Final Results

RNS Number : 8592O
eXpansys Plc
06 July 2010
 

Embargoed for release at 07.00 hours, 6 July 2010

 

eXpansys plc

Final Results for the Year Ended 30 April 2010

eXpansys plc ("eXpansys" or the "Group"), a leading global online retailer of wireless technology, announces its audited results for the year ended 30 April 2010.

 

CHAIRMAN'S STATEMENT

 

In my Interim Statement, I referred to an improvement in the Group's results which arose from the significant business rationalisation measures implemented in the year to 30 April 2009.  These measures, whilst delivering a welcome improvement, served only to stabilise eXpansys and the Group remained vulnerable to a number of market and financial pressures.  It was clear that growth in profitability and shareholder value would be constrained by the prevailing difficult trading conditions, compounded by the Group's ongoing shortage of working capital.

 

The challenge which we faced was to find solutions to these issues.  I am very pleased to report that with the support of our major shareholder, Peter Jones, and our dedicated staff, eXpansys has made rapid and significant progress under the leadership of its new Chief Executive Officer, Anthony Catterson, and exciting times lie ahead.

 

Anthony joined eXpansys in January 2010, bringing an innovative, fresh and informed perspective to the management of the Group and identifying new ways in which to drive the Group's performance.

 

Results

 

Further improvements were recorded during the year.  Revenue for the year increased, overall, by 8% to £50.7 million (2009: £47.1 million) with revenue in the second half increasing by 39% year on year to £30.4 million (six months to April 2009: £21.8 million).  Pre-tax loss before exceptional costs and losses related to discontinued operations reduced by 37% to £0.20 million (2009: £0.31 million) and there was a positive movement in EBITDA pre exceptionals to a surplus of £1.30 million from £0.99 million in the prior year. 

 

There were, however, a number of significant exceptional costs incurred amounting to £2.5 million.  Despite this, the pre-tax loss from continuing operations was reduced by 29% to £2.7 million (2009: £3.8 million).

 

Strategic Review

 

Following his appointment in January, Anthony immediately conducted a major review of the business, concluding that eXpansys could exploit its current model and leverage its unique market position and global reach more effectively and was failing to explore new business propositions fully.

 

Addressing these issues requires innovation, focus and investment.  I am pleased to report that, following today's announcement of the Proposed Acquisition of Data Select Network Solutions Limited ("DSNS") and PJ Media Limited and Proposed Placing to raise approximately £28 million net of expenses, we have made an exciting start.  At the heart of our new strategy lies the desire to deliver shareholder value.  Whilst eXpansys will continue to pursue organic growth, we have identified an opportunity to grow the Group more rapidly through the acquisition of two synergistic and complementary businesses, via a reverse takeover, which also affords us a timely fundraising opportunity.

 

Proposed Acquisitions, Placing and Reverse Takeover

 

The Group will, today, announce that it has conditionally agreed, subject to shareholder approval, to acquire DSNS and PJ Media Limited (together the "Acquisitions").  DSNS is a privately owned, profitable, UK based company focused on the distribution of mobile phone SIM cards.  PJ Media is a profitable, UK based company, providing e-commerce and web publishing solutions to a variety of international customers.  Following the Acquisitions, the directors intend to capitalise upon the opportunities available to the Enlarged Group and aim to create a global on-line consumer electronics superstore.

 

The total consideration for the Acquisitions is £38 million to be satisfied by a cash payment of £13.4 million and by the issue of 442,364,707 Consideration Shares to the Vendors, together with an obligation to pay approximately £10.8 million debt.  In order to satisfy the cash component of the Acquisitions and to enable it to implement its strategy, the Board is proposing to raise £30 million (approximately £28 million net of expenses) by way of a Placing of 535,714,286 Ordinary Shares at 5.6 pence per share. The acquisitions of DSNS constitutes a reverse takeover under the AIM Rules by virtue of the size of the transaction and is, therefore, subject to the approval of the Shareholders of the Company.  Such approval is being sought at the General Meeting, which has been convened for 23 July 2010.

 

People

 

As part of the preparation for the acquisition of DSNS and PJ Media and to prepare for the next stage of the Group's development, some additional board changes have taken place.  Having been with the Company for 5 years, Cate Hulme has decided to leave the Company to pursue other opportunities and the Board would like to thank her for her significant contribution. Tim Eltze will act as CFO until a permanent CFO is appointed.  Frederic Pont, President for Europe, steps down from the Board, but will continue to lead the Group's European operations.  Bob Wigley will be appointed Non-executive Chairman of the Company and Peter Jones CBE will be joining the Board as Non-executive Deputy Chairman.  Finally, I am stepping down as Chairman, but will remain with eXpansys as a non-executive Director.  We have an ambitious strategy for eXpansys and I am confident that this board has the necessary experience and track record to deliver it.

