Preliminary Results 2009

RNS Number : 1334W
eXpansys Plc
23 July 2009
 



PRELIMINARY RESULTS 2009


eXpansys plc ('eXpansys' or the 'Group'), a leading global online retailer of wireless technology, announces its preliminary results for the year ended 30 April 2009.


Key points


Successful implementation of major review and improvement programme, following the global economic downturn and resulting unprecedented turbulent trading conditions


Business risk reduced, cost base challenged and management of working capital improved:



-

Operations rationalised and headcount reduced by 86 - employee related expenses lowered by £122,000 per month and operational expenses by £40,000 per month



-

£1.5 million UK bank debt repaid in full, reducing monthly interest charge by £15,000



-

Cash inflow from operating activities of £1.0 million (2008: outflow £0.5 million)



-

Significant reduction in inventory - down £5.0 million to £1.5 million



-

Debtors reduced by £3.6 million to £2.1 million


£1.92 million additional working capital raised via placing with Virtual Phone Shop Limited ('VPS'), a company controlled by Peter Jones


Group strengthened to trade through difficult economic environment 


Well positioned to benefit from upturn in discretionary purchases in medium term



Roger Butterworth, Chief Executive, said: 'The last year was undoubtedly a very challenging time for the Group.  Our products have always been discretionary spend items and the global economic downturn has hit Group sales hard.  The Board, however, reacted swiftly and the resulting review and overhaul of Group operations has strengthened eXpansys significantly and created a leaner business, which is better able to handle harsh trading conditions and well positioned to take advantage of any upturn.

 

'The reduction in our sales was exacerbated by manufacturers withholding new product releases - our lifeblood - for better times.  New products such as the Nokia N97, HTC Hero and Apple i-Phone 3GS are now beginning to come to market and I am pleased to report that eXpansys has benefited from these.  Whilst we remain cautious, I am now more hopeful for the future of the business than I have been for some time and I believe the prospects of the Group in FY 2010 are very good indeed.'


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


Cenkos Securities plc

Tel: +44 (0) 20 7397 8926

Stephen Keys

skeys@cenkos.com


Rawlings Financial PR Limited

Tel: +44 (0) 1653 618 016

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. eXpansys operates some 50 websites in 15 different languages, operating in 16 currencies.  


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 and Hong Kong. 



CHAIRMAN'S STATEMENT


There is no doubt that the results are disappointing and that this has been another tough year for the Group. Our swift action to reduce costs, rationalise the business and raise additional working capital have, however, improved our prospects considerably, creating a stronger, leaner Group which the Board believes is capable of achieving sustainable profitability in the short to medium term.


Major review and improvement programme


As the economic climate worsened, with the inevitable impact on revenue and margins, management conducted a major review of Group operations and implemented a successful business improvement programme, the details of which are in our Chief Financial Officer's Review. In short, we took immediate action to preserve and support the Group's core operations, closing the Singaporean venture, Mobile & Wireless Group ('MWg'), which, despite early promise, had become a major drain on the Group's cash resources; outsourcing our UK warehousing operations; reducing headcount and related costs; raising additional working capital and addressing our historical inventory and debtor issues.


Fundraising


After the year end, the Company raised £1.92 million net of expenses in a Placing of 133,333,333 shares at 1.5 pence per share with Virtual Phone Shop Limited ('VPS'), a company controlled by Peter Jones, to provide the Group with the additional working capital. VPS now holds 81% of the Company's share capital.  


People


Stephen Vincent, a director of VPS, has today joined the Board of eXpansys as a Non-executive Director, following the successful completion of the Placing. Stephen's knowledge of our sector is profound and the expertise garnered as Finance Director of Phones International Group will be highly valued by the Group. On behalf of everyone at eXpansys, I welcome him to the Board.  


I also take this opportunity to thank Barry Roberts, who resigned as Chairman at our AGM in October 2008, for his contribution to the Group and, on behalf of the Board, wish him all the best for the future.  


