of the sales pipeline has lead to a lower than expected level of cash generation, however the directors believe that the company has sufficient funds to meet its present requirements.
Commenting on Outlook, Carsten Brinkschulte, CEO of Synchronica, said, "During 2009, Synchronica invested significantly in developing our flagship product Mobile Gateway and expanding the Company's global reseller network. These efforts have started to pay off and the Company now enjoys a much improved competitive positioning and a global sales channel with local presence. As a result, Synchronica was able to sign a record 13 new contracts with mobile operators throughout 2009, predominantly in the Company's target emerging markets of Africa, Asia and Latin America.
In addition to mobile operators, we are now starting to see significant interest from device manufacturers who wish to bundle Mobile Gateway with their products, allowing them to offer advanced mobile messaging to their users. This presents Synchronica with significant opportunities, and adds substantially to our sales prospects.
The introduction of Mobile Gateway 5 in February 2010 and the acquisition of the IM business of Colibria AS in April further improves our competitive position and market share accelerating the Company's commercial development, bringing us closer to our aim of becoming the market leader for next-generation messaging in emerging economies."
Enquiries:
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Synchronica plc
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Carsten Brinkschulte, CEO Angus Dent, CFO, Nicole Meissner, COO, |
+44 (0) 7977 256 406 +44 (0) 7977 256 347 +44 (0) 7977 256 412 |
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FinnCap |
Clive Carver , Nomad |
+44 (0) 20 7600 1658 |
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Charlotte Stranner, Corporate Finance |
+44 (0) 20 7600 1658 |
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Stephen Norcross, Corporate Broker |
+44 (0) 20 3207 3211 |
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Walbrook PR Ltd
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Paul McManus |
+44 (0) 20 7933 8787 +44 (0) 7980 541 893 |
Synchronica plc
Chairman's statement
for the year ended 31 December 2009
Synchronica continues to make great strategic and commercial progress as we focus our efforts on becoming the leading provider of push mobile email solutions for mobile operators in emerging markets. Key to this progress is the enhancement of our distribution network.
During 2009 we successfully secured global reseller agreements with Brightstar, Nokia Siemens Networks, and a large Asian-based network equipment vendor. This has resulted in us being able to substantially enlarge our customer footprint, and welcome new customers from our target markets of the Middle East and Africa, Eastern Europe, Asia and Latin America. Our distribution partnerships provide Synchronica with global reach and local presence in all the high growth markets and we remain confident that our focus on distribution will continue to bear fruit.
Financial Results
We increased revenue slightly on last year at £3.83m (2008: £3.71m). The consensus broker expectation had been for higher revenues in 2009 and in the latter part of 2009 and into 2010 we believed that this had been achieved. However, we were informed in early 2010 by a customer that, as a result of that customer being involved in acquisition discussions, the relevant counter-signatures and purchase orders relating to the delivery of Mobile Gateway in 2009 would not be received in time for us to recognize the revenue in 2009. We gave the appropriate guidance to the market, and have in the meantime successfully restarted discussions with the customer aiming to conclude this contract soon after the acquisition is completed.
Our gross profits remain comfortably above 90% of revenue for our core Mobile Gateway product. Administrative costs, net of exceptional charges, have fallen from £6.6m in 2008 down to £6.0m in 2009. Excluding exceptional items we recorded a significantly reduced operating loss of £2.31m against a loss of £4.55m the previous year. The loss after tax was lower at £3.08m (2008:£6.10m) and loss per share was lower at 0.6p (2008: loss per share 2.9p).
Cash Position and Flow
The Group turned the year with £2.63m (2008: £3.49m) of cash, and added £2.8m (gross) from a placing in April 2010, with a further £2m on a twenty four month swap, as described below. We derive our revenue from a relatively small number of discreet licensing deals, the frequency and timing of which is often difficult to predict. In recent years our revenue has been heavily weighted towards the second half.
With the level of interest shown in our product being at an all time high, our sales pipeline has never been stronger. However, we are reliant upon a steady and sustained conversion of these prospects into revenue and cash. In this context please also see Note 4.
MessagePhone™ Collaboration and Placing
In June 2009, the Company announced a collaboration agreement with Brightstar, a global device distributor and KCM, a Korean device manufacturer to design, build, market and sell a family of low cost mobile devices which will be bundled with Synchronica's Mobile Gateway product. £4.7m was raised to fund MessagePhone's™ development and rollout via a placing.