 

The Board is supported by dedicated staff in all the Group's territories.  I thank them for their important contribution through difficult times and trust that they will enjoy more prosperous times which lie ahead.

 

Prospects

 

The Proposed Placing, Acquisitions and Reverse Takeover, combined with the strategic and operational measures implemented by Anthony Catterson and the Group's new Chief Operating Officer, Tim Eltze, give me every reason to be optimistic and excited about the future prospects for eXpansys.

 

These are changing times for eXpansys and the Board is confident that, following the successful conclusion of the proposed transaction, the Group will be very well placed to deliver growth.

 

Graham Dawber

Non-executive Chairman

5 July 2010

 



CHIEF EXECUTIVE'S OPERATING REVIEW

 

I am pleased to present my first CEO's review since joining the Group in January 2010.

 

eXpansys has, historically, failed to deliver an acceptable level of return to its shareholders, positively engage its employees or provide a unique interaction with its customers.  Our internal goal is to improve the 'eXpansys experience' for these three key stakeholder groups.

 

Markets

 

Consumer confidence across Western economies remains fragile and we expect that discretionary spending on consumer electronics, our core business, will remain suppressed in the short term.  This places emphasis on our need to be more competitive and operationally efficient than ever before, whilst leveraging the opportunities presented by increasing affluence in developing markets.

 

Innovative products, such as the iPad and HTC Desire, have, however, stimulated consumer purchases, despite the economic gloom and our core competence in Smartphones and related products gives us confidence that we are operating in the most progressive sub sector of the consumer technology market.

 

Operational review

 

It is pleasing to report that our European business managed to increase its revenues, gross margin and profit for the year under exceptionally challenging trading conditions.  This was achieved by focusing on trading platforms, such as Amazon Marketplace, although net margin percentage suffered as we competed for customer orders.

 

The turnaround of eXpansys UK continued in the year.  Revenue and margins were improved and the business contributed a small pre-tax profit to the Group, compared to a significant loss in the prior year.

 

Our North American business had a disappointing year with revenue and margins decreasing and we now have an opportunity, through the recruitment of new leadership, to set the business firmly on the road to recovery. 

 

In Asia, the decline in our Australasian business impacted revenue and margins.  However, operational efficiencies and effective cost control measures, allowed us to reduce the overall loss, year on year, in this region.

 

Financial Review

 

The rapid decline in revenue, which the Group has experienced in recent years, was reversed with a year on year increase of 7.8% to £50.7 million (2009: £47.1 million) and gross profit margin of 20.7% (2009: 21.0%), leading to an increase in gross margin of 6.0% to £10.5 million (2009: £9.9 million).


Distribution costs reduced by 10.5% to £2.8 million (2009: £3.2 million) in the year, despite the increase in revenue, as the Group enjoyed the benefits of an extensive two year cost reduction programme.  A reduction in administration costs, excluding exceptionals, of 11.9% to £7.8 million (2009: £8.9 million) was also achieved. 

 

Exceptional costs of £2.5 million (2009: £3.2 million) were also incurred, primarily comprising £0.4 million for the completion of the UK warehouse reorganisation, £0.7 million provision for commercial disputes arising in January 2010, £0.7 million additional amortisation charge relating to change in useful economic life of website development and £0.6 million exceptional directors' remuneration. 

 

Due to the repayment of UK banking facilities in January 2009, there was a significant reduction in finance costs of £0.2 million.

 

The pre-tax loss from continuing operations was reduced by 29.7% to £2.7 million (2009: £3.8 million). 

 

Strategic Review

 

I spent my first 90 days at eXpansys conducting a detailed review of the business and its strategy, focusing intently on operations, people, commercial activities, competition and, of course, the eXpansys customer experience.

 

During this review, I established that eXpansys has a world class technology platform with significant reach and transactional advantages.  This strong foundation, however, was not being resourcefully leveraged, requiring effective commercial planning and execution to maximise its value.  Most of our activities in the next 12 months will be focused on our proposition development and customer interaction.  We will begin transforming the niche eXpansys brand into a more generally known, consumer-facing entity, where there are significant opportunities for growth in our Smartphone, accessory and computing categories.

 

The core issues identified during my strategic review of eXpansys were:

 

·       deficient working capital;

 

·       a need for direct Network supply relationships to allow eXpansys to operate in the whole of the Smartphone market and not just the <5% that is sim-free; and

 

·      weakness in online model execution - poor proposition development, search engine optimization (SEO), conversion and customer base development.

 

eXpansys has, today, announced the Proposed Acquisition of Data Select Network Solutions Limited ("DSNS") and PJ Media Limited and Proposed Placing to raise approximately £28 million net of expenses, which the directors believe will address these critical issues. 

