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Arcontech Group PLC (ARC)

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Friday 20 March, 2009

Arcontech Group PLC

Half Yearly Report

RNS Number : 1754P
Arcontech Group PLC
20 March 2009
 






20 March 2009


ARCONTECH GROUP PLC 

(formerly Knowledge Technology Solutions plc)


INTERIM REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2008


Arcontech Group PLC (AIM: ARC)('Arcontech' or the 'Company'), providers of products and services for real-time financial market data processing and trading, reports its unaudited results for the six months ended 31 December 2008.


Financial and business highlights:


  • Turnover from the continuing Arcontech business £466,409 (2007 £548,446), reflecting the low level of new contracts won and delivered in the period.
  • Losses before taxation from the continuing business for the period reduced to £465,156 (six months to 31 December 2007 £704,084).
  • Cost base substantially reduced. 
  • Recurring revenues now cover 51% of our cost base.


Richard Last, Chairman of Arcontech Group, said:


'Despite the general level of uncertainty in the financial services markets, we believe the opportunities for the refocused Arcontech business are significant. We have continued to invest in sales and marketing whilst reducing our overall level of costs. With recent sales wins we anticipate delivering an improved financial result for the second half of the current year.



 

Enquiries; please contact:


Andrew Miller (Chief Executive)

Arcontech Group PLC

020 7256 2300

Richard Last (Chairman and Non-Executive Director)


Arcontech Group PLC


01608 683108

Shane Gallwey/Blaine Tatum

Blue Oar Securities PLC

020 7448 4400



Chairman's Statement


The results of Arcontech Group Plc ('Arcontech') for the six months ended 31 December 2008 finally bring to a close our withdrawal from the MarketTerminal business. Management is now able to focus on the growth and development of Arcontech's contributions and distribution software, and on its 'AXE' CFD and spread betting system, where we believe significant opportunities exist.


The continuing Arcontech business reported a turnover of £466,409 for the six month period to 31 December 2008, (six month period to 31 December 2007 £548,446), this reduction reflects the low level of new contracts won and delivered in the period; partly due to the disruption caused by management focus on the withdrawal from the MarketTerminal business. Losses before taxation from the continuing business for the period were reduced to £465,156 (six months to 31 December 2007 £704,084) reflecting the action previously taken to reduce costs and the non-recurrence of exceptional charges. 


The profit from the discontinued MarketTerminal operations reflects the higher than expected number of MarketTerminal users converting to the Sharescope System for which we received a fee and the reduced costs of closure compared to those anticipated at the year end. 


The cost base of the business has been substantially reduced and now has a monthly run rate of approximately £138,000, whilst contracted support revenues amount to approximately £56,000 per month; 40% of our costs being covered by support revenues. In addition we have 'run-rate' sales of over £15,000 per month from existing customers, which, combined with the contracted revenues covers 51% of our 

cost base. This leaves the business well placed to benefit from the increase in larger project sales to new and existing customers, which we believe is achievable despite the present challenging market conditions. 


I am pleased to report that the level of new business sales opportunities has increased significantly in recent months, reflecting the benefit of focusing management and sales resources on our core business areas. In February we secured a significant contract for our market data contributions system from a leading European banking group. The system is to be deployed in four major financial centres. We believe that other similar opportunities exist, albeit the timing of order placement is far less predictable in these uncertain markets.


Financing


At the close of business on 31 December 2008 the business had net cash balances of approximately £374,000, increasing to approximately £550,000 on 28 February 2009. Although the level of cash will fluctuate depending on the timing of the receipt of orders, we expect the company to remain cash positive for at least the remainder of the year. 


Management and staff 


Once again I should like to thank our management and staff for their continued hard work and dedication in what has clearly been a demanding time for the company. We believe that the road ahead, whilst challenging, will be one of opportunity and that the skills and dedication of our team will ensure that we are able to benefit from this environment. 


Outlook


Despite the general level of uncertainty in the financial services markets, we believe the opportunities for the refocused Arcontech business are significant. We have continued to invest in sales and marketing whilst reducing our overall level of costs. With recent sales wins we anticipate delivering an improved financial result for the second half of the current year.  