We launched MessagePhone™ with our partners in February 2010 at events in London and the Mobile World Congress in Barcelona. We have since received the first purchase orders for MessagePhone™, including revenues for licences and services for the bundled Mobile Gateway.
Board Changes and Staff
On the 18 November 2010, we appointed Michael Jackson to the Board as a Non-executive Director. Michael is the founder and Chairman of Elderstreet Investments Limited, best known for investing in young and ambitious technology businesses. He is also recognised for his long and successful position as chairman of Sage plc. We welcome the experience which Michael brings to Synchronica from the technology and smaller company arena.
On 31 May 2010, Robert Mahalski, a Non-executive Director since January 2008, chose to leave the Synchronica Board.
A key asset of the Company is our team. Once again, Synchronica's progress could not have been possible without the hard work and total dedication of our management team and staff, all of whom are committed to Synchronica's success.
Post Year-End Events
On the 31 March 2010, Synchronica plc announced the acquisition of the IMPS instant messaging business of Colibria AS, a leading mobile instant messaging company. Synchronica has acquired Colibria's IMPS technology and 13 contracts with mobile operators. We expect that the acquisition will accelerate our entry in to the instant messaging market, and that it will also boost the demand for Synchronica Mobile Gateway among those customers which use Colibria's technology.
At the same time we announced a placing to raise £4.8m gross, £2.8m in cash and an equity swap placing providing the Company with further funding of approximately £2.0m over the next 24 months. The funds have been used in part to satisfy the cash consideration element of the acquisition and will be used to provide the enlarged Company with further working capital for further development and roll-out of Mobile Gateway 5, our award winning software.
Trading Update
Thanks to the Company's reseller network and the MessagePhone™, 2010 has started positively building the sales pipeline to a higher level than ever before. However to date the conversion of this pipeline to revenue has been slower than expected. The Directors believe that the sales pipeline is sufficient to meet market expectations for the year, provided there is an accelerated rate of conversion to revenue in the remainder of the year. In previous years Synchronica's revenue has been heavily weighted towards the second half. The slower conversion of the sales pipeline has lead to a lower than expected level of cash generation, however the directors believe that the company has sufficient funds to meet its present requirements.
Outlook
With the launch of Mobile Gateway 4 during 2009, Synchronica was able to offer a push email and synchronization product which can support any mobile handset, regardless of how basic it may be. In 2010, the Company launched Mobile Gateway 5, which in addition to push email and synchronization for any mobile phone, now introduces Instant Messaging and connectivity to Social Networking communities. We believe that this, in tandem with the MessagePhone™ initiative, and our strong sales channels, will see Synchronica exceed the momentum of recent contract wins, and leverage on our technological superiority to capture a significant market share.
David A Mason
Chairman
7 June 2010
Synchronica plc
Chief Executive's report
for the year ended 31 December 2009
CEO Review
In spite of the global economic crisis experienced in 2009, Synchronica has shown the greatest progress yet by signing 13 new contracts with mobile operators. Our investments in refining our product strategy are now beginning to bear fruit as we increased the revenues generated from our award-winning Mobile Gateway product by 175% from 2007 to 2008 and by a further 175% from 2008 to 2009. We have gained significant market traction and Mobile Gateway is now positioned as a serious mobile messaging platform especially for operators in emerging economies.
We have seen an increased awareness in the industry for Synchronica as we continue to improve our competitive positioning from a technical and commercial perspective. This was validated with biggest contract to date for Mobile Gateway, a USD 1.05m order from an Indonesian distributor in March 2010, and the presentation of Mobile Gateway to more than 40 prospective mobile operator customers during Mobile World Congress 2010, the mobile industry's most important event.
Throughout 2009, we have established a new route to market and diversified our product and revenue streams in the form of the MessagePhone™, the expansion of our product functionality to instant messaging and social networking, and our new hosting services for cost-conscious customers. We are now starting to see these efforts paying off with greatly enhanced customer base and a strong pipeline.
Market Overview
Synchronica believes that the mobile phone is becoming the preferred device for consumers in emerging markets to access Internet content and services. It is widely documented that in many developing countries, the mobile phone is starting to provide an accessible, cost-effective alternative to Internet cafes. Operators in these markets continue to experience massive subscriber growth and are seeing a rapid increase of mobile data usage as mobile phones are contributing to the economic growth in these regions.
