Interim Results

eXpansys Plc 28 January 2008 INTERIM RESULTS eXpansys plc ('eXpansys' or the 'Group'), a leading online retailer of wireless technology which floated on AIM in April 2007, announces its interim results for the six months to 31 October 2007. Key points: * Revenue growth from previous half year of 30% to £32.3 million * Gross profit margin stable at 21.5% * Pre-exceptional EBITDA growth of 1O% to £1.3 million. Profit before tax and exceptional items of £0.5 million * Successful acquisition of YooNoo Limited, the leading on-line retailer of GPS equipment in the UK, now fully integrated and Group's sales of GPS equipment are strong * Acquisition of significant assets on attractive terms from O2. This also gave a unique opportunity to recruit some of the previous O2 personnel and to create a presence for the Group in Singapore, with excellent potential in sales channels, product set and geographical reach Roger Butterworth, Chief Executive, said: 'The success of the e-commerce channel, including a contribution from new product lines, has been encouraging and the Directors intend to pursue the strategy of diversifying the Group's product range. Whilst the Group has experienced challenges in its first year as a public company, the Board believes that there are significant opportunities for a diversified, on-line retailer of electrical products with a strong and trusted brand like 'eXpansys'. The Directors will continue to seek to capitalise upon these opportunities and view the future with confidence.' For further information, please contact: eXpansys plc Tel: +44 (0) 161 232 3410 Roger Butterworth, CEO roger@eXpansys.com Investor relations website www.eXpansys.com/investor.aspx Rawlings Financial PR Limited Tel: +44 (0) 1756 770 376 Catriona Valentine catriona@rawlingsfinancial.co.uk About eXpansys The Group specialises in the sale of handheld electronic devices with wireless connectivity and boasts a wide offering ranging from smartphones and ultra mobile personal computers, to cameras and GPS equipment. Under the umbrella of www.eXpansys.com, www.nomatica.com, www.portix.com and www.mobileplanet.com, eXpansys operates some 50 websites in 12 different languages that cater to the major economies of the world and serve both retail customers and blue-chip corporate accounts including Microsoft, Oracle, The Metropolitan Police and Dell Computer. Based in Manchester, eXpansys has grown both organically and through acquisition and has a global infrastructure that allows it to service its international customer base through a network of warehouses in the UK, France, USA, Hong Kong and Australia. CHIEF EXECUTIVE'S STATEMENT The six months to 31 October 2007 have been a challenging but exciting time for everyone at eXpansys, following our successful AIM listing in April. The key objective for the Group, as stated in the AIM Admission Document, is to generate sustainable profits with positive cash flow. Whilst we have encountered a number of issues since flotation that have affected our progress, we still believe that by increasing gross margins through the shortening of our supply chain and, where possible, buying stock directly from the manufacturer and utilising the scalability of our business is the way to achieve this profitable and cash generative growth. Performance Turnover in the first half recovered strongly from the second half last year following the receipt of funds from the IPO, with 30% growth to £32.3 million. Pre-exceptional EBITDA grew 10% to £1.3 million compared to the equivalent period last year. Whilst we had expected to be debt free, a delayed payment of some $0.8 million contributed to our continued utilisation of our overdraft facility and we have incurred a higher than expected interest charge of £0.3 million as a result. Exceptional items during the period included a stock provision of £0.9 million and redundancy costs of £0.4 million. Our European operations have performed ahead of our expectations, achieving record results, and we continue to make good progress in the United States. As we stated in our update of 27 November, however, we have been experiencing some pricing pressure, particularly in the UK. In addition, with reductions in consumer spend being seen across the retail sector and increased levels of competition being experienced, some of our suppliers have imposed more restrictive terms. As a result of these pressures, our attentions have been focused on the strategic direction of the business and examining new growth opportunities. A number of rationalisation measures are currently underway, including closure of non profitable offices and a reduction in staff numbers in the UK and US. We have started the New Year with a reduced cost base and will continue to monitor this closely. During