Our staff have shown exceptional dedication in the face of extremely difficult trading conditions and I would like to thank them all for their commitment and enthusiasm.  


Outlook


Despite the turbulent economic conditions and cash flow issues we have faced, I believe that eXpansys is through the worst and the Group is much better positioned to take advantage of any upturn in discretionary spend purchases.  


Our priority for the first half of the current year is to cope with the difficult ongoing market conditions and complete our improvements to the Group's operations. The Board remains cautiously optimistic and, using our strong branding and global infrastructure, aims to return the Group to sustainable profitability in the short to medium term.


Graham Dawber

Non-executive Chairman

22 July 2009 



CHIEF EXECUTIVE'S OPERATING REVIEW


In my half year statement to shareholders, I outlined the decisive actions we had taken to mitigate the increasingly difficult global market conditions and to change the eXpansys business over to a new business model with lower costs and considerably less stock risk.  I am pleased to report that these actions were successful and that we made further progress throughout the second half of the year, which I expect to continue giving rise to considerable improvement in our results.


Our markets


While there have been regional variations in timing, all of the markets in which we operate have been adversely affected by the poor economic conditions of the last 12 months. Both consumers and businesses have drastically reduced their expenditure on significant discretionary purchases, including portable technology products, and this, combined with the shortage of cash caused by the losses in our MWg business and the reduced availability of both supplier credit and bank credit, has affected the eXpansys business severely. 


Following the year end, we addressed our cash shortfall through an issue of new shares and increased credit facilities, provided by our new investor. In addition to this, we are beginning to see some return of consumer spending in our UKUSA and Far East operations. The business in mainland Europe, which was last to suffer the effects of the global downturn, however, is still significantly affected by it.


Business review


The Company's core market remains the online sale of portable electronic devices. We continue to operate through four subsidiaries, eXpansys UK Limited, eXpansys SAS in Montpellier, France, which services mainland Europe, eXpansys Inc in Chicago, selling throughout the Americas, and eXpansys (Hong Kong) Limited, which covers the China and Australasian region.


As I noted in my half year report, the Group's operations in Singapore were closed down at the end of October 2008, incurring substantial losses. These losses are fully accounted for in these full year results.


During the year under review, we sought to reduce our overheads substantially through the outsourcing of our UK warehousing and call centre functions. This has been achieved and the business in the UK has a greatly reduced overhead as a result. Whilst we reduced inventory substantially in the UK and elsewhere, better Electronic Data Interface ('EDI') links with our suppliers ensured stock was available for next day shipment to our UK customers. The process of reducing the stock that we own and have physical control of, while increasing the stock that we can call upon electronically, will continue throughout the current financial year.


New products remain a significant source of revenue for the Group. Our early adopter customer base values our ability to deliver the very latest technology as fast as possible and we were doubly affected when several major manufacturers decided to delay new product releases because of the adverse economic conditions. However, in June 2009, there were major new releases from Nokia, Apple and HTC.


Placing and major new shareholder


Following the £1.92 million working capital fundraising in June 2009, VPS - a division of Phones International Group - became our largest investor with a shareholding of 81% in the business.  Phones International has been a business partner of eXpansys since 2001. Data Select, a wholly owned subsidiary of Phones International, has provided trade credit of £1.25 million, and has helped us to secure further credit from third party suppliers. This has resulted in a significant improvement in our cash flow and consequently in revenues, which will assist in our aim to deliver sustainable profitability going forward.


Prospects


The last year was undoubtedly a very challenging time for the Group.  Our products have always been discretionary spend items and the global economic downturn has hit Group sales hard.  The Board, however, reacted swiftly and the resulting review and overhaul of Group operations has strengthened eXpansys significantly and created a leaner business, which is better able to handle harsh trading conditions and well positioned to take advantage of any upturn.


The reduction in our sales was exacerbated by manufacturers withholding new product releases - our lifeblood - for better times.  New products such as the Nokia N97, HTC Hero and Apple i-Phone 3GS are now beginning to come to market and I am pleased to report that eXpansys has benefited from these.  