According to the Program for Developmental Entrepreneurship, an initiative sponsored by the Massachusetts Institute of Technology, a developing country's GDP increases 0.6 percent whenever 10 mobile phones per 100 people are added. Similarly, Blycroft Publishing, a UK-based telecommunications publisher, reported that Africa's mobile phone market grew by 25% in 2008, attracting 74 million new subscribers and taking the total number of subscribers to 370 million. Some of the factors that contributed to this growth, the study found, included the launch of 11 new networks in Ghana, Benin, Botswana, Congo Brazzaville, Guinea-Conakry, Kenya, Niger, Nigeria, Senegal, Sudan and Uganda. A further study from Ernst & Young (Africa Connected: A telecommunications growth story), indicates this trend shows no sign of waning, with expectations of the mobile phone penetration in Africa to rise from 37% today to more than 60% in 2012.
Market Overview (continued)
Contrary to the common belief that subscribers in emerging markets lack sophistication, and would not embrace services beyond simple voice and SMS, Juniper Research expects mobile revenues in the Middle East and Africa to hit $107 billion by 2013, with data services expected to make up 24 per cent of the total billed service revenue. The developing world is hungry for access to the online applications we take for granted - email, instant messaging and social networking. Due to the low PC penetration in emerging markets, the mobile device has the opportunity to become the primary device for accessing these next-generation messaging applications.
Reporting on the Mobile IM market in Africa and Latin America, Frost & Sullivan suggest that the total market for Mobile Instant Messaging solutions is estimated to grow to almost 500 million users by 2015 from almost zero in 2008. This represents a CAGR of 54% over the next five to six years in these regions. Similarly, Informa estimates the mobile social networking market will undergo substantial growth over the next 3 years; At the end of 2008, there were approximately 92.5 million mobile social networking users globally, with conservative estimates putting this number at 641.6 million by 2013.
Taking these observations into account, Synchronica has made significant investments in its product and organisational structure to support our strategic objective of providing advanced mobile messaging services specifically geared to operators in the high-growth emerging markets. We believe that with our flagship product, Mobile Gateway 5, we now enable our customers to access the largest market potential. Mobile Gateway 5 fully addresses the needs of operators in emerging markets delivering messaging services to the entire device landscape - from high-end Smartphones to the most basic mobile phone. We further believe that the technical limitation of competing products are exposed when compared to Mobile Gateway, as they tend to address only high-end devices which are generally unsuitable to the demographic realities of operators in emerging markets. As a result, we are experiencing a high win-rate in competitive situations and we expect to continue expanding our customer base and market share.
Operational Performance
During 2009, Synchronica launched Mobile Gateway 4, which incorporated the Email-to-SMS, Email-to-MMS and document transcoding technologies which we acquired with AxisMobile in 2008. Consequently our flagship messaging product, Mobile Gateway, which in 2008 could only support 1,380 mobile phones, can now support virtually any device - as of May 2010, we list 6,272 different models from hundreds of device manufacturers. Following the reporting period, we launched Mobile Gateway 5 which in addition to mobile email and synchronization, now also provides instant messaging and connectivity to social networking communities.
As a result of the improved competitive position provided by Mobile Gateway 4, Synchronica signed a record 13 new contracts with mobile operators throughout 2009 - predominantly in the emerging markets of Africa, Asia and Latin America.
While in 2009 Synchronica received revenue from these customers for initial license requirements, we expect to receive further revenue as their user base grows, and they place expansion orders. For example, 5 contracts have been signed with subsidiaries of a large Pan African and Middle Eastern mobile Group. Synchronica's relationship with these subsidiaries presents us with significant expansion potential. Combined, the 5 subsidiaries have placed initial orders which total 360,000 licenses for Mobile Gateway, yet they have over 75 million subscribers. Assuming a successful launch and reasonable takeup-rates, we have every reason to believe that we will see substantial expansion orders from these operators within the next 12-18 months.
The impact expansion orders have on revenue contribution has already been demonstrated. In April 2009, we announced two significant expansion orders with a combined value of US$645,000, from one of the largest mobile operators in Russia and the CIS. It is reasonable to expect subsequent expansion orders from our customers as they commercialise their service and the user base exceeds the initial license orders. Synchronica will also receive recurring revenues from customers in the form of hosting fees (where hosting is provided), annual support and maintenance subscriptions, and annual licensing from those customers who chose this arrangement.
