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Intellego (ARGP)

  Print      Mail a friend       Annual reports

Friday 03 September, 2010

Intellego

Final Results






For immediate release 3 September 2010

             Intellego Holdings Plc ("Intellego" or "the Company")
             Financial statements for the year ended 31 March 2010

The  Company today announces that its  audited financial statements for the year
ended  31 March 2010, extracts from which are set out below, are being posted to
shareholders, and will be available on the website www.intellego.co.uk

Chairman's Statement

The  year under review has seen significant changes to your Company. In response
to  continuing losses,  your newly  appointed executive  team has  implemented a
series of measures to improve the Company's financial position and performance.

Overheads have been reduced by 30% or £485,000 pa and the product offerings have
been focussed on the more profitable business units.

Following  the year  end we  have completed  three significant transactions. The
main  part of the software  distribution business has been  sold for £464,000; a
related trade investment of £100,000 was secured at the same time; and Creditors
Voluntary  Arrangements  were  approved  with  the Company's creditors releasing
£440,000 in liabilities.

The  effect  of  these  post  balance  sheet  transactions brings the group into
positive net assets of £83,000.

These  measures provide the foundations  for profitable trading, a substantially
strengthened balance sheet and a more secure future.

Result for the Period

As  I commented  in last  year's statement  we, like  many other companies, were
affected  by the recession and this has continued through this year. The results
for the full year ended 31 March 2010 showed a loss of £1,043,000 on turnover of
£1,853,000.

In the first half of the Period sales were 23% below 2009 and, although we won a
large  distribution  contract  in  October  last  year,  this  made a negligible
contribution.  As our distribution  division was making  losses, £465,000 in the
period,  we decided to scale  back that activity and  following the year end, we
disposed of the largest part of that business to NetDimensions (Holdings) Ltd as
described below.

Three  quarters of the losses,  £768,000 in the year  to 31 March 2010 relate to
discontinued,  loss-making operations of  £465,000, one-off reorganisation costs
of  £70,000 and non-cash charges for  amortisation and depreciation of £233,000.
Our cost-cutting exercise will further benefit the on-going business by £376,000
in a full year.

Changes during the Period

In order to achieve the objective of profitable trading the following steps have
been taken:

Financial  - We reduced costs throughout  the business. Overall annual overheads
have  been reduced  in aggregate  by approximately  £485,000. Although this cost
reduction  programme began at  the end of  2009, due to contractual obligations,
the full benefits are being realised only following the period end. In addition,
organisational  changes have been made to reduce  the costs of production and to
improve margins and adopt more flexible working practices.

Market  - Intellego is concentrating its sales  effort on its chosen markets and
has  re-organised its sales force  to be more customer  and solution rather than
product  focused. We are using existing expertise and market knowledge to create
products  that  can  be  sold  repeatedly,  direct by Intellego's sales team and
through our channel partners.

Products  -  We  have  changed  the  product  mix by introducing more of our own
products  delivered to  customers through  managed services.  This is creating a
business with the following characteristics:

  *             Higher margins;

  *             Recurring revenue streams;

  *             Increased  revenues  with  products  charged  for  on a per user
    basis; and

  *             The creation of our own valuable intellectual property.

We  are developing of  libraries of products  with widespread appeal targeted at
specific market sectors, typically regulatory and compliance products, the first
two being:

  *             Healthcare  - Zenosis and Think  Medicine libraries are targeted
    at the pharmaceutical, biotech and healthcare markets; and

  *             Financial  - The first financial  services library products were
    launched  - a  set of  workbooks are  available on-line  together with novel
    services to assist candidates to pass the new JO and RO exams to achieve RDR
    level 4 compliance.

We  are offering a  range of performance  enhancing third party,  best of breed,
bought-in  products. These  include software  platforms and  tools both of which
will  be  sold  as  a  component  in  a  complete  solution managed by Intellego
including:

  *             Learning management systems;

  *             Software simulation products; and

  *             Bought-in content.