Whilst we remain cautious, I am now more hopeful for the future of the business than I have been for some time and believe the prospects of the Group in FY 2010 are very good indeed.


Roger Butterworth

Chief Executive Officer

22 July 2009 



CHIEF FINANCIAL OFFICER'S REVIEW


Focus on reducing risk and challenging costs


In light of the ongoing harsh economic conditions, our focus, this year, was fixed firmly on reducing business risk, improving management of working capital and challenging all costs. Despite the Group's poor financial performance, I am pleased to report that we successfully addressed these key issues. 


We have taken decisive action by closing the Singaporean business, Mobile & Wireless Group ('MWg'), during October 2008 in order to reduce ongoing trading losses and improve cash flow. During the first half of the year, MWg incurred a trading loss of £370,000 (2008: trading loss of £1.1 million), with a loss on disposal of £1.0 million which have been shown as discontinued operations in the Income Statement.  


Additional radical action was taken to reduce costs further. We closed our UK warehouse in December 2008, outsourcing the warehousing and logistics operations. These premises were successfully sublet in April 2009. A global redundancy programme was also undertaken during the year, incurring exceptional costs of £179,000. Headcount was reduced by 86 to 142 with a further reduction of 11 post year end. These combined actions have reduced monthly employee related expenses by £122,000 with a further £40,000 reduction in operational expenses.


Significant improvements in working capital


We made significant progress in the management of working capital within our ongoing operations, despite the very difficult economic conditions:


repaying UK bank debt in full, £1.5 million, reducing the Group's dependency on unreliable support;


generating positive cashflow from operating activities of £1.0 million, compared to 2008 cash outflow of £0.5m;


reducing inventory by £5.0 million;


decreasing receivables by £3.6 million; and


achieving a net repayment of creditors, in addition to the banking facilities, of £4.4 million.


Operating Results 


Like for like revenue decreased by £9.0 million to £47.1 million (2008: £66.8 million which included £10.7 million attributable to non-core distribution business, Portix, sold in April that year).


A significant proportion of our oldest inventory was obtained through historical business acquisitions pre flotation. We had expected to sell these products profitably and had, therefore, avoided aggressive pricing policies. In order to focus on moving the restructured business forward, we focused on realising cash through the sale of this older stock and now believe it has become necessary to make provisions for this inventory, which led to exceptional costs of £2.1 million. This has depressed our gross profit margin for the year under review to 21.1%. Pre-exceptionals, the gross profit margin would have increased to 25.5%. 


Exceptional administration expenses were also incurred during the year of £684,000 relating to redundancies and reorganisation costs and £734,000 bad debt write offs netted against a release of warranty provision of £286,000.


Non-exceptional administration costs for the full year were reduced by 10.0% to £8.9 million, (2008: £9.9 million) due to the restructuring highlighted above.  


The disposal of the non-core UK distribution business in April 2008, resulted in a profit on disposal of £187,000, with an immediate cash consideration of £760,000 and £400,000 deferred consideration payable, dependent on two trading contracts being awarded to the acquiror. Unfortunately, £300,000 of the deferred consideration did not become payable, leading to a write off in the current year.  


There were also reductions in interest charges on bank loans and overdrafts by £224,000 to £235,000, due to the repayment of the UK banking facilities during the year.  


Post balance sheet events


On 15 June 2009, we issued 133,333,333 new ordinary shares, raising £2 million, to Virtual Phone Shop Limited, a company controlled by Peter Jones.  