 

Post transaction, the Group's balance sheet will be robust, with funds available to grow the business both organically and through earnings enhancing acquisition.

 



People

 

My review also included a detailed assessment of senior management and key personnel.  As evidenced by our recruitment of Tim Eltze as Chief Operating Officer in May 2010, eXpansys is building a 'fit for purpose' executive team, which is able to deliver the Group's ambitions both internally and externally.  

 

The Group's employees have shown great dedication and loyalty to the business, despite the challenges it has faced over the last few years.  I would like to thank them for their continued efforts and I look forward to developing and growing eXpansys with them over the next few years.

 

The Future

 

Competition and Markets

 

I am respectful of the competition we face in our chosen markets but I am confident that eXpansys has an opportunity to increase its market share through innovation and more effective and consistent execution.  The Group will continue to benefit from outstanding new product design, like the iPad, and ever-improving functionality, as evidenced by the Google developed Android operating system for Smartphones.

 

Our, as yet, untapped global capability leaves us well positioned to take advantage of the rapid growth in spending on consumer electronics in the developing economies of the world and we aim to strengthen our coverage of these territories accordingly.

 

Outlook and Prospects

 

The global financial markets remain unstable and consumer confidence in mature economies has yet to recover to pre-2007 levels.  This status may well deteriorate in the short term as the impact of Government reductions in expenditure filter their way through the economies of Western Europe in particular.

 

Following the significant cost reduction programme implemented over the past two years, eXpansys's operating overhead, however, is now efficient and this will enable us to react should our margins come under pressure.  I also believe that the combination of product innovation, opportunities in developing economies and the planned improvement to our business model through better purchasing, marketing and operational execution will present significant growth opportunities for the business in the short to medium term.  We will also look to leverage maximum strategic benefit from the acquired businesses as mentioned earlier.

 

We face a challenging but exciting year as eXpansys changes into a more productive and customer friendly business.  The foundations for growth are in place and I am confident that eXpansys will deliver better performance moving forward.

 

Anthony Catterson

Chief Executive Officer

5 July 2010

 



 

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 April 2010

 


2010

2009


£000

£000




Revenue

50,742

47,052







Exceptional cost of sales

-

(2,057)

Other cost of sales

(40,230)

(35,077)




Cost of sales

(40,230)

(37,134)




Gross profit

10,512

9,918




Distribution costs

(2,849)

(3,182)







Exceptional administrative expenses

(2,474)

(1,132)

Other administrative expenses

(7,884)

(8,903)




Administrative expenses

(10,318)

(10,035)




Operating loss from continuing operations

(2,655)

(3,299)




Exceptional operating loss

(2,474)

(3,189)

Other operating loss

(181)

(110)




Finance income

3

35

Finance costs

(17)

(235)




Loss on disposal of distribution business

-

(300)




Loss from continuing operations before taxation

(2,669)

(3,799)

Tax (charge)/credit

(40)

465




Loss for the year from continuing operations

(2,709)

(3,334)




Discontinued operations



Loss for the year from discontinued operations

-

(1,379)




Loss for the year

(2,709)

(4,713)




Currency translation differences

401

669




Total comprehensive expense for the year

(2,308)

(4,044)




Earnings per share (pence)



Basic loss per share from continuing operations

(1.7)p

(5.2)p

Diluted loss per share from continuing operations

(1.7)p

(5.2)p




Basic loss per share from loss for the year

(1.7)p

(7.4)p

Diluted loss per share from loss for the year

(1.7)p

(7.4)p

 



GROUP STATEMENT OF FINANCIAL POSITION

At 30 April 2010

 


2010

2009


£000

£000

ASSETS



Non current assets



Plant and equipment

554

470

Intangible assets

4,570

4,949

Deferred income tax assets

1,528

1,289





6,652

6,708

Current assets



Inventories

1,922

1,540

Trade and other receivables

2,506

2,082

Income tax receivable

-

37

Cash and short term deposits

924

405





5,352

4,064




Total assets

12,004

10,772




LIABILITIES



Current liabilities



Trade and other payables

(8,393)

(6,754)

Financial liabilities

(89)

(248)

Income tax payable

(213)

-

Government grants

(56)

(86)

Provisions

(40)

(22)





(8,791)

(7,110)

Non current liabilities



Financial liabilities

(128)

(203)

Deferred income tax liabilities

-

(7)





(128)

(210)




Total liabilities

(8,919)

(7,320)







Net assets

3,085

3,452




Capital and reserves



Equity share capital

445

112

Equity share premium

10,641

9,053

Merger reserve

750

750

Currency translation

1,089

688

Retained earnings

(9,840)

(7,151)