The  directors believe that this portfolio  of products and services will enable
the Company to take advantage of market demand for business improvement, to have
a  competitive  edge  and  have  the  potential to expand quickly and profitably
whilst controlling overheads.

Post balance sheet events

NetDimensions

On  28 April 2010 we announced the sale of Intellego's EKP distribution business
to  NetDimensions  for  up  to  £464,000  together with a £100,000 investment by
NetDimensions  in Intellego.  This move  has enabled  the Company  to change its
focus from being a distributor to a publisher and provider of managed e-learning
solutions.  This sale allowed the Company to  generate capital from this part of
the  business which  will be  redeployed by  investing in  its own new published
products.  Part  of  the  consideration  due  to Intellego is performance based,
amounting to £94,000 over the next two years, up to £188,000 in aggregate.

We remain a partner of NetDimensions and will continue to sell their products as
part  of  our  solutions.  We  expect  reciprocal business opportunities will be
introduced  to  us  by  NetDimensions.  We  also  welcome NetDimensions £100,000
investment in Intellego.



Management of historic liabilities

After  the year end the quoted Company  and its main trading subsidiary proposed
Company  Voluntary Arrangements (CVAs)  to the creditors  and members. Both CVAs
were  approved in  June and  July this  year. Note  5 of the  accounts shows the
benefits  of the  CVAs. The  advantages of  the CVAs  are that the amount of the
liabilities  is reduced, whilst outstanding creditor  payments are phased over a
period during which the Company is protected by the Court from these creditors.

These  events  are  further  detailed  within  notes  1 and  5 to  the financial
statements.  The combined  effect of  these events  is to  have strengthened the
Company's balance sheet by £933,000 to positive net assets of £83,000.

Current trading

The  Board believes the changes made are  beginning to have a positive impact in
the  current financial year. Turnover which  was expected to fall, following the
disposal  of the distribution business, is now building. Margins are higher than
in  previous years, and overheads are lower.  The sales pipeline is building and
we  have  secured  several  significant  initial  project  sales  with  FTSE-250
customers and we are now winning repeat business from them.

Outlook

Since  the start of the  current financial year, sales  are broadly in line with
budget.  As the full benefit of the cost cutting exercise begins to take effect,
the  Company is nearing profitable trading  month-on-month and is slightly ahead
of  budget. We expect that  the business should become  profitable in the second
half of the current financial year.

At  the start of September  2010 we are opening a  new sales division to exploit
our published catalogue, and have recruited an experienced sales manager to head
up  this new business  unit, which we  expect to be  profitable by the financial
year end.

In  order to create value we plan to  generate profits and increase the scale of
the business so we continue to review possible business combinations which would
accelerate that process.

Finally,  I would like to thank the loyalty and contributions made by all staff,
shareholders,  advisers  and  suppliers  through  what  has been a year of major
changes and challenges.

There was change in every aspect of the Company during the year and the Company
has emerged with a stronger balance sheet, lower overheads, higher margins and
new products.


For further information:


Intellego Holdings plc

  *       Angus Forrest Telephone 0845 058 3960



Beaumont Cornish Limited

  *       Roland Cornish Telephone 020 7628 3396


Intellego Holdings Plc                                    11
Financial statements for the year ended 31 March 2010

Consolidated statement of comprehensive income

                                                         2010        2009

                                                    Note £           £


 Revenue                                             2     1,853,266   2,342,124


 Cost of sales                                           (1,037,843)   (674,903)


 Gross profit                                                815,423   1,667,221

 Operating charges before depreciation and
 amortisation and restructuring                          (1,524,226) (1,947,114)


 EBITDA((1)) before restructuring costs                    (708,803)   (279,893)


 Restructuring costs                                        (66,000)    (73,914)


 EBITDA                                                    (774,803)   (353,807)


 Depreciation and amortisation                             (233,451)   (126,403)



 Operating loss                                          (1,008,254)   (480,210)