Richard Last

Chairman

  

CONSOLIDATED INCOME STATEMENT for the six months ended 

31 December 2008




Six months ended 31 December


Six months ended 31 December


Year ended 30 June 


Notes

2008


2007


2008

 

 

 

 

Restated*

 

Restated*



£


£


£

Continuing operations







Revenue


466,409


548,446


1,177,173








Distribution costs


(6,352)


(85,337)


(32,677)








Administrative costs excluding exceptional items


(930,556)


(968,280)


(2,287,111)








Exceptional administrative costs

3

(2,103)


(221,787)


(222,062)















Operating loss


(472,602)


(726,958)


(1,364,677)








Finance income 


7,446


22,874


36,548















Loss before taxation


(465,156)


(704,084)


(1,328,129)








Taxation 

5

-


-


67,754















Loss for the period from continuing operations


6

(465,156)


(704,084)



(1,260,375)








Discontinued operations







Profit/(loss) for the period after tax from discontinued operations



4

65,843


(210,879)




(377,123)















Loss for the period


(399,313)


(914,963)


(1,637,498)















Loss per share*














From continuing operations

6






Basic


(0.063)p


(0.162)p


(0.242)p

Diluted


(0.063)p


(0.162)p


(0.242)p








From continuing and discontinued operations


6






Basic


(0.054)p


(0.211)p


(0.314)p

Diluted


(0.054)p


(0.211)p


(0.314)p









*See discontinued operations - note 4


CONSOLIDATED BALANCE SHEET as at 31 December 2008






31 December 




31 December 




30 June


Notes

2008


2007


2008



£


£


£








Non-current assets







Goodwill


1,634,547


1,422,598


1,634,547

Plant and equipment


131,589


128,731


154,390















Total non-current assets


1,766,136


1,551,329


1,788,937















Current assets







Inventories


-


281


-

Trade and other receivables


606,268


519,158


563,159

Cash and cash equivalents


374,478


796,951


1,082,604















Total current assets


980,746


1,316,390


1,645,763















Current liabilities







Trade and other payables 


(736,831)


(1,084,387)


(1,052,521)















Total current liabilities


(736,831)


(1,084,387)


(1,052,521)















Net current assets


243,915


232,003


593,242















Net assets


2,010,051


1,783,332


2,382,179















Equity







Share capital 


736,443


488,643


736,443

Share premium account


8,516,940


7,489,278


8,516,940

Share option reserve


73,105


-


45,920

Retained earnings


(7,316,437)


(6,194,589)


(6,917,124)

















2,010,051


1,783,332


2,382,179











CONSOLIDATED CASH FLOW STATEMENT for the six months ended 

31 December 2008




Six months ended 31 December 


Six months ended 31 December 


Year ended 30 June


Notes

2008


2007


2008





Restated*


Restated*



£


£


£

Continuing operations








Net cash used in operating activities

7

(705,110)


(558,734)



(1,162,698)








Investing activities







Interest received


7,446


22,874


  36,548

Acquisition of subsidiary, net of cash acquired 




-



(782,574)



  (784,523)

Purchases of property, plant and equipment



(1,956)



(21,744)



   (75,178) 















Net cash used in investing activities


(699,620)


(1,340,178)


(1,985,851)















Financing activities







Proceeds on issue of shares


-


1,000,000


2,239,000

Expenses paid in connection with share issues



-



(76,481)



(130,019)















Net cash generated from financing activities



-



923,519



  2,108,981








Net (decrease) / increase in cash and cash equivalents from continuing operations




(699,620)




(416,659)


   


123,130








Discontinued operations







Cash flows from operating activities


(10,757)


(262,699)


(519,153)

Cash flows from investing activities


2,251


2,858


  5,176








Net decrease in cash and cash equivalents from discontinued operations




(8,506)




(259,841)


   


(513,977)















Net decrease in cash and cash equivalents


(708,126)


(676,500)


(390,847)








Cash and cash equivalents at beginning of period



1,082,604



1,473,451



  1,473,451








Cash and cash equivalents at end of period



374,478



796,951



1,082,604










NOTES TO THE FINANCIAL INFORMATION for the six months ended 

31 December 2008

 

1       Basis of preparation


The financial information for the year ended 30 June 2008 set out in this interim report does not comprise the Group's statutory accounts as defined in section 435 of the Companies Act 2006. 

The statutory accounts for the year ended 30 June 2008, which were prepared under International Financial Reporting Standards (IFRS) as adopted for use in the EU, applied in accordance with the provisions of the Companies Act 1985, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. 