the period, the business adapted to meet the changing market place and the decision was taken to broaden our product offering in order to deliver upon our growth plans. The opportunity to acquire YooNoo Limited, the leading on line retailer of GPS equipment in the UK, for a modest consideration was particularly attractive. It is pleasing to report that YooNoo has been fully integrated and that the Group's sales of GPS equipment have performed strongly. The Group also commenced the sale of additional consumer electronic equipment and the success of this approach has exceeded our expectations. At the period end, we became aware of the decision by O2 to exit their business in Asia and capitalised upon the opportunity to buy its significant stock and other assets on attractive terms. Whilst completing this transaction, it became apparent that there was a unique opportunity to recruit some of the previous O2 Asia personnel and to create a presence for the Group in Singapore. The Group has established a 90% owned subsidiary, MWg Singapore, which has excellent potential in several areas - sales channels, product set and geographical reach. This opportunity has, however, involved investment in start up and business development costs. The Board evaluated the proposition fully and decided that it provided a unique opening for the Group to generate growth in a new territory with significant potential. The Board continues to explore various sources of external funding for MWg and is actively seeking a partner to share in the costs and rewards of this opportunity. Our policy in the past has been to avoid aggressive pricing, as we have always believed and demonstrated that the substantial majority of our stock can be realised profitably. In order to fund MWg and capitalise on the potential of the Singapore business, however, we undertook an aggressive pricing campaign, focusing on our older stocks in the UK. The Board concluded that longer term benefits to the Group, through the realisation of older stock, outweighed the short term negative effects of such a pricing policy. This policy precipitated a re-examination of the stock values reflected in our accounts with additional provisions being required. The Board will continue to seek external funding or partners for MWg and will ensure that the costs incurred in relation to this opportunity remain in line with the rewards identified. Market and Business Review The business remains essentially unchanged from the business detailed in the Company's Admission Document, other than the addition of the MWg business to the Group. The items sold by the Group are, in many cases, luxury items, this leaves eXpansys vulnerable to an economic downturn in any of our key territories. Our supply chain is, however, very efficient and our costs are much lower than high street retailers. We believe that we have the ability to be price competitive and maintain market share at the expense of retailers with higher cost bases in all market conditions. We also believe that the broadening of our geographic spread into Asia will provide a good counterbalance to our European and North American businesses and will make the Group more robust in the event of an economic downturn in any one key territory. Our UK business has been a disappointment with costs ahead of plan and gross margins lower than anticipated. I believe that this reflects the experience of many other retailers in the current market and so we have taken steps to re-structure this business in line with the anticipated revenues and gross margins for 2008. In contrast, our business in the Eurozone, under the leadership of Frederic Pont, has performed particularly well. Mr Pont's remit has been extended to also cover the UK. The US business continues to improve and now makes a positive contribution to the Group and the Group's business in Asia is experiencing exceptional growth as a result of the O2 Asia deal. The market generally continues to move away from a subsidised handset model and towards a model where customers buy handsets and connectivity separately. In the last 6 months O2 SIMplicity and the Apple i-Phone have both contributed towards this trend and the recent appointment of eXpansys as the first T-Mobile Premier Reseller of connectivity, with a special focus on SIM free smartphone handsets, underlines both the movement of the market in this direction and eXpansys' position at the heart of the market. Outlook The Directors constantly monitor consumer spending habits and it is pleasing to note that the wide-spread acceptance of on-line retailing continues to grow with the move from the high street to on-line retailing clearly evident. This has been seen first hand by the Group with over a billion page-views on the eXpansys websites in