 Finance income                                                    -       1,310

 Finance cost                                               (35,561)    (31,062)


 Loss on ordinary activities before taxation             (1,043,815)   (509,962)


 Taxation                                                -           7,354

 Loss on ordinary activities after taxation              (1,043,815) (502,608)


 Other comprehensive income / (expense)                  -           -


 Total comprehensive income / (expense)                  (1,043,815) (502,608)

 Basic and diluted loss per share                            (0.58)p     (0.40)p





 Intellego Holdings Plc                                  11
 Financial statements for the year ended 31 March 2010

 Consolidated statement of financial position





                                  Note 2010        2009        2008

                                       £           £           £

Assets

   Non-Current Assets

   Property, plant and equipment       51,599      81,668      81,746

   Goodwill                       4    206,289     278,295     179,070

   Other intangible assets             198,817     307,376     142,672

                                       456,705     667,339     403,488


   Current Assets

   Inventory                           12,000      4,575       5,472

Trade and other receivables            588,856     691,802     576,577

Cash and cash equivalents              8,029       92,905      370,738

                                       608,885     789,282     952,787


Total Assets                           1,065,590   1,456,621   1,356,275


Liabilities

   Non-Current Liabilities

   Long term borrowings                131,960     29,022      48,236



   Current Liabilities

   Trade and other payables            1,678,127   1,373,330   773,020

   Borrowings                          105,449     173,049     150,057

                                       1,783,576   1,546,379   923,077


Total Liabilities                      1,915,536   1,575,401   971,313


Net (Liabilities)/Assets               (849,946)   (118,780)   384,962


Equity

Share capital                          853,017     661,567     649,314

Share premium                          1,545,048   1,423,849   1,423,849

Merger reserve                         31,000      31,000      29,387

Shares to be issued                    -           -           15,000

Profit and loss account                (3,279,011) (2,235,196) (1,732,588)


Total Equity                           (849,946)   (118,780)   384,962





 Intellego Holdings Plc                                  11
 Financial statements for the year ended 31 March 2010

 Consolidated statement of changes in equity








                  Share   Share      Merger   Shares to Profit and   Total
                          premium    reserve  be issued              equity
                  capital                               loss account

                  £       £          £        £         £            £



Balance at 1      649,314 1,423,849  29,387   15,000    (1,732,588)  384,962
April 2008


Shares issued in  4,753   -          410      -         -            5,163
respect of
Professional
Development
Partnership
Limited

Shares to be      7,500   -          1,203    (15,000)  -            (6,297)
issued in respect
of Copia
acquisition

Loss for the year -       -          -        -         (502,608)    (502,608)
and total
comprehensive
income/(expense)


Balance at 31     661,567 1,423,849  31,000   -         (2,235,196)  (118,780)
March 2009



Balance at 1      661,567 1,423,849  31,000   -         (2,235,196)  (118,780)
April 2009


Shares issued in  191,450 121,199    -        -         -            312,649
year

Loss for the year -       -          -        -         (1,043,815)  (1,043,815)
and total
comprehensive
income/(expense)


Balance at 31     853,017 1,545,048  31,000   -         (3,279,011)  (849,946)
March 2010






 Intellego Holdings Plc                                   11
 Financial statements for the year ended 31 March 2010

 Consolidated statement of cash flows

          Year to 31 March 2010         Year to 31 March 2009


   Note   £                       £



Cash flows from operating activities

Loss after taxation                                       (1,043,815) (502,608)

Adjustments for:

      Depreciation                                        52,887      45,322

      Amortisation                                        108,559     81,081

      Impairment                                          72,006      -

      Investment income                                   -           (1,310)

      Interest expense                                    35,561      31,068

      Decrease/(increase) in trade and other receivables  102,945     (97,572)

      (Increase)/decrease in inventories                  (7,425)     897

      Increase in trade and other payables                304,797     581,021






 Cash (used in) /generated from operations    (374,485)   137,899

 Interest paid                                (35,561)    (31,068)