Total equity

3,085

3,452

 

The financial statements of eXpansys plc ("the Group") for the year ended 30 April 2010 were authorised for issue by the Board of Directors on 5 July 2010 and the balance sheet was signed on the Board's behalf by

 

Anthony Catterson

Chief Executive Officer

GROUP STATEMENT OF CHANGES IN EQUITY

At 30 April 2010

 


Equity

share

capital

£000

 

Equity

share

premium

£000

 

Merger

reserve

£000

Currency

translation

service

£000

 

Retained

earnings

£000

 

Total

equity

£000

At 1 May 2008

112

9,053

750

19

(2,454)

7,480

Share based payment

-

-

-

-

16

16

Loss for the year

-

-

-

-

(4,713)

(4,713)

Exchange differences*

-

-

-

669

-

669








At 30 April 2009

112

9,053

750

688

(7,151)

3,452

Equity share issue

333

1,588

-

-

-

1,921

Share based payment

-

-

-

-

20

20

Loss for the year

-

-

-

-

(2,709)

(2,709)

Exchange differences*

-

-

-

401

-

401








At 30 April 2010

445

10,641

750

1,089

(9,840)

3,085

 

*Exchange differences relate to the retranslation of net assets of subsidiary undertakings.

GROUP CASH FLOW STATEMENT

For the year ended 30 April 2010

 


2010

2009


£000

£000




Operating activities



Operating loss from continuing operations

(2,655)

(3,299)

Adjustments to reconcile loss for the year to net cash flow from operating activities



Exceptional write down of deferred consideration

-

(300)

Depreciation of plant and equipment

214

321

Amortisation of intangible assets

1,263

775

Share based payments

20

16

Currency movements

(67)

(112)

(Increase)/decrease in inventories

(381)

4,968

(Increase)decrease in trade and other receivables

(525)

3,597

Increase/(decrease) in trade and other payables

1,567

(4,415)




Cash generated from continuing operations

(564)

1,551

Discontinued operations: MWg Singapore

-

(152)

Income tax paid

(35)

(182)

Interest paid

(15)

(200)




Net cash flow (used in)/from operating activities

(614)

1,017




Investing activities



Discontinued operations: MWg Singapore

-

(158)

Payments to acquire plant and equipment

(123)

(136)

Payments to acquire intangible assets

(411)

(560)




Net cash flow (used in)/from investing activities

(534)

(854)




Financing activities



Proceeds from share issues

1,921

-

New borrowings

-

26

Repayment of borrowings

(61)

(18)

Repayments of capital element of finance leases and hire purchase contracts

(104)

(168)




Net cash flow from/(used in) financing activities

1,756

(160)




Increase in cash

608

3

Cash and cash equivalents at the beginning of the year

316

313




Cash and cash equivalents at the year end

924

316

 



 

NOTES

 

1.  Basis of preparation

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Finance Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 April 2010 and applied in accordance with Companies Act 1985. 

 

The Group financial statements are presented in Sterling (being the Group's functional and measurement currency) and all values are rounded to the nearest thousand pounds (£000) except where indicated otherwise. 

 

The principal accounting policies adopted by the Group are set out in note 2.

 

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 30 April 2010 or 2009 but is derived from those financial statements. The comparative figures are derived from the financial statements for the year ended 30 April 2009. The auditors have reported on the Group's statutory financial statements and the report was unqualified and did not contain a statement under section 498 (2) or 498 (3) Companies Act 2006. The statutory financial statements for the year ended 30 April 2010 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

 

The financial statements of eXpansys plc and its subsidiaries (the 'Group') for the year ended 30 April 2010 were authorised for issue by the Board of Directors on 5 July 2010 and the balance sheet was signed on the Board's behalf by Anthony Catterson.  The annual report is available to shareholders and members of the public on the Company's website at www.expansysplc.com.  

 

The financial information contained in this preliminary statement does not constitute statutory accounts as defined by Section 240 of the Companies Act.  

 

2.  Accounting policies

 

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year.  The nature of estimation means that actual outcomes could differ from those estimates.  Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary.  Whilst every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain and, as such, changes in estimates and assumptions may have a material impact in the financial statements. 

 

The key sources of estimation uncertainty that have significant risk of causing material adjustment to carrying amounts of assets and liabilities within the next financial year are the measurement of:

 

·          indefinite life intangible assets

·          inventory provisions; and

·          trade receivable provisions; and

·          taxation.

 

The measurement of intangible assets on a business combination involves estimation of future cash flows and the selection of a suitable discount rate.  The Group determines whether indefinite life intangible assets are impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated.  This involves estimation of future cash flows and choosing a suitable discount rate.  Any estimates of future economic benefits made in relation to these assets may differ from the benefits that ultimately arise and materially affect the recoverable value of the asset.