The figures for the six months ended 31 December 2008 and 2007 are unaudited and do not constitute statutory accounts.

The Directors have elected not to apply IAS34 Interim financial reporting. 

2        Accounting policies


The Group's results for the six months ended 31 December 2008 have been prepared on a basis consistent with the Group's accounting policies published in the financial statements for the year ended 30 June 2008. These accounting policies reflect International Financial Reporting Standards (IFRS) and interpretations that are expected to be applicable to the Group for its financial statements for the year ending 30 June 2009.








Six months ended 31 December 2008


Six months ended 31 December 2007


Year ended 30 June 2008





Restated*


Restated*

3

Administrative costs - exceptional














Continuing operations














Directors remuneration - payment in lieu of notice


2,103



135,315



135,315









Restructuring costs - office relocation expenses


-



86,472



86,747

















2,103


221,787


222,062
















*See discontinued operations - note 4



4
Discontinued operations
 
On 29 August 2008 Knowledge Technology Services Limited terminated its MarketTerminal subscription service. The comparative income statement has been re-presented to show the discontinued operations separately from continuing operations.




Six months ended 31 December


Six months ended 31 December


Year ended 30 June 



2008


2007


2008

Results of discontinued operations



£



£



£








Revenue


-


369,255


762,431








Distribution costs


117,396


(437,920)


(874,478)








Administrative costs


(53,804)


(145,072)


(270,252)















Operating profit/(loss) from discontinued operations




63,592



(213,737)



(382,299)








Finance income 


2,251


2,858


5,176















Profit/(loss) before taxation


65,843


(210,879)


(377,123)








Taxation 


-


-


-















Profit/(loss) for the period 


65,843


(210,879)


(377,123)






















Earnings/(loss) per share - discontinued operations














Basic


0.009p


(0.049)p


(0.072)p

Diluted


0.009p


(0.049)p


(0.072)p









The results for the six months ended 31 December 2008 reflect the adjustment to the provision made in the year ended 30 June 2008 in respect of forecast net costs relating to the termination of the Market Terminal subscription service.



5

Taxation from continuing activities








Taxation is based on the unaudited results for the period and provision has been estimated at the rate applicable to the company at the time of this statement.


  

6

Earnings per share















Six months ended 31 December


Six months ended 31 December


Year ended 30 June



2008


2007


2008





Restated*


Restated*



£


£


£


From continuing operations














Earnings







Earnings for the purposes of basic and diluted earnings per share being net loss attributable to equity shareholders



(465,156)




(704,084)




(1,260,375)










From continuing and discontinued operations














Earnings







Earnings for the purposes of basic and diluted earnings per share being net loss attributable to equity shareholders



(399,313)




(914,963)




(1,637,498)










Number of shares







Weighted average number of ordinary shares for the purposes of basic earnings per share



736,442,943




434,098,861




520,890,310









Number of dilutive shares under option


-



-



-









Weighted average number of ordinary shares for the purposes of dilutive earnings per share



736,442,943




434,098,861




520,890,310










The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is performed to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options. The impact on the net loss of these potential ordinary shares is anti-dilutive.


*See discontinued operations - note 4

  


7

Cash used in operations




Six months ended 31 December


Six months ended 31 December


Year ended 30 June



2008 


2007 


2008





Restated*


Restated*



£


£


£


Continuing operations














Operating loss

(472,602)


(726,958)


(1,364,677)


Depreciation charge

24,757


19,976


47,580


Non cash share option charges

27,185


-


45,920


Increase in trade and other receivables


(128,522)



(85,027)



(68,784)


Increase in inventories

-


(281)


-


(Decrease)/increase in trade and other payables


(155,928)



233,556



214,657


Loss on disposal of property, plant and equipment


-



-



171









Cash used in continuing operations


(705,110)



(558,734)



(1,125,133)









Tax paid

-


-


(37,565)

















(705,110)


(558,734)


(1,162,698)









*See discontinued operations - note 4



8

Dividends




  There were no dividends paid or proposed during the period (2007: Nil).



9

Copies of this statement




Copies of this statement are available from the Company Secretary at the Company's registered office at 8th Floor Finsbury Tower, 103-105 Bunhill Row, LondonEC1Y 8LZ or from the Company's website at www.arcontech.com.



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