Cate Hulme

Chief Financial Officer

22 July 2009   GROUP INCOME STATEMENT

For the year ended 30 April 2009



2009

2008


£000

£000



Restated*




Revenue

47,052

66,789







Exceptional cost of sales

(2,057)

(1,576)

Other cost of sales

(35,077)

(52,421)




Total cost of sales

(37,134)

(53,997)




Gross profit

9,918

12,792




Distribution costs

(3,182)

(3,657)







Exceptional administrative expenses 

(1,132)

(418)

Other administrative expenses

(8,903)

(9,889)




Total administrative expenses

(10,035)

(10,307)




Operating loss from continuing operations

(3,299)

(1,172)




Exceptional operating loss

(3,189)

(1,994)

Other operating (loss) / profit

(110)

822




Finance revenue

35

28

Finance costs

(235)

(459)




(Loss) / profit on disposal of distribution business

(300)

187




Loss from continuing operations before taxation

(3,799)

(1,416)

Tax credit

465

366




Loss for the year from continuing operations

(3,334)

(1,050)




Discontinued operations



Loss for the year from discontinued operations

(1,379)

(1,124)




Loss for the year

(4,713)

(2,174)




Loss for the year attributable to:



  Equity holders of the parent

(4,713)

(2,174)

  Minority interest

-

-




Loss for the year

(4,713)

(2,174)




Earnings per share (pence)



Basic and diluted loss per share from continuing operations

(7.4)p

(2.6)p

Basic and diluted loss per share from loss for the year

(10.5)p

(5.3)p


*restated for the segregation of results of operations discontinued during 2009

  

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 30 April 2009



2009

2008


£000

£000



*restated




Income and expense recognised directly in equity



Currency translation differences

669

43

Deferred taxation on share based payment

-

(179)




Net income / (expense) recognised directly in equity

669

(136)




Loss for the year from continuing operations before taxation

(3,779)

(1,416)

Tax credit

465

366

Loss for the year from discontinued operations

(1,379)

(1,124)




Total recognised expense relating to the year

(4,044)

(2,310)




Attributable to:



Equity holders of the parent

(4,044)

(2,310)

Minority interest

-

-





(4,044)

(2,310)


*restated for the segregation of results of operations discontinued during 2009



GROUP BALANCE SHEET

As at 30 April 2009


2009

2008


£000

£000

ASSETS



Non current assets



Plant and equipment

470

751

Intangible assets

4,949

4,812

Deferred income tax assets

1,289

812





6,708

6,375

Current assets



Inventories

1,540

6,912

Trade and other receivables

2,082

6,459

Income tax receivable

37

-

Cash and short term deposits

405

2,179





4,064

15,550




Total assets

10,772

21,925




LIABILITIES



Current liabilities



Trade and other payables

(6,754)

(11,250)

Financial liabilities

(248)

(2,124)

Income tax payable

-

(79)

Government grants

(86)

(44)

Provisions

(22)

(625)





(7,110)

(14,122)

Non current liabilities



Financial liabilities

(203)

(263)

Deferred tax liabilities

(7)

(60)





(210)

(323)




Total liabilities

(7,320)

(14,445)







Net assets

3,452

7,480




Capital and reserves



Equity share capital

9,165

9,165

Merger reserve

750

750

Currency translation

688

19

Retained earnings

(7,151)

(2,454)




eXpansys Group shareholders' equity

3,452

7,480

Minority interest

-

-




Total equity

3,452

7,480


The financial statements of eXpansys plc ('the Group') for the year ended 30 April 2009 were authorised for issue by the Board of Directors on 22 July 2009 and the balance sheet was signed on the Board's behalf by


R Butterworth

CEO

C Hulme

CFO



GROUP CASH FLOW STATEMENT

For the year ended 30 April 2009



2009

2008


£000

£000



*restated




Operating activities



Operating loss from continuing operations

(3,299)

(1,172)

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

321

590

Amortisation of intangible assets

775

575

Share based payments

16

1

Currency movements

(112)

4

Decrease / (increase) in inventories

4,968

(598)

Decrease / (increase) in trade and other receivables

3,597

(484)

(Decrease) / increase in trade and other payables

(4,415)

2,520




Cash generated from continuing operations

1,551

1,436

Discontinued operations: MWg Singapore

(152)

(1,499)

Income tax paid

(182)

(4)

Interest paid

(200)

(430)




Net cash flow from operating activities

1,017

(497)




Investing activities



Payments to acquire subsidiary undertaking

-

(303)