 

Calculation of inventory provisions requires judgements to be made which include forecast consumer demand and inventory loss trends. 

 

Provisions for irrecoverable receivables are based on extensive historical evidence and the best available information in relation to specific issues, but are nevertheless inherently uncertain. 

 

The complex nature of tax legislation across the tax jurisdictions in which the Group operates necessitates the use of estimates and assumptions, where the outcome may differ from that assumed.  The extent to which tax losses can be utilised depends on the extent to which taxable profits are generated in the relevant jurisdictions in the foreseeable future, and on the tax legislation then in force and, as such, the value of associated deferred tax assets is uncertain. 

 

3.  Segment information

 

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, since they are responsible for making strategic decisions. 

 

Operating segments are reported in a manner consistent with the internal reporting provided to the Board which is split in accordance with statutory trading entities in the group, in addition to the parent company.

 

·          eXpansys plc, parent company, incorporated in United Kingdom

·          eXpansys UK Limited, incorporated in United Kingdom

·          eXpansys Nomatica SAS, incorporated in France

·          eXpansys Inc (formerly Mobile Planet Inc), incorporated in United States of America

·         eXpansys Hong Kong Limited, incorporated in Hong Kong, and its subsidiaries RCK Communications Limited, incorporated in Hong Kong , and eXpansys Shenzen Trading Company, incorporated in China

·         Mobile & Wireless Group PTE Limited (MWg), incorporated in Singapore during November 2007 and discontinued in October 2008

 

Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions between third parties.  Segment revenue, segment expense and segment result includes transfers between business segments.  Those transfers are eliminated on consolidation. 

 

No one customer accounts for more than 10% of Group revenue. 

 

The following tables present revenue and (loss)/profit and certain asset and liability information regarding the Group's business segments for the years ended 30 April 2010 and 2009.



 







Continuing

Operations


eXpansys

UK

 

eXpansys

Nomatica

 

eXpansys

Inc

 

eXpansys

Hong Kong

eXpansys

plc

 

 

Total

 


£000

£000

£000

£000

£000

£000

Year ended 30 April 2010







External customers

14,882

24,998

7,897

2,965

-

50,742

Inter-segment

4,605

2,244

790

561

-

8,200








Segment revenue

19,487

27,242

8,687

3,526

-

58,942








Results







Operating (loss)/profit

(23)

271

(514)

(975)

(1,414)

(2,655)

Net finance costs

(11)

(1)

(1)

(1)

-

(14)

Tax (charge)/credit

(60)

(280)

(5)

-

305

(40)

Loss for the year for continuing operations





(2,709)








Assets and liabilities







Segment assets

3,435

3,184

4,076

339

970

12,004








Segment liabilities

(4,297)

(2,637)

(1,077)

(275)

(633)

(8,919)








Other segment information







Depreciation

122

26

18

48

-

214

Amortisation

-

27

1

5

1,230

1,263

 







Continuing

Operations


eXpansys

UK

 

eXpansys

Nomatica

 

eXpansys

Inc

 

eXpansys

Hong Kong

eXpansys

plc

 

 

Total

 


£000

£000

£000

£000

£000

£000

Year ended 30 April 2009







External customers

14,289

20,317

8,532

3,893

21

47,052

Inter-segment

8,775

3,209

1,445

1,142

-

14,571








Segment revenue

23,064

23,526

9,977

5,035

21

61,623








Results







Operating (loss)/profit

(1,711)

102

(502)

(859)

(329)

(3,299)

Net finance costs

(190)

(7)

(3)

-

-

(200)

Tax (charge)/credit

495

(74)

(8)

-

52

465

Loss on disposal of distribution business






(300)

Loss for the year for continuing operations





(3,334)








Assets and liabilities







Segment assets

3,056

2,847

3,103

324

1,442

10,772








Segment liabilities

(4,102)

(1,887)

(757)

(314)

(260)

(7,320)








Other segment information







Depreciation

204

41

22

54

-

321

Amortisation

608

104

10

53

-

775

 

4.  Exceptional items

 


2010

2009


£000

£000




Cost of sales



Exceptional stock write downs in order to generate cash

-

2,057




Administrative expenses



Costs in relation to redundancies in eXpansys UK and eXpansys Inc

29

179

Provision against two debts due from overseas businesses in financial difficulties

 

-

 

734

Provision against warranty costs from overseas supplier in financial difficulties

58

-

Cost of Australian office reorganisation

23

295

Release of warranty provision

-

(286)

Cost of UK warehousing reorganisation

378

210

Provisions for commercial disputes arising in January 2010

740

-

Provision for related party transactions

11

-

Exceptional Directors' remuneration

555

-

Additional amortisation charge due to change in useful economic life of website development costs

 

680

 

-


2,474

1,132




Total exceptional costs

2,474

3,189

 

All of the exceptional items in the table above, except for the related party provision, are deemed allowable for corporation tax purposes. 