We also made great progress in expanding our global sales channel during the reporting period by signing reseller agreements with Nokia Siemens Networks and an unnamed top-5 Asian network equipment provider. Both of these reseller partners, in tandem with our existing partner Brightstar, provide Synchronica with global access to mobile operators and provide the local presence required to win and support mobile operators around the world.
Contract Wins
2009 saw Synchronica win the most contracts signed by the Company in a single year. During the period, Synchronica announced 13 new orders for operators in various fast growing emerging markets to deploy our messaging product Mobile Gateway, in addition to an expansion order from one of the largest mobile operators in Russia and the CIS.
Mobile Gateway now represents the vast majority of the Company's revenues, which have grown from £1.157m in 2008 to £3.1m in 2009.
Collaboration Agreement, Fund Raising and Launch of MessagePhone™
In June 2009, we announced a collaboration agreement with Brightstar, a leading device distributor and KCM, a Korean device manufacturer, to build, market and sell a family of low cost mobile devices to be bundled with Mobile Gateway. To fund its development and rollout, we completed a placing which raised £4.7m, and in November 2009, we announced that our partners had received the first order for MessagePhone™.
The MessagePhone™ was launched in February 2010 at events in London and during Mobile World Congress in Barcelona. MessagePhone™ is a turnkey, integrated solution which includes an optimized handset and hosted push email, synchronization (calendar, contacts and tasks), social networking feeds and instant messaging services delivered via Synchronica's Mobile Gateway.
The first purchase orders have been received from subsidiaries of large mobile operator groups in Africa and Latin America. In March 2010, we announced that Synchronica had received a purchase order for Mobile Gateway - which is to be bundled with the initial 20,000 MessagePhone's that will be shipped to the Latin American customer. The MessagePhone™ is distributed by Brightstar, a multi-billion dollar distributor with global reach and local presence in our target markets. We expect sales of the MessagePhone™ to accelerate in the second half of 2010 as the first two operators introduce the product to the market and further operators are signed up to introduce the MessagePhone™.
Reseller Network
During the period we made good progress in establishing further channel partnerships with two telecommunications equipment vendors. This supplements our existing reseller partnership with Brightstar, which has successfully produced a number of contract wins in the Latin American region for us.
In February 2009, we announced the signing of a global reseller agreement with Nokia Siemens Networks, the world's second largest network equipment provider. While the agreement provides us with a valuable global sales channel, it also reiterates the strong competitive position that Mobile Gateway occupies in the market. We also signed our third distribution agreement with a large Asian telecommunications equipment vendor that wishes to remain unnamed. The vendor currently provides services to 31 of the 50 largest worldwide telecoms operators, and has invested a great deal of effort in building relationships with operators in particular in emerging markets.
We believe that our enlarged reseller network - Brightstar, Nokia Siemens Networks, and the Asian-based telecommunications vendor - delivers a global reach to our products. With 5 contract wins from our reseller network in 2009, it is obvious that the strategy is yielding results. We are confident of increased success via these channels for 2010 and beyond.
Enhancements to Synchronica Mobile Gateway
In order to improve the market reach and feature set of Synchronica's flagship messaging product, Mobile Gateway, we have made significant investments in research and development. In February 2009, we announced Mobile Gateway 4 which extends mobile email and synchronisation to virtually any mobile phone in use today. This is achieved by combining Email to SMS and Email to MMS, in addition to attachment transcoding technology, with the existing industry standards used by Mobile Gateway. Thanks to these innovations, we are now able to address the entire device landscape from high-end Smartphones to the lowest common denominator, which is essential in our target market of emerging economies.
Continuing to improve the competitive positioning of our product, we announced post the period end, the launch of our latest version of Mobile Gateway. In addition to push email and synchronization for virtually any mobile phone in use, Mobile Gateway 5's functionality is significantly expanded with the introduction of instant messaging, and connectivity to social networking and newsfeeds. Initial feedback from existing and prospective customers has been very positive.