the six month period. This change in spending patterns has, however, been offset by a worsening domestic retail environment and the Group's performance over the key Christmas period was not as good as had been expected, particularly in the UK. It is prudent to be cautious in our outlook for the UK consumer and it is reasonable to expect pressures on margins that have been experienced so far this year to continue. At the same time, the Group is continuing with an aggressive pricing policy, focused on older stock, in order to fund the start up costs necessary to capitalise on the opportunity in MWg. Whilst the Directors are confident that actions taken will deliver success, they will have an impact on results for the full year, which the Directors expect to be materially below market expectations. The success of the e-commerce channel, including a contribution from new product lines, has been encouraging and the Directors intend to pursue the strategy of diversifying the Group's product range. Whilst the Group has experienced challenges in its first year as a public company, the Board believes that there are significant opportunities for a diversified, on-line retailer of electrical products with a strong and trusted brand like 'eXpansys'. The Directors will continue to seek to capitalise upon these opportunities and view the future with confidence. Roger Butterworth Chief Executive Officer 25 January 2008 CONSOLIDATED INCOME STATEMENT For the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited Notes £000 £000 Revenue 4 32,337 29,264 ------------------------------------------------------------------------------- Exceptional costs of sale 5 (946) - Other costs of sale (25,059) (22,682) -------- -------- Total costs of sale (26,005) (22,682) ------------------------------------------------------------------------------- Gross profit 6,332 6,582 ------------------------------------------------------------------------------- Exceptional selling and distribution costs 5 - (223) Other selling and distribution costs (1,797) (1,546) -------- -------- Total selling and distribution costs (1,797) (1,769) ------------------------------------------------------------------------------- Exceptional administrative expenses 5 (399) (317) Other administrative expenses (4,744) (4,283) -------- -------- Total administrative expenses (5,143) (4,600) ------------------------------------------------------------------------------- Operating (loss) / profit from continuing operations (608) 213 ------------------------------------------------------------------------------- Exceptional operating loss 5 (1,344) (540) Other operating profit 736 753 -------- -------- EBITDA and exceptional items 1,261 1,149 Depreciation of plant and equipment (290) (221) Amortisation of intangible assets (235) (175) Exceptional items 5 (1,344) (540) ------------------------------------------------------------------------------- Operating (loss) / profit from continuing operations (608) 213 Finance revenue 7 12 Finance costs (268) (185) -------- -------- (Loss) / profit from continuing operations before taxation (869) 40 Tax credit 6 52 292 -------- -------- (Loss) / profit for the half year from continuing operations (817) 332 Loss for the half year from discontinued operations - - -------- -------- (Loss) / profit for the half year (817) 332 -------- -------- (Loss) / profit for the half year attributable to: Equity holders of the parent (817) 296 Minority interest - 36 -------- -------- (Loss) / profit for the half year (817) 332 -------- -------- Earnings per share (pence) Basic (loss) / earnings per share from continuing operations (2.0)p 1.4p Diluted (loss) / earnings per share from continuing operations (2.0)p 1.4p Basic (loss) / earnings per share from loss for the year (2.0)p 1.4p Diluted (loss) / earnings per share from loss for the year (2.0)p 1.4p -------- -------- Pre exceptional earnings per share (pence) Basic earnings per share from continuing operations before exceptionals - 3.9p Diluted earnings per share from continuing operations before exceptionals - 3.9p -------- -------- The notes form an integral part of this consolidated half yearly financial information. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Income and expense recognised directly in equity Currency translation differences (86) (60) -------- -------- Net expense recognised directly in equity (86) (60) (Loss) / profit for the half year (817) 332 -------- -------- Total recognised (expense) / income relating to the half year (903) 272 -------- -------- Attributable to: Equity holders of the parent (903) 236 Minority interest - 36 -------- -------- (903) 272 -------- -------- The notes form an integral part of this consolidated half yearly financial information. CONSOLIDATED BALANCE SHEET For the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited Notes £000 £000 ASSETS Non current assets Plant and equipment 7 1,534 871 Intangible assets 7 4,917 5,004 Deferred tax assets 6 655 403 -------- -------- 7,106 6,278 -------- -------- Current assets Inventories 10,797 6,426 Trade and other receivables 8 7,235 4,870 Government grants - 8 Cash and short term deposits 239 411 -------- -------- 18,271 11,715 -------- -------- Total assets 25,377 17,993 -------- -------- LIABILITIES Current liabilities Trade and other payables 9 (12,749) (12,605) Financial liabilities 10 (1,994) (2,003) Income tax payable (120) (102) Government grants (38) - Provisions 11 (980) (16) -------- -------- (15,881) (14,726) -------- -------- Non current liabilities Financial liabilities 10 (324) (1,843) Deferred tax liabilities 6 (66) (32) Provisions 11 (727) - -------- -------- (1,117) (1,875) -------- -------- Total liabilities (16,998) (16,601) -------- -------- NET ASSETS 8,379 1,392 -------- -------- CAPITAL AND RESERVES Equity share capital 9,511 948 Currency translation (110) (79) (Accumulated losses) / retained earnings (1,022) 467 -------- -------- eXpansys Group shareholders' equity 8,379 1,336 Minority interest - 56 -------- -------- TOTAL EQUITY 8,379 1,392 -------- -------- The notes form an integral part of this consolidated half yearly financial information. CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 October 2007 Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Operating activities (Loss) / profit for the half year (608) 213 Adjustments to reconcile profit for the half year to net cash inflow from operating activities Tax on continuing operations 8 (40) Net finance costs (261) (173) Depreciation of property, plant and equipment 290 221 Amortisation of intangible assets 221 175 Currency movements 1 101 (Increase) / decrease in inventories (4,739) 249 Increase in trade and other receivables (2,438) (1,056) Increase in trade and other payables 4,013 247 Increase in provisions 1,691 6 -------- -------- Net cash flow from operating activities (1,822) (57) -------- -------- Investing activities Outflow on acquisition of YooNoo Limited (196) - Cash acquired with YooNoo Limited 272 - Payments to acquire property, plant and equipment (26) (49) Payments to acquire intangible assets (272) (318) -------- -------- Net cash flow from investing activities (222) (367) -------- -------- Financing activities Share issue costs (4) - New borrowings - 235 Repayment of borrowings (24) (300) Repayments of capital element of finance leases and hire purchase contracts (120) (86) -------- -------- Net cash flow from financing activities (148) (151) -------- -------- Decrease in cash (2,192) (575) Cash and cash equivalents at the beginning of the half year 739 (143) -------- -------- Cash and cash equivalents at the half year end (1,453) (718) -------- -------- The notes form an integral part of this consolidated half yearly financial information. NOTES TO CONSOLIDATED HALF YEARLY FINANCIAL INFORMATION 1. General Information eXpansys plc is a public limited company incorporated and domiciled in England and Wales, and the address of its registered office is 3 Hardman Square, Spinningfields, Manchester, M3 3EB, United Kingdom. The Company's shares are traded on the Alternative Investment Market. This condensed consolidated half yearly financial information was approved for issue by the board of directors on 25 January 2008. These Interim Financial Statements are a condensed set of financial statements and are prepared in accordance with the requirements of IAS 34. The Interim Financial Statements for the six months ended 31 October 2007 are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the six months ended 31 October 2006, prepared under UK GAAP, was audited as part and included in the Admission Document, and the report of the auditors was unqualified. Statutory accounts for the year ended 30 April 2007, prepared under UK GAAP, were approved by the Board of Directors on 27 July 2007 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985. 2. Basis of preparation The Interim Financial Statements for the six months ended 31 October 2007 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) for the first time. The Group has historically prepared its audited annual financial statements under UK GAAP and this is the first year that the Group is required to prepare financial statements that comply with IFRS. As such, the accounting policies and basis of preparation differ from those set out in the Report and Financial Statements for the year ended 30 April 2007. The disclosure required by IFRS 1 First-time Adoption of International Financial Reporting Standards for the transition from UK GAAP to IFRS and the details of the elections made on conversion to IFRS were set out in the IFRS Restatement Report, available on www.eXpansys.com. A summary of the restatement of the UK GAAP financial statements to IFRS is included in note 15. 