 

5.  Earnings per ordinary share

 

Basic earning per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share for the year amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:


2010

2009


£000

£000




Loss for the year from continuing operations

(2,709)

(3,334)

Loss for the year from discontinued operations

-

(1,379)

Less minority interests


-




Loss attributable to equity holders of the parent

(2,709)

(4,713)

 


2010

2009



(restated)


thousands

thousands




Basic weighted average number of shares

163,781

63,993

Dilutive potential ordinary shares:



      Employee and consultant options

1,125

6,080

      Warrants over options

-

403




Diluted weighted average number of shares

164,906

70,476

Where ordinary shares are issued at a discount to the market price, the weighted average number of shares should reflect that the discount is effectively a bonus given to shareholders for no consideration.  The weighted average number of shares in the current year and prior year reflect this. 

 

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. 

 

Earnings per share from continuing operations before exceptional items

The Group presents as exceptional items on the face of the Statement of Comprehensive Income, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to facilitate better assessment of trends in financial performance.

 

To this end, basic and diluted earnings from continuing operations per share is also presented on this basis and using the weighted average number of ordinary shares for both basic and diluted amounts as per the table above. 

 

The amounts for earnings per share from continuing operations after exceptional items are as follows:

 


2010

2009



(restated)

 

Basic loss per share

(1.7)p

(5.2)p

Diluted loss per share

(1.7)p

(5.2)p

 

Net loss from continuing operations before exceptional items and attributable to equity holders of the parent is derived as follows:

 


2010

2009


£000

£000




Loss for the year from continuing operations

(2,709)

(3,334)

Loss on disposal of distribution business

-

300

Exceptional items after tax attributable to equity holders of the parent

2,474

3,189




(Loss)/profit from continuing operations before exceptional items attributable to equity holders of the parent

 

(235)

 

155

                                                                               

The amounts for earnings per share from continuing operations before exceptional items are as follows:

 


2010

2009



(restated)

 

Basic (loss)/earnings per share

(0.1)p

0.2p




Diluted (loss)/earnings per share

(0.1)p

0.2p

 



 

6.  Impairment of goodwill

 

As required by IAS 36 Impairment of Assets , goodwill is subject to annual impairment reviews.  These reviews are carried out using the following criteria. 

 

Goodwill acquired through business combinations has been allocated for impairment testing purposes to three cash generating units, which are also reportable segments, as follows:

 

·          eXpansys UK Limited cash-generating unit;

·          eXpansys Inc cash-generating unit; and

·          eXpansys Nomatica SAS cash-generating unit.

 

These represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

 

The recoverable amount of each CGU is determined based on calculating its value in use, using cash flow projections based on financial budgets approved by the board covering a three year period. 

The discount rate applied to cash flow projections is 9.1% (2009: 12.0%) and is the Group's weighted average cost of capital. 

 

Cash flows beyond the three year budget are extrapolated using a 2% growth rate (2009: 2%). 

 

The tax rate used in the projections is 28% (2009: 28%).

 

Carrying amount of goodwill allocated to cash-generating units:

 


eXpansys

UK

eXpansys

Inc

eXpansys

Nomatica

 

Total


£000

£000

£000

£000






Carrying amount of goodwill





- 2010

218

3,004

743

3,965

- 2009

218

2,485

772

3,475

 

Key assumptions used in value in use calculations

 

The calculation of value in use is most sensitive to the following assumptions:

 

·          Gross margin;

·          Distribution and administration expenses;

·          Discount rates; and

·          Growth rate used to extrapolate cash flows beyond the budget period.

 

Gross margins and distribution and administration expenses are based on average values achieved in the three years preceding the start of the budget period.  These are increased to reflect anticipated efficiency improvements due to shortening of the supply chain and in line with expected growth netted against anticipated efficiency improvements respectively. 

 

Discount rates reflect management's estimate of return on capital employed required in each business.  This is the benchmark used by management to assess operating performance and to evaluate future capital investment proposals. 

 

Sensitivity to changes in assumptions

 

A sensitivity analysis has been performed on the base case assumptions used for assessing the goodwill. 

 

With regards to the assessment of value in use of the cash-generating units, the directors believe that there are no reasonably possible changes in any of the key assumptions, which would cause the carrying value of the unit to exceed its recoverable amount.