Acquisition of the IM Business of Colibria AS (post-period end)
In April 2010, we completed the acquisition of the IMPS instant messaging business of Colibria AS, a leading developer of mobile instant messaging technologies. In addition to Colibria's IMPS technology, Synchronica also acquired as part of the transaction 13 contracts with mobile operators. Colibria's proven, carrier-grade mobile IM technology and emerging markets-oriented customer base complement our focus on open standards-based messaging solutions, and we believe that the transaction will accelerate our entry into the mobile instant messaging market. In addition to bolstering sales of the MessagePhone™, which will be shipped with the technology ready-installed, we also intend to use the acquisition as a springboard for cross-selling and up-selling opportunities to further expand our market share in emerging markets.
Group Strategy
Synchronica's strategy remains largely unchanged in that we continue to focus our efforts on mobile operators in emerging markets, service providers and handset manufacturers. The new features provided by Mobile Gateway 5 means that Synchronica can now provide a 'one-stop' solution for next-generation mobile messaging. Our industry standards based approach to connect users to email, Instant Messaging, Social Networks and Web-Feeds - offering a true, mass-market solution with the largest possible addressable market and service uptake, provides operators with a solution that can significantly increase revenues from data traffic, and can help to combat subscriber churn. We will also continue to expand the MessagePhone™ initiative, in which we remain confident that with a significant addressable market in emerging economies, it will prove successful having already received two orders.
Outlook
Thanks to our reseller network, and the MessagePhone™, 2010 has started strongly. In addition to mobile operators, we are now starting to see significant interest from device manufacturers and distributors who wish to bundle Mobile Gateway with their products, allowing them to offer advanced mobile messaging to their users. This presents Synchronica with significant opportunities, and adds substantially to our sales prospects.
As subscribers in emerging markets continue to sign on to mobile services in droves, we remain steadfast in focusing our efforts on being part of this massive opportunity. We continue to value and appreciate the support of our shareholders, in addition to our dedicated team which is focused on building Synchronica to become the preferred developer of next generation mobile messaging.
Carsten Brinkschulte
Chief Executive
7 June 2010
Synchronica plc
Consolidated statement of comprehensive income
for the year ended 31 December 2009
2009 2008
Note £'000 £'000
(Restated)
Revenue 3,827 3,708
Cost of sales (154) (1,675)
______ ______
Gross profit 3,673 2,033
Administrative cost
Exceptional items 5 (925) (1,956)
Other administrative expenses (5,986) (6,587)
Total administrative costs (6,911) (8,543)
______ ______
Operating loss (3,238) (6,510)
Finance income 92 518
Finance costs (75) (495)
______ ______
Loss before taxation (3,221) (6,487)
Taxation 6 144 387
______ ______
Loss for the year after tax attributable to
the equity holders of the parent company (3,077) (6,100)
Other Comprehensive Income
Exchange difference on translation of foreign operations (98) (92)
______ ______
Total comprehensive income for the year (3,175) (6,192)
______ ______
Loss per ordinary share from continuing operations
Basic and diluted loss per share 7 (0.6)p (2.9)p
______ ______
Synchronica plc
Consolidated statement of financial position at 31 December 2009
The Group
2009 2008
£'000 £'000
(restated)
Non-current assets
Intangible assets 5,079 4,205
Property, plant and equipment 165 192
Investment in subsidiaries - -
Derivative financial instruments 194 465
_______ _______
Total non-current assets 5,438 4,862
_______ _______
Current assets
Trade and other receivables 1,659 1,718
Corporation tax 14 104
Cash and cash equivalents 2,633 3,494
_______ _______
Total current assets 4,306 5,316
_______ _______
Total assets 9,744 10,178
_______ _______
Current liabilities
Trade and other payables 1,911 3,848
Deferred tax 76 140
Corporation tax 88 21
Provisions 1,027 1,135
_______ _______
Total current liabilities 3,102 5,144
_______ _______
Non-current liabilities
Provisions 336 411
_______ _______
Total non-current liabilities 336 411
_______ _______
Total liabilities 3,438 5,555
_______ _______
2009 2008
£'000 £'000
(restated)