 Net cash (used in)/ generated from operating activities    (410,046)   106,831






Cash flows from investing activities


 Purchase of property, plant and equipment    (22,818)   (45,244)

 Investment in intangible assets              -          (128,969)

 Overdraft acquired with business             -          (8,155)

 Acquisition of business                      -          (191,990)

 Interest received                            -          1,310



 Net cash used in investing activities    (22,818)   (373,048)






Cash flows from financing activities

 Net proceeds from issue of share capital    312,649   (15,394)

 Net movement of long-term bank loan         130,346   (19,214)



 Net cash generated from/(used in) financing activities    442,995    (34,608)


 Net increase/(decrease) in cash and cash equivalents      10,131     (300,825)

 Cash and cash equivalents at beginning of period          (60,930)   239,895


 Cash and cash equivalents at end of period                (50,799)   (60,930)



 Intellego Holdings Plc                                  11
 Financial statements for the year ended 31 March 2010

 Extracts from Notes to the group financial statements




1Going concern

The Group incurred losses in both the current and prior year. The directors have
considered that it is appropriate to adopt the going concern basis in the
preparation of the financial statements. In reaching this conclusion the
directors have considered the cash flow forecasts, current trading and prospects
as further detailed in the chairman's statement together with the Net Dimensions
sale which both took place after the year end, a further cost reduction
programme and a Company Voluntary Arrangement which are detailed below.

Net Dimensions sale
As further detailed in the chairman's statement and note 5, in April 2010
Intellego sold the UK distribution rights for the EKP range of Learning
Management software back to NetDimensions Limited. This comprised the business
and assets including the goodwill and customer list. Intellego will continue as
an affiliate of NetDimensions and will receive commissions on the sale of its
products. As an affiliate of NetDimensions Intellego will continue to sell EKP
or introduce EKP sales leads to NetDimensions but be much less involved in the
sale and technical implementation and after-sale processes. The value of the
sale was £464,000, with £276,000 being payable on completion which was offset
against the balance owing to NetDimensions of £263,000 (net cash received of
£14,000), and performance based payments of up to £94,000 receivable in
quarterly installments as the performance targets are achieved. Further net
liabilities of £117,000 associated with this business were also released.  In
May 2010 NetDimensions also invested £100,000 in the ordinary shares of
Intellego representing a 13.7% stake in the group. The financial effect of this
is illustrated in note 5.

Cost reductions
The Group underwent a cost reduction programme in the last quarter of 2009,
relating to the reduction of the staff base and operating locations, which
resulted in anticipated annual cost savings of approximately £350,000. The cost
reduction programme has continued into the current year with an anticipated
further annual saving of approximately £485,000.

Company Voluntary Arrangement (CVA)
As further detailed in the chairman's statement and note 5 both Intellego Group
Limited and Intellego Holdings Plc entered into a CVA with their creditors in
June 2010 and July 2010 respectively. Payments under the CVA are required to be
made for 6 months for Intellego Holdings Plc and for 60 months for Intellego
Group Limited. This will result in a release to the consolidated statement of
comprehensive income of approximately £409,000 in the 2011 financial statements
and the effect of this has been illustrated in note 5. This will have a
significant positive impact on the group's liquidity position going forward.
Intellego Holdings Plc and Intellego Group Limited are protected by the court
from their creditors as long as the terms of the CVA are adhered to. Should the
group be unable to maintain payments under the CVAs that would cast doubt about
the group's ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the company was unable to
continue as a going concern.



2Segment analysis

The adoption of IFRS 8 has not affected the identified operating segments for
the Group. However the accounting policy for identifying segments is now based
on internal management reporting information that is regularly reviewed by the
chief operating decision maker. In contrast, IAS 14 required the Group to
identify two sets of segments (business and geographical) based on risks and
rewards of the operating segments.