 

7.  Authorised and issued share capital

 


2010

2009


£000

£000

Authorised:



230,000,000 (20009: 80,000,000) ordinary shares of 0.25p each

575

200





2010

2009


£000

£000

Allotted and called up:



178,171,007 (2009: 44,837,674) fully paid ordinary shares of 0.25p each

445

112

 

On 15 June 2009, 133,333,333 new ordinary shares were issued pursuant to a Placing of new ordinary shares at 1.5 pence per share, raising £2 million with costs incurred of £0.08 million.  Transaction costs were charged against share premium.

 

Following the admission of the 133,333,333 ordinary shares to AIM on 16 June 2009, the Company's total issued share capital was 178,171,007 ordinary shares of 0.25 pence each.

 

8.  Share based payments

 

Share options

During the year ended 30 April 2010, 1,912,551 (2009: 505,320) share options expired when the employees left the Company, and the remaining options lapsed in July 2009 when change of control occurred due to the share issue to Peter Jones. 

 


 

Exercise

price

(pence)

 

Outstanding

as at

30 April

2009

 

 

 

 

Granted

 

 

 

Cancelled/

expired

 

 

 

Lapsed

 

Outstanding

as at

30 April

2010

 

Issued 6 March 2007







Cate Hulme







(director until July 2010)

10.25

425,320

-

-

(425,320)

-








Issued 30 April 2008







Roger Butterworth







(director until January 2010)

20.00

1,892,551

-

(1,892,551)

-

-

Cate Hulme







(director until July 2010)

20.00

500,000

-

-

(500,000)

-

Steve Muttram







(director until June 2010)

20.00

354,879

-

-

(354,879)

-

Frederic Pont







(director until July 2010)

20.00

354,879

-

-

(354,879)

-

Employees

20.00

2,292,551

-

-

(2,292,551)

-








Cancelled and reissued 30 April 2008







Employees

20.00

220,000

-

(20,000)

(200,000)

-

Consultant

20.00

40,000

-

-

(40,000)

-








Issued 290 January 2010







Anthony Catterson (director)

10.00

-

4,500,000

-

-

4,500,000










6,080,180

4,500,000

(1,912,551)

(4,167,629)

4,500,000

 

There were no cash settled share options and no share options were exercised during either year. 

 

On 29 January 2010, further equity settled share options were granted, exercisable at the discretion of the option holder, for up to ten years from issue date:

 


Number of shares

under option

Exercise price

(pence)

Anthony Catterson (director)

4,500,000

10.0

 

The share options are subject to certain performance criteria and exercisable over the following periods:

 


Quantum able to be

exercised

 

Period exercisable

Anthony Catterson (director)

1,125,000

1 September 2010 to 28 January 2020

Anthony Catterson (director)

1,125,000

1 March 2011 to 28 January 2020

Anthony Catterson (director)

1,125,000

1 September 2011 to 28 January 2020

Anthony Catterson (director)

1,125,000

1 March 2012 to 28 January 2020

 

The fair value of equity settled share options granted is estimated as at the date of the grant using the Black-Scholes-Merton model, taking into account the terms and conditions upon which the options were granted.  The following table lists the inputs to the model for the year ended 30 April 2010.

 



2010




Dividend yield (%)


0

Expected share price volatility (%)


40

Risk free interest rate (%)


1.4

Expected life of option (years)


2

 

The expected volatility reflects the assumption that the AIM index is indicative of future trends, which may also not necessarily be the actual outcome. 

 

The expense to the profit and loss account during the year ended 30 April 2010 was £20,000 (2009: £nil). 

 

The weighted average exercise price is 10.0 pence (2009: 19.32 pence) for the 4,500,000 shares (2009: 6,080,179) under option at 30 April 2010. 

 

The weighted average exercise price of the shares expired during the year ended 30 April 2010 was 20.0 pence (2009: 28.62 pence) for the 1,912,551 (2009: 505,320) shares expired in the year.

 

The weighted average exercise price of shares granted during the year ended 30 April 2010 was 10 pence for the year 4,500,000 options granted in the year.  There were no share options granted during the year ended 30 April 2009.

 

Warrants

On 4 April 2007, a warrant to subscribe for 403,539 0.25p ordinary shares at 58p each was issued to Cenkos Securities plc, the Company's Nominated Advisor and Broker.  The transaction has been measured at the fair value of the equity instruments (as set out above) as there was no additional service performed in exchange for these options.  The fair value of this award was not material. 

 

On 30 October 2007, a warrant to subscribe for 1,000,000 0.25p ordinary shares at par was issued to O2, in the event that any of the stage payments under the Asset Agreement signed the same day, were late.  The earliest available date for exercise is 5 February 2008 and latest is 15 August 2008.  The transaction has been measured at the fair value of the service received in the form of a loan at £62,000.  These warrants have expired during the year ended April 2009, since the consideration under the Asset Agreement was repaid in full.