Equity and reserves
Ordinary shares 5,775 3,785
Share premium 20,572 17,783
Merger reserve 1,578 1,578
Accumulated losses (21,436) (18,438)
Translation reserve (183) (85)
_______ _______
Equity attributable to shareholders of
the parent company 6,306 4,623
_______ _______
Total equity and liabilities 9,744 10,178
_______ _______
Consolidated statement of cash flow
for the year ended 31 December 2009
The Group
2009 2008
Restated
£'000 £'000
Cash flows from operating activities
Loss before taxation (3,221) (6,487)
Adjusted for:
Depreciation 134 218
Amortisation of intangibles 413 297
Impairment of intangibles 35 415
Loss on disposal of property, plant and equipment 19 -
Finance income (92) (518)
Finance cost 75 495
Equity settled share based payment 79 125
______ ______
Cash flows from operating activities before
changes in working capital and provisions (2,558) (5,455)
- Decrease in assets held for resale - 1,675
- (Increase)/decrease in receivables (134) 476
- (Decrease)/increase in payables (2,583) 209
- (Decrease)/increase in provisions (108) 79
______ ______
Cash utilised from operations (5,383) (3,016)
Tax received 184 282
Interest paid - (2)
______ ______
Net cash used in operating activities (5,199) (2,736)
______ ______
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired - (66)
Purchase of intangible assets (609) (145)
Purchase of property, plant and equipment (126) (166)
______ ______
Net cash used in investing activities (735) (377)
______ ______
Cash flows from financing activities
Net proceeds from issue of ordinary shares 4,779 5,128
Proceeds from derivative financial instruments 461 357
Finance costs paid (7) -
Interest received 22 31
______ ______
Net cash generated from financing activities 5,255 5,516
______ ______
Net (decrease)/increase in cash and cash equivalents (679) 2,403
Cash and cash equivalents at 1 January 2009 3,494 757
Effects of exchange rate changes on cash
and cash equivalents (182) 334
______ ______
Cash and cash equivalents at 31 December 2009 2,633 3,494
______ ______
Synchronica plc
Consolidated statement of changes in equity
for the year ended 31 December 2009
|
|
Share capital
£'000 |
Share premium
£'000 |
Merger reserve
|
Accumul-ated losses
£'000 |
Transla-tion Reserve
£'000 |
Total attributable to equity shareholders of the parent £'000
|
|
At 1 January 2008 |
840 |
13,167 |
- |
(12,463) |
7 |
1,551 |
|
|
|
|
|
|
|
|
|
Adjustment for share based payments |
- |
- |
- |
125 |
- |
125 |
|
Proceeds from placing |
1,681 |
3,447 |
- |
- |
- |
5,128 |
|
Share issued in exchange for derivative financial assets |
517 |
1,169 |
- |
- |
- |
1,686 |
|
Consideration on acquisition of subsidiary |
681 |
- |
1,446 |
- |
- |
2,127 |
|
Shares issued in exchange for debt on acquisition of subsidiary |
66 |
- |
132 |
- |
- |
198 |
|
|
|
|
|
|
|
|
|
Total comprehensive income |
- |
- |
- |
(6,100) |
(92) |
(6,192) |
|
|
_____ |
_______ |
______ |
_______ |
_______ |
_______ |
|
At 31 December 2008 |
3,785 |
17,783 |
1,578 |
(18,438) |
(85) |
4,623 |
|
|
|
|
|
|
|
|
|
Adjustment for share based payments |
- |
- |
- |
79 |
- |
79 |
|
Proceeds from placings |
1,990 |
2,789 |
- |
- |
- |
4,779 |
|
|
|
|
|
|
|
|
|
Total comprehensive income |
- |
- |
- |
(3,077) |
(98) |
(3,175) |
|
|
_____ |
_______ |
______ |
_______ |
_______ |
_______ |
|
At 31 December 2009 |
5,775 |
20,572 |
1,578 |
(21,436) |
(183) |
6,306 |
|
|
_____ |
______ |
______ |
______ |
______ |
______ |
1 General information
Synchronica plc is incorporated in England under the Companies Act 2006. The address of its registered office is Mount Pleasant House, Lonsdale Gardens, Royal Tunbridge Wells, Kent, TN1 1NY, United Kingdom.
These consolidated financial statements are presented in pound sterling, which represented the reporting currency of the Group and parent company; the functional currency of the Group entities is the United States dollar. Foreign operations are consolidated in accordance with the policies set out in note 2 below.
2 Basis of preparation
The Financial Statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union ("IFRS"), IFRIC
interpretations and the parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The Financial Statements have been prepared under the
historical cost convention.
The preparation of Financial Statements in conformity with IFRS requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial information, including the reported amounts of revenues and
expenses during the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual results may
ultimately differ from those estimates.