3. Accounting policies The accounting policies adopted are in accordance with International Financial Reporting Standards and are consistent with those in the IFRS Restatement Report available on www.eXpansys.com. 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 (including goodwill); * warranty provisions; * inventories; * trade receivables; and * the estimation of share-based payment costs. The measurement of intangible assets other than goodwill 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. The measurement of warranty provisions involves estimation of the level of repairs and returns expected on certain products sold within the last twelve months, based on historical warranty claim information, as well as recent trends that might suggest that past cost information may differ from future claims. Factors that could impact the estimated claim information include parts and labour costs. 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 estimation of share-based payment costs requires the selection of an appropriate valuation method, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest, inputs for which arise from judgements relating to the future volatility of the Company's share price, expected dividend yields, risk free interest rates and expected lives of the options. The directors draw upon a variety of external sources to aid in the determination of the appropriate data to use in such calculations. 4. Segment information The Group is managed and reported on a worldwide basis, according to four operating divisions aligned to the four trading subsidiaries: * eXpansys UK Limited, incorporated in United Kingdom, shipping to United Kingdom and the rest of the world from warehouses in Manchester, United Kingdom and Melbourne, Australia; * eXpansys Nomatica SAS, incorporated in France, shipping to Continental Europe from its warehouse in Montpelier, France; * Mobile Planet Inc, incorporated in United States of America, shipping to United States and Canada, from its warehouse in Bloomington, Chicago, United States of America; and * eXpansys Hong Kong Limited, incorporated in Hong Kong, shipping to the Far East from its warehouse in Hong Kong. Therefore the primary segment reporting format is determined to be geographical segments by origin as the Group's risks and rates of return are affected predominantly by differences in geographic location. Segmental analysis by destination would not be materially different. Transfer prices between business segments are set on an arms 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 in consolidation. The following tables present revenue and profit and certain asset and liability information regarding the Group's business segments for the six months ended 31 October 2007 and 2006. All operations are continuing. UK & rest Continental USA & Far of world Europe Canada East Total £000 £000 £000 £000 £000 Six months ended 31 October 2007 Unaudited Revenue Sales to external customers 16,832 6,348 7,848 1,309 32,337 Inter-segment sales 6,494 1,976 2,688 1,267 12,425 ------ ------ ------ ------ ------ Segment revenue 23,326 8,324 10,536 2,576 44,762 ------ ------ ------ ------ ------ Results Segment result (212) 407 (31) (162) 2 Segment result (excluding exceptional items) 794 395 178 (39) 1,328 ------ ------ ------ ------ ------ UK & rest Continental USA & Far of world Europe Canada East Total £000 £000 £000 £000 £000 Six months ended 31 October 2006 Unaudited Revenue Sales to external customers 14,059 6,211 7,649 1,345 29,264 Inter-segment sales 7,945 752 2,164 1,291 12,152 ------ ------ ------ ------ ------ Segment revenue 22,004 6,963 9,813 2,636 41,416 ------ ------ ------ ------ ------ Results Segment result 51 254 304 50 659 Segment result (excluding exceptionals) 305 540 304 50 1,199 ------ ------ ------ ------ ------ 5. Exceptional items Six months ended 31 October 2007 2006 Unaudited Unaudited £000 £000 Exceptional stock provision 946 - Non recoverable distribution expenses - 223 Costs relating to renegotiation of covenants - 31 Redundancy costs in eXpansys Nomatica SAS - 286 Redundancy costs in eXpansys UK and Mobile Planet 380 - Costs in relation to letter of credit facilities 18 - -------- -------- 1,344 540 -------- -------- 6. Tax The credit included in the income statement is as follows: 2007 2006 Unaudited Unaudited £000 £000 UK corporation tax (6) (136) Foreign tax (52) (19) Adjustments relation to prior periods - 56 Deferred tax 110 391 -------- -------- 52 292 -------- -------- Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual income tax rate