 

9.  Related party transactions

 

Data Select Limited

Data Select, one of the Group's suppliers, is a subsidiary of Phones International Group Limited, which is ultimately owned by Peter Jones, who obtained a controlling shareholding in eXpansys plc in June 2009.  Stephen Vincent, director of eXpansys plc, is also a director of Data Select Limited. 

 

In March 2009, a credit facility was agreed between eXpansys UK Limited with Data Select Limited for up to £1.25 million.  The facility is secured by way of a fixed and floating charge debenture between the eXpansys UK Limited and Data Select and is guaranteed by eXpansys plc.  The Directors, having consulted with Cenkos Securities plc as the Company's Nominated Adviser, consider the terms of this transaction are fair and reasonable insofar as the Company's Shareholders are concerned. In being consulted, Cenkos Securities has relied on the Directors' commercial assessment of the transaction.

 

Since the share issue in June 2009, purchases of products and services from Data Select Limited amounted to £5,896,000 and £367,000 respectively and sales to Data Select Limited amounted to £437,000. 

 

At 30 April 2010, the amount owed to Data Select Limited was £2,633,000.

 

P J Media Limited

Following the share issue in June 2009, P J Media Limited, became a related party, since it is ultimately controlled by Peter Jones, who obtained a controlling interest in eXpansys plc in June 2009.  Stephen Vincent, director of eXpansys plc, is also a director of P J Media Limited. 

 

Since that date, purchases of products and services from P J Media Limited amounted to £4,300. 

 

At 30 April 2010, the amount owed to P J Media Limited was £nil. 

 

SCI CAP70


The French subsidiary, eXpansys Nomatica SAS, leases its premises in Montpelier from SCI CAP70, a company owned by Frederic Pont (director until July 2010) and Roger Butterworth (director who resigned 28 January 2010) amongst others.  The directors believe that the lease is on arms length commercial terms. 

 

The lease commenced on 1 January 2007, lasts for nine years with a break clause at 31 December 2009 and 31 December 2012 and rent is 232,000 Euros pa, payable quarterly in advance

 

R Butterworth

 

During the year, a loan was outstanding to Roger Butterworth, director until January 2010.

 


2010

2009


£000

£000




As at 1 May

-

-

Additional funds from Company

11

-

Repayment to the Company

(11)

-




Amount outstanding at 30 April

-

-

 

The highest balance outstanding during the year was £11,000 (2009: £nil).

 

Lively View Limited


A payment was made of £11,000 in December 2009 to Lively View Limited, a company incorporated in Hong Kong.  The Company understands that the sole shareholder and director of Lively View Limited is Roger Butterworth, director of eXpansys plc until January 2010. 



 

10.  Ultimate controlling party

 

In the opinion of the directors, the controlling party of eXpansys plc has been Peter Jones since the share issue in June 2009.

 

11.  Additional cash flow information

 

(a) Analysis of Group net debt

 


At


New finance

At


1 May 2009

Cash flow

lease

30 April 2010


£000

£000

£000

£000






Cash at bank and in hand

405

519

-

924

Bank overdrafts

(89)

89

-

-


316

608

-

924

Finance leases

(132)

104

(20)

(48)

Bank loans

(230)

61

-

(169)







(46)

773

(20)

707

 

 


At


New finance

At


1 May 2008

Cash flow

lease

30 April 2009


£000

£000

£000

£000






Cash at bank and in hand

2,179

(1,774)

-

405

Bank overdrafts

(1,866)

1,777

-

(89)


313

3

-

316

Finance leases

(299)

167

-

(132)

Bank loans

(222)

(8)

-

(230)







(208)

162

-

(46)






 

(b) Cash flows relating to operating exceptional items

 

Net cash flow from operating activities includes the following exceptional cash flows:

 


2010

2009


£000

£000




Costs in relation to redundancies in eXpansys UK and eXpansys Inc

-

179

Cost of UK warehousing reorganisation

-

210





-

389

 



 

For further information, please contact:

 

eXpansys plc

Anthony Catterson, CEO

 

Tel: +44 (0) 161 918 3499

acatterson@expansys.com

Tim Eltze, COO and Company Secretary

Tel: +44 (0) 161 918 3473

tim.eltze@expansys.com

Cenkos Securities plc

Stephen Keys/Camilla Hume

Tel: +44 (0) 20 7397 8926

skeys@cenkos.com

 

M:Communications

Nick Miles/Ben Simons

 

Tel  +44 (0)20 7920 2330

miles@mcomgroup.com

 

Investor relations website

www.expansys.plc.uk

 

About eXpansys

 

eXpansys are a leading online global consumer electronics superstore, operating directly in 50 countries with a vast range of products, a focused approach to service and value for its customers, and a fundamental belief that technology can change peoples lives.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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