3 Accounting Policies
The Group's detailed accounting policies are consistent with those applied in the financial statements for the year ended 31 December 2008 with the exception of IFRS 3 (revised) which has been early adopted and applied as a change in accounting policy in the comparative and current financial periods.
4 Going Concern
These Group financial statements have been prepared on the going concern basis which is supported by forecasts and projections covering the period to 31st December 2011.
The Group made a loss of £3.077 million for the year to 31 December 2009 (£6.100 million: 2008) and had cash of £2.633 million at that time. In April 2010 the Company raised an additional £4.8 million (£2.8 million in cash plus £2m on a 24 month swap) before expenses from existing and new shareholders. From this placing £0.611 million was used as part consideration for the acquisition of the Colibria IMPS business (See note 9).
The forecasts and projections, which include monthly 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 a 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 Group's cash flow. The forecasts are reliant on signing new deals with new customers which is expected but not guaranteed, negotiations are ongoing.
In addition the Group 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. This leaves the Group with little opportunity to reduce costs if it is to remain competitive.
Given the above the directors acknowledge that there is a material uncertainty related to these events, that may cast significant doubt on the Group'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.
The Group has faced the uncertainties noted above throughout its life. To date, when required, management has been successful in raising additional funding from existing and new investors. Based on forecasts and projections and the additional funding raised since the balance sheet date, management expect the company to continue as a going concern.
5 Exceptional Items
2009 2008
£'000 £'000
Costs on closure of site 462 1,956
Abortive acquisition costs 193 -
Exceptional bad debt, re exchange control restrictions introduced at short notice 270 -
_____ _____
925 1,956
_____ _____
Costs on closure of site are expenditure incurred in closing an office acquired with the acquisition of AxisMobile Limited. The abortive acquisition cost relate to a transaction to acquire a technology company. Bad debt relates to a provision for two customers.
6 Taxation
2009 2008
£'000 £'000
Income tax (credit)/expense
UK research and development tax credit (221) (266)
UK adjustment to provision for previous periods - 10
Overseas corporation tax charge 74 3
Overseas adjustment to provision in previous periods 67 (5)
Deferred tax (64) (129)
_____ _____
(144) (387)
_____ _____
The UK research and development tax credit received represents the refund of tax due from research carried out in the year ended 31 December 2008 (2007: 31 December 2006 and 2007).
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:
2009 2008
£'000 £'000
Loss on ordinary activities before taxation (3,221) (6,487)
_____ _____
Theoretical tax at UK corporation tax rate 28% (2008 - 28.5%) (901) (1,849)
Effects of:
- unrelieved tax losses 604 1,229
- impairment of intangible assets 10 486
- expenditure that is not tax deductible 278 10
- capital allowances less than depreciation 59 91
- adjustments in respect of prior periods 67 5
- higher tax rates on overseas earnings 2 -
- research and development tax credit (221) (266)
- share based payments 22 36
-deferred tax (64) (129)
_____ _____
Actual current taxation credit (144) (387)
_____ _____
A potential deferred tax asset of £6,542,000 (2008 - £5,740,000) in relation to unrelieved losses of £23,363,000 (2008 - £20,500,000) 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.