Cash acquired with subsidiary undertaking

-

271

Inflow on disposal of distribution business

-

760

Discontinued operations: MWg Singapore

(158)

(171)

Payments to acquire plant and equipment

(136)

(64)

Payments to acquire intangible assets

(560)

(572)




Net cash flow from investing activities

(854)

(79)




Financing activities



Proceeds from share issues

-

400

New borrowings

26

-

Repayment of borrowings

(18)

(28)

Repayments of capital element of finance leases and hire purchase contracts

(168)

(222)




Net cash flow from financing activities

(160)

150




Increase / (decrease) in cash

3

(426)

Cash and cash equivalents at the beginning of the year

313

739




Cash and cash equivalents at the year end

316

313


*restated for the segregation of results of operations discontinued during 2009



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 2009 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 above does not constitute the Group's statutory financial statements for the year ended 30 April 2009 but is derived from those financial statements. The comparative figures are those of the financial statements for the year ended 30 April 2008. The report of the auditors was unqualified and did not contain a statement under s.237 (2) or (3) Companies Act 1985. The statutory financial statements for the year ended 30 April 2009 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.


The financial statements of eXpansys plc and its subsidiaries (the 'Group') for the year ended 30 April 2009 were authorised for issue by the Board of Directors on 22 July 2009 and the balance sheet was signed on the Board's behalf by Roger Butterworth and Cate Hulme.  


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


The annual report is available to shareholders and members of the public on the Company's website at www.expansys.com.  


2. Accounting policies


Judgements and key sources of estimation uncertainty 

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);

inventories; and

trade receivables; and

taxation.

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.


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 many 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 Group is managed and reported, on a worldwide basis, according to operating divisions aligned to the main trading subsidiaries: 


eXpansys UK Limited, incorporated in United Kingdom, shipping to United Kingdom and the rest of the world from warehouses in United Kingdom;

eXpansys Nomatica SAS, incorporated in France, shipping to Continental Europe from its warehouse in MontpelierFrance;

eXpansys Inc (formerly 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;

eXpansys Hong Kong Limited, incorporated in Hong Kong, shipping to the Far East from its warehouse in Hong Kong; and

Mobile & Wireless Group PTE Limited (MWg), incorporated in Singapore during November 2007 and discontinued in October 2008, shipping on a world wide basis through the warehouses in the rest of the Group and direct from suppliers.  


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.  


Secondary segment information (business segments) has not been reported separately as all of the revenue and expenses and all the assets relate to the one continuing activity, being the sale of portable communication and computing devices.


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 on consolidation.  


Segment assets consist primarily of plant and equipment, intangible assets, inventories, trade and other receivables and cash and cash equivalents. Unallocated assets comprise goodwill and intercompany balances.  


Segment liabilities comprise operating liabilities. Unallocated liabilities comprise intercompany balances and financial liabilities.  


Capital expenditure comprises additions to plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.  


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 2009 and 2008.


During the year the MWg business was discontinued, therefore, 2008 results were restated for the segregation of the results of these operations.  







Continuing

Operations

Discontinued

Operations


UK &

rest of

world


Continental

Europe


USA &

Canada


Far

East



Total



MWg


£000

£000

£000

£000

£000

£000








Year ended 30 April 2009














Revenue







Sales to external customers

 

14,310

 

20,317

 

8,532

 

3,893

 

47,052

 

2,099

Inter-segment sales

8,775

3,209

1,445

1,142

14,571

277








Segment revenue

23,085

23,526

9,977

5,035

61,623

2,376








Results







Segment result

(1,941)

86

(502)

(942)

(3,299)

370








Group operating loss





(3,299)


Net finance costs





(200)


Exceptional write off of deferred consideration






(300)










Loss before taxation for continuing operations






(3,799)


Tax expense





465









Loss for the year for continuing operations






(3,334)









Assets and liabilities







Segment assets

5,853

3,069

820

324

10,066


Unallocated assets





706









Total assets





10,772









Segment liabilities

(5,780)