used for the year to 30 April 2008 is 30%. Deferred tax The deferred tax included in the balance sheet is as follows: 2007 2006 Unaudited Unaudited £000 £000 Deferred tax liability Accelerated capital allowances 66 32 -------- -------- Deferred tax asset Depreciation in advance of capital allowances 94 112 Other timing differences 141 44 Tax losses 420 247 -------- -------- 655 403 -------- -------- 7. Tangible and intangible assets Plant and Intangible equipment assets £000 £000 Six months ended 31 October 2007 (Unaudited) Opening net book value at 1 May 2007 876 4,846 Additions 942 385 Depreciation and amortisation (290) (235) Foreign exchange difference 6 (79) -------- -------- Closing net book value at 31 October 2007 1,534 4,917 -------- -------- Plant and Intangible equipment assets £000 £000 Six months ended 31 October 2006 (Unaudited) Opening net book value at 1 May 2006 886 5,081 Additions 216 318 Depreciation and amortisation (221) (175) Foreign exchange difference (10) (220) -------- -------- Closing net book value at 31 October 2006 871 5,004 -------- -------- 8. Trade and other receivables 31 October 2007 2006 Unaudited Unaudited £000 £000 Trade receivables 5,158 2,455 Less provisions for impairment of receivables (206) (47) -------- -------- Trade receivables - net 4,952 2,408 Other taxes - 617 Other debtors 502 341 Prepayments and accrued income 1,781 1,504 -------- -------- 7,235 4,870 -------- -------- 9. Trade and other payables 31 October 2007 2006 Unaudited Unaudited £000 £000 Trade payables 10,882 11,582 Social security and other tax payables 318 247 Other payables 117 151 Accruals and deferred income 1,432 625 -------- -------- 12,749 12,605 -------- -------- 10. Financial liabilities Current Non-current 31 October 31 October 2007 2006 2007 2006 Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 Bank overdraft 1,692 1,129 - - Obligations under finance leases and hire purchase contracts 251 296 149 246 Instalments due on bank loan 51 578 175 1,597 -------- -------- -------- -------- 1,994 2,003 324 1,843 -------- -------- -------- -------- 11. Provisions Onerous lease Returns Warranties TOTAL Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 At 31 October 2006 and 1 May 2007 Current - 16 - 16 Non-current - - - - -------- -------- -------- -------- - 16 - 16 Arising during the year 582 46 1,063 1,691 -------- -------- -------- -------- At 31 October 2007 582 62 1,063 1,707 -------- -------- -------- -------- Analysed as: Current 291 62 627 980 Non-current 291 - 436 727 -------- -------- -------- -------- 582 62 1,063 1,707 -------- -------- -------- -------- 12. Business combinations On 27 July 2007, the Group acquired 100% of the shares in YooNoo Limited, a private company incorporated in England and Wales. The company is involved in the retail of global positioning systems within the UK. Total consideration comprised initial cash consideration and fees of £196,000, and deferred consideration of up to £900,000 which is subject to adjustments based on gross margin achieved in the first twelve months following acquisition. The current best estimate of the directors' of the deferred consideration to be paid is minimal. Book and fair values of the net assets at date of acquisition were as follows: Fair Provisional Book value fair value Value adjustments to Group Unaudited Unaudited Unaudited £000 £000 £000 Plant and equipment 58 - 58 Cash 272 - 272 Trade receivables 42 (22) 20 Other receivables 57 - 57 Inventories 339 (16) 323 Trade payables (514) - (514) Other payables (129) (3) (132) -------- -------- -------- Net assets 125 (41) 84 -------- -------- Goodwill arising on acquisition 112 -------- Consideration 196 -------- Fair value adjustments relate principally to provisions against doubtful debts and stock. Included in the £112,000 of goodwill recognized above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature, and the directors believe is attributable to YooNoo's strong position within the UK GPS market and the synergies expected to arise after its acquisition by the Group. Discharged by: £000 Unaudited Cash 155 Deferred consideration - Costs associated with the acquisition, settled in cash 41 -------- Total consideration 196 -------- 13. Warrants On 30 October 2007 a warrant to subscribe to one million 0.25p ordinary shares at par was issued to O2 Holdings Limited. These are exercisable in full during six periods lasting two weeks each, only when a payment due from eXpansys under the Stock Purchase Agreement is late. The transaction has been measured at the fair value of the equity instruments as there was no additional service performed in exchange for these options. The fair value of this award was not material. 