2009 2008
£'000 £'000
Numerator
Losses used for calculation of basic and diluted EPS 3,077 6,100
__________ __________
Number Number
Denominator
Weighted average number of ordinary shares used in basic EPS 479,249,011 207,780,284
__________ __________
Basic and diluted loss per share (pence) (0.6)p (2.9)p
__________ __________
67,694,512 (2008 - 19,813,205) 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 Prior Period Acquisition of AxisMobile Limited
As disclosed in last year's financial statements, on 10 September 2008, the Group completed the acquisition of AxisMobile Limited ('AML'). During the year the fair value of deferred income reflected in the prior year was revised by £0.713m to reflect the actual stage of completion of the customer installations . In addition costs of acquisition have been written off to the statement of comprehensive income in accordance with the requirements of IFRS 3 Revised and the goodwill arising on the acquisition impaired accordingly. Further adjustments include a reclassification of Capital to be issued of £532,000 as a current liability and an adjustment to deferred tax for these amounts. The group has adopted IFRS 3 Revised in order to provide consistent accounting for this and future acquisitions.These changes have been treated as a prior year adjustment in these financial statements and the numbers restated accordingly. Had these amounts been finalised at the 2008 financial statements year end, the reported amounts would have differed to those previously reported as follows:
deferred income would have been £713,000 higher;
goodwill would have been £608,000 higher; and
Retained losses would be £105,000 higher
Details of the restated fair value of the net assets acquired, purchase consideration and goodwill are as follows:
Purchase consideration £'000
Cash paid 83
Share consideration 2,127
Deferred Consideration 532
______
Total purchase consideration 2,742
Fair value of net identifiable liabilities 489
______
Goodwill 3,231
______
Axis acquisition Carrying values Fair
Pre-acquisition value
£'000 £'000
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)
Provision (882) (882)
Deferred income (248) (961)
Deferred Tax (269)
______ ______
Net assets acquired (1,700) (489)
Goodwill 3,231
______
Consideration 2,742
______
Consideration satisfied by: £'000
Cash 83
Share consideration 2,127
Deferred consideration 532
______
Consideration 2,742
______
The impact of the restatement is as follows:
|
|
As previously Stated
£'000 |
Adoption of IFRS3
(1) £'000 |
Revision of 2008 acquisition fair value (2) £'000 |
Deferred tax on acquisition
(3) £'000 |
Restatement
£'000 |
|
|
|
|
|
|
|
|
Effect on Statement of Financial Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
3,328 |
(105) |
713 |
269 |
4,205
|
|
Deferred income |
(399) |
- |
(713) |
- |
(1,112) |
|
Deferred tax liability |
- |
- |
- |
(140) |
(140) |
|
Deferred consideration |
- |
(532) |
- |
- |
(532) |
|
Other net assets |
2,202 |
- |
- |
- |
2,202 |
|
|
______ |
______ |
______ |
______ |
______ |
|
Net Assets |
5,131 |
(637) |
- |
129 |
4,623 |
|
|
|
|
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
|
Capital to be issued |
532 |
(532) |
- |
- |
- |
|
Accumulated losses |
(18,462) |
(105) |
- |
129 |
(18,438) |
|
Other equity reserves |
23,061 |
- |
- |
- |
23,061 |
|
|
______ |
______ |
______ |
______ |
______ |
|
Equity
|
5,131 |
(637) |
- |
129 |
4,623 |
|
|
______ |
______ |
______ |
______ |
______ |
|
Effect on Consolidated Statement of Comprehensive Income |
|
|
|
|
|
|
Other administrative expenses
|
6,564 |
105 |
- |
- |
6,669 |
|
Taxation |
(258) |
- |
- |
(129) |
(387) |
|
|
|
|
|
|
|
|
|
|
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 Events after the balance sheet date
On 7 April 2010 80,000,000 ordinary shares were issued in exchange for a derivative financial instrument. 24 monthly instalments are calculated by reference to the share price in the preceeding month. This defers the existing derivative financial instrument. The fee for the transaction is 8,000,000 ordinary shares. In addition the company issued 8,510,204 ordinary shares in accordance with the provisions of the agreement to purchase the shares of Axis Mobile Limited in 2008.
On 21 April the company raised £2,790,000 before expenses by placing 111,600,000 ordinary shares. The company also entered into an asset purchase and licensing agreement with Colibria AS of Norway. The assets form Colibria's Instant Messaging and Presence Service (IMPS) business. The assets include intellectual property rights, software, a patent, customer contracts, reseller contracts, consultancy contracts and shares in a Filipino subsidiary. Colibria AS does retain limited worldwide rights over some of the intellectual property for use in other products. In addition Colibria granted a worldwide licence to Synchronica in respect of certain software in addition to the software described above. The consideration for these assets was the payment of Eur700,000 and the issue of 54,054,054 ordinary shares initially and up to 72,072,072 ordinary shares in October 2010 if all conditions are met.
10 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 2009 and the year ended 31 December 2008.
The financial statements for the year ended 31 December 2008 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 2009 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The audit report for the year ended 31 December 2008 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 £6,206,000 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 2008 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 2009 is unaudited and do not constitute accounts within the meaning of the Companies Act 2006. An audit report will be issued in relation to the financial statements for the year ended 31 December 2009 and will contain an emphasis of matter paragraph similar to the paragraph issued in the financial statements for the year ended 31 December 2008, described above.
This information is provided by RNS
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