(1,923)

(819)

(598)

(9,120)


Unallocated liabilities





1,800









Total liabilities





(7,320)









Other segment information







Plant and equipment capital expenditure


82


18


6


30


136


-

Intangible assets capital expenditure


560


-


-


-


560


-

Impairment of trade receivables 


736


-


-


-


736


-

Depreciation

204

41

22

54

321

-

Amortisation

608

104

10

53

775

-







Continuing

Operations

Discontinued

Operations


UK &

rest of

world


Continental

Europe


USA &

Canada


Far

East



Total



MWg


£000

£000

£000

£000

£000

£000








Year ended 30 April 2008














Revenue







Sales to external customers

 

32,738

 

17,422

 

12,968

 

3,661

 

66,789

 

2,866

Inter-segment sales

13,778

3,921

4,376

2,803

24,878

-








Segment revenue

46,516

21,343

17,344

6,464

91,667

2,866








Results







Segment result

(1,080)

390

(469)

(13)

(1,172)

(1,124)








Group operating loss





(1,172)


Profit on disposal of division





187


Net finance costs





(431)









Loss before taxation for continuing operations






(1,416)


Tax credit





366









Loss for the year for continuing operations






(1,050)









Assets and liabilities







Segment assets

11,354

3,373

1,714

788

17,229

1,219

Unallocated assets





3,477









Total assets





20,706









Segment liabilities

(9,624)

(2,363)

(1,330)

(368)

(13,685)

(2,281)

Unallocated liabilities





1,521









Total liabilities





(12,164)









Other segment information







Plant and equipment capital expenditure


257


23


16


96


392


183

Intangible assets capital expenditure


810


-


-


-


810


-

Impairment of trade receivables 


103


-


-


-


103


-

Depreciation

474

44

24

18

560

30

Amortisation

575

-

-

-

575

-


2008 results were restated for the segregation of results of operations discontinued during 2009.


4. Exceptional items



2009

2008


£000

£000




Cost of sales



Exceptional stock write downs in order to generate cash

2,057

1,576




Administrative expenses



Costs relating to restructuring of Group financing arrangements

-

29

Costs in relation to redundancies in eXpansys UK and eXpansys Inc

179

389

Provision against two debts due from overseas businesses in financial difficulties


734


-

Cost of Australian office reorganisation

295

-

Release of warranty provision

(286)

-

Cost of UK warehousing reorganisation

210

-


1,132

418




Total exceptional costs

3,189

1,994


All of the exceptional items in the table above are deemed allowable for corporation tax purposes.  


2008 results were restated for the segregation of results of operations discontinued during 2009.


5.  Discontinued operations


In October 2008, the Board took the decision to close MWg and therefore this business has been treated as discontinued in the financial statements.


The results of MWg for 2009 and 2008 are presented below:



2009

2008


£000

£000




Revenue

2,099

2,866

Cost of sales

(1,339)

(1,998)




Gross margin

760

868

Expenses

(1,104)

(1,977)




Operating loss

(344)

(1,109)

Finance costs

(26)

(15)




Loss before tax from discontinued operation

(370)

(1,124)

Loss on disposal of discontinued operation

(1,009)

-

Tax

-

-




Loss for the year from discontinued operations

(1,379)

(1,124)


The business commenced trade in November 2007 and therefore the results for 2008 financial year include only six months of trade. The results for 2009 financial year also include only six months of trade since the business was closed at the end of October 2008.