14. Commitments As at 31 October 2007, the Group has a commitment to pay a supplier £43,000 over the next two years, for participation in their distribution network (2006: £173,000). 15. Transition to IFRS For all periods up to and including the year ended 30 April 2007, eXpansys plc and its subsidiaries (the Group) prepared its financial statements in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP). The financial statements for the year ended 30 April 2008 will be the first the Group is required to prepare in accordance with IFRS as adopted by the European Union, in accordance with the regulations of the Alternative Investment Market. The Group publishes comparative information for one year in its Annual Report and Financial Statements, therefore the date of transition to IFRS is 1 May 2006, this being the start of the earliest period of comparative information. The Group has started from an opening balance sheet as at 1 May 2006 and made those changes in accounting policies and other restatements required by IFRS 1 for the first time adoption of IFRSs. A detailed IFRS Restatement Report with reconciliations and explaining the adjustments made by the Group in restating its UK GAAP balance sheet as at 1 May 2006 and its previously published UK GAAP financial statements for the year ended 30 April 2007, was approved by the directors on 28 December 2007 and is available from the company's website www.eXpansys.com The preliminary IFRS financial statements for the year ended 30 April 2007 which comprise the consolidated IFRS balance sheet as at 1 May 2006 and the 30 April 2007 and the consolidated IFRS income statement for the year ended 30 April 2007 together with the accounting policies note, have been audited by Ernst & Young LLP. The audit report from Ernst & Young LLP is unqualified. However, there is a possibility that the preliminary financial statements may require adjustment before being incorporated into final IFRS financial statements if certain accounting standards issued by the IASB are subject to further amendments before the publication of the final 2008 IFRS financial statements. Summary of differences between UK GAAP and IFRS on loss for the period attributable to equity shareholders Year ended 30 April 2007 Audited £000 Loss for the year ended in accordance with UK GAAP (605) IAS 18 Returns provision adjustment (5) IAS 19 Holiday pay provision adjustment (6) IAS 20 Government grants adjustment (56) IFRS 3 Reversal of goodwill amortisation 209 IAS 12 Income taxes adjustment 4 Restatement of minority interests (48) -------- Loss for the year attributable to equity shareholders of the parent company in accordance with IFRS (507) -------- Summary of differences between UK GAAP and IFRS on net assets 30 April 1 May 2007 2006 Audited Audited £000 £000 Net assets in accordance with UK GAAP 9,416 1,141 IAS 18 Returns provision adjustment (15) (10) IAS 19 Holiday pay provision adjustment (19) (12) IAS 20 Government grants adjustment (56) - IAS 21 Foreign currency adjustment for goodwill (308) - IFRS 3 Reversal of goodwill amortisation 209 - IAS 12 Income taxes adjustment 186 4 Restatement of minority interests (73) - -------- -------- Net assets in accordance with IFRS 9,340 1,123 -------- -------- Significant changes in accounting policies Significant changes in accounting policies, which have arisen from eXpansys' transition to IFRS, are noted below. Presentation of financial statement The primary financial statements are presented in accordance with IAS 1 Presentation of Financial Statements. Although similar, such a presentation differs from the UK GAAP equivalent. Under UK GAAP, 'exceptional item' was a defined term. Under IAS 1, there is no definition of 'exceptional item'; however the standard provides examples of circumstances where, if such items of income and expense are material, the nature and amount should be disclosed separately. Included in these examples are many one off items which the Group has previously described as 'exceptional'. Accordingly the Group will continue to identify such items separately. There are a number of reclassifications between balance sheet captions that arise from the application of various IFRS. The most significant reclassifications are: * website development costs (£1,087,000 as at 30 April 2007), which, under UK GAAP, are classified as a tangible fixed asset, whereas under IAS 38 Intangible assets are capitalised as an intangible asset, as only computer software that is integral to a related item of hardware is included in plant and equipment; * goodwill is disclosed separately from intangible assets; * deferred tax assets and current tax liabilities are disclosed as separate items on the face of the balance sheet; and * minority interests were disclosed separately from equity in the UK GAAP balance sheet. Under IAS 27 minority interests have been presented as part of equity and have therefore been reclassified. In addition the change in net assets from remeasurement that is attributable to the minority interest is an increase of £25,000 at 1 May 2006 and decrease of £73,000 at 30 April 2007. IFRS 3 Business combinations Under UK GAAP, goodwill on acquisitions was capitalised and amortised, on a straight line basis, over its estimated useful economic life of between 5 and 20 years. Under IFRS 3, positive goodwill arising on a business combination is considered to have an indefinite life and consequently is not amortised, but instead is subject to impairment testing both annually and when there are indications that the carrying value may not be recoverable in full. Amortisation of goodwill arising on the purchase of businesses ceased at 1 May 2006 resulting in an increase in profit for the year ended 30 April 2007 of £209,000. As of both 1 May 2006 and 30 April 2007, an impairment review was carried out as required by IAS 38. The board believes that there has been no impairment of goodwill. As permitted by IFRS 1, eXpansys has applied IFRS 3 prospectively from the transition date, rather than restating all previous business combinations. IAS 12 Income tax Under IAS 12, deferred tax must be recognised on the difference between the carrying value of the shares, being the charges to the income statement under IFRS2 and any future tax deductions under Schedule 23, in relation to each option grant. This resulted in a deferred tax asset of £181,000 as at 30 April 2007, thus increasing net assets by the same amount. The deferred tax credit in the income statement was only increased by £2,000, since the estimated future tax deductions exceeded the IFRS2 expense charged to the income statement for the scheme, and the excess is therefore taken to equity. There is a further £5,000 deferred tax asset recognised as at 30 April 2007 relating to the IFRS adjustment for holiday pay. IAS 18 Revenue Under IAS 18, revenue is recognised on despatch when the significant risks and rewards are deemed to have passed to the customer and a returns provision is recognised in accordance with IAS 37 Provisions. This resulted in a reduction in net assets at 1 May 2006 and 30 April 2007 of £10,000 and £15,000 respectively and an increase in loss for the year ended 30 April 2007 of £5,000. IAS 19 Employee benefits Under UK GAAP, no provision is made for annual leave accrued. Under IAS 19, eXpansys' policy is now to recognise the expected cost of compensated short term absences at the time the related service is provided. The impact of this change in policy is to reduce profit for the year ended 30 April 2007 by £6,000 and net assets as at 30 April 2007 by £19,000. IAS 20 Government grants Under IAS 20, eXpansys must now recognise government grant income received when it is reasonable to expect that the grants will be received and that all related conditions will be met. Since the current grants receivable relate to costs, the revenue is deferred and recognised in the income statement in order to match to the employee expenditure that it is intended to compensate. The impact of this change in policy is to reduce profit for the year ended 30 April 2007 and net assets as at 30 April 2007 by £56,000. IAS 21 The effects of changes in foreign exchange rates IAS 21 requires that any goodwill and fair value adjustments to the carrying amount of assets and liabilities arising on acquiring a foreign operation should be treated as the foreign operation's assets and liabilities and translated at the closing rate in accordance with the method noted above. Under UK GAAP, goodwill was treated as denominated in Sterling, being the functional currency of eXpansys plc, and was therefore not retranslated at each balance sheet date. The impact of retranslation of the goodwill relating to Mobile Planet Inc (based in USA with a functional currency of US Dollars) and eXpansys Nomatica SAS (based in France with a functional currency of Euros) on equity at 30 April 2007 are reductions of £298,000 and £10,000 respectively and with no impact on the loss for the year ended 30 April 2007. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the business. The directors of eXpansys plc are listed in the eXpansys plc Annual Report and Financial Statements for 30 April 2007 and there have been no changes since the date of publication. A current list of directors is maintained on the eXpansys website www.eXpansys.com. On behalf of the Board on 25 January 2008 Roger Butterworth Chief Executive Officer Cate Hulme Chief Finance Officer This information is provided by RNS The company news service from the London Stock Exchange ZMGRRGRZM

Companies

XPS Pensions Group (XPS)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today