The major classes of assets and liabilities of MWg as at 31 October 2008 were as follows:





£000



Assets


Property, plant and equipment

158

Inventory

404

Trade receivables

701

Cash

70


1,333



Liabilities


Trade payables

(633)

Other liabilities

(2,317)


(2,950)



Net liabilities of disposal group

(1,617)


The net cash flows attributable to MWg are as follows:



2009

2008


£000

£000




Operating cash flows

(152)

(1,499)

Investing activities

(158)

(171)




Net cash outflow

(310)

(1,670)





2009

2008




Basic and diluted loss per share from discontinued operations

(3.1)p

(2.7)p


6. 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 amounts are calculated by dividing the profit 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:



2009

2008


£000

£000




Loss for the year from continuing operations

(3,334)

(1,050)

Loss for the year from discontinued operations

(1,379)

(1,124)

Less minority interests

-

-




Loss attributable to equity holders of the parent

(4,713)

(2,174)



2009

2008


thousands

thousands




Basic weighted average number of shares

44,838

40,914

Dilutive potential ordinary shares:



  Employee and consultant options

6,080

1,231

   Warrants over options

403

904




Diluted weighted average number of shares

51,321

43,049


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 income statement, 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:



2009

2008




Basic loss per share from continuing operations

(7.4)p

(2.6)p


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



2009

2008


£000

£000




Loss for the year from continuing operations

(3,334)

(1,050)

Less minority interests

-

-




Loss from continuing operations attributable to equity holders of the parent

(3,334)

(1,050)

Loss / (profit) on disposal of distribution business

300

(187)

Exceptional items after tax attributable to equity holders of the parent

3,189

1,994




Profit from continuing operations before exceptional items attributable to equity holders of the parent


155


757

                    

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



2009

2008




Basic earnings per share from continuing operations before exceptional items

0.3p

1.9p




Diluted earnings per share from continuing operations before exceptional items

0.3p

1.8p


7. Reconciliation of movements in equity




Equity share

capital


Merger

reserve

Currency

translation

reserve


Retained

earnings


£000

£000

£000

£000






At 1 May 2007

8,765

750

(24)

(150)

Issue of shares

400

-

-

-

Share based payment

-

-

-

49

Deferred tax movement on share based payments


-


-


-


(179)

Loss for the year

-

-

-

(2,174)

Exchange differences on retranslation of net assets of subsidiary undertakings


-


-


43


-






At 30 April 2008

9,165

750

19

(2,454)

Share based payment

-

-

-

16

Loss for the year

-

-

-

(4,713)

Exchange differences on retranslation of net assets of subsidiary undertakings


-


-


669


-






At 30 April 2009

9,165

750

688

(7,151)




Share

holder

equity


Minority

Interests


Total

equity



£000

£000

£000






At 1 May 2007


9,341

-

9,341

Issue of shares


400

-

400

Share based payment


49

-

49

Deferred tax movement on share based payments




(179)


-


(179)

Loss for the year


(2,174)

-

(2,174)

Exchange differences on retranslation of net assets of subsidiary undertakings



43


-


43






At 30 April 2008


7,480

-

7,480

Share based payment


16

-

16

Loss for the year


(4,713)

-

(4,713)

Exchange differences on retranslation of net assets of subsidiary undertakings



669


-


669






At 30 April 2009


3,452

-

3,452


Equity share capital

The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital, comprising 0.25p ordinary shares.  


Merger reserve

As a result of the acquisition of eXpansys Nomatica SAS in a share for share exchange, merger relief was taken and no share premium was recognised, rather the premium arising was credited to merger reserve.


Currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.  


8. Post balance sheet events


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.


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, and the ultimate controlling party has become Peter Jones.  


9. Additional cash flow information


(a) Analysis of Group net debt



At


New finance

At


1 May 2007

Cash flow

lease

30 April 2008


£000

£000

£000

£000






Cash at bank and in hand

739

1,440

-

2,179

Bank overdrafts

-

(1,866)

-

(1,866)


739

(426)

-

313

Finance leases

(492)

222

(29)

(299)

Bank loans

(250)

28

-

(222)







(3)

(176)

(29)

(208)







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 cashflow from operating activities includes the following exceptional cash flows:



2009

2008


£000

£000




Non recoverable distribution expenses

-

223

Costs relating to restructuring of Group financing arrangements

-

29

Costs in relation to redundancies in eXpansys UK and eXpansys Inc

179

172

Cost of UK warehousing reorganisation

210

-





179

424


        




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