Intellego operates three main segments Distribution, Services and Publishing.
The activity undertaken by the Distribution segment is the resale of software
developed by third parties. The Services segment includes consultancy,
customisation, including development of content, and integration of e-learning
systems. Maintenance of these systems is undertaken by the Distribution segment.
The Publishing segment includes the sale of internally generated content. The
revenues and net result generated by each of Intellego plc's segments are
summarised as follows:

Year to 31 March 2010

           Distribution   Services   Publishing       Group

           £              £          £            £

 Revenue   1,051,588      530,692    270,986      1,853,266




 Loss for the period   (463,581)   (477,860)   (102,374)   (1,043,815)





 Segment assets   224,160   264,698   576,732   1,065,590





 Segment liabilities   (887,675)   (479,079)   (548,782)   (1,915,536)





 Segment depreciation and amortisation   73,247   80,472   79,732   233,451





 Segment capital additions   -   22,818   -   22,818






Year to 31 March 2009

           Distribution    Services   Publishing       Group

           £              £           £            £

 Revenue   808,353        1,169,191   364,580      2,342,124




 Loss for the period   (194,017)   (289,267)   (19,324)   (502,608)





 Segment assets   376,548   643,127   436,946   1,456,621





 Segment liabilities   (764,964)   (597,143)   (213,294)   (1,575,401)





 Segment depreciation and amortisation   39,660   43,572   43,171   126,403





 Segment capital additions   7,354   29,224   8,666   45,244






The Group's revenues from external customers may also be summarised by
geographical area as follows.
All operations are located in the UK:


                  2010        2009

                  £           £


 United Kingdom   1,478,678   2,112,408

 North America    241,073     54,948

 Europe           133,515     174,768

                  1,853,266   2,342,124





3Loss per share

The calculation of loss per share is based on a loss for the period of
£1,043,815 (2009: £502,608) and on 178,392,927 (2009: 131,060,569) ordinary
shares, being the weighted average number of ordinary shares in issue during the
year.


The loss attributable to ordinary shareholders and the weighted average number
of ordinary shares for the purpose of calculating the diluted earnings per share
are identical to those used for the loss per share. This is because the exercise
of share options and warrants would have the effect of reducing the loss per
share and is therefore not dilutive under the terms of IAS 33.


                                    2010      2009


 Basic and diluted loss per share   (0.58)p   (0.40)p





4Goodwill




 2010                Goodwill

                     £

 Cost

 At 1 April 2009     278,295

 Impairment          (72,006)

 At 31 March 2010    206,289




 2009                Goodwill

                     £

 Cost

 At 1 April 2008     179,070

 Additions           99,225

 At 31 March 2009    278,295





The goodwill relates to the acquisition of Modinex Limited in 2005, the
acquisition of the business and selected assets and liabilities of eMedit
Limited in December 2006, the acquisition of Copia Limited in November 2007,

the acquisition of Professional Development Partnership Limited in April 2008
and the business and assets of Zenosis Limited in May 2008.


Impairment review


Goodwill is tested annually for impairment by reference to the recoverable
amount of the relevant cash generating units. The brought forward carrying
amount of goodwill totalling £278,295 has been allocated to the cash generating
units as follows.



                 £

 Distribution    20,465

 Services        174,947

 Publishing      82,883

                 278,295





The recoverable amount for each of the cash-generating units was determined
based on value-in-use calculations.


This is calculated on the basis of projected cash flows for the following five
years derived from detailed budgets for the ensuing year, with subsequent years
including modest nominal rates of sales and cost growth ranging from zero to 5%
per annum and steady gross margins. These cash flows are adjusted to present day
values at a discount rate based on a cost of capital of 10% per annum.


An impairment of £20,465 has been made in respect of goodwill in the
distribution sector and an impairment of £51,541 has been made in respect of
goodwill in the services sector.


There was no requirement for any impairment provision as at 31 March 2009 or 31
March 2008.





5Post balance sheet events

The pro-forma Group statement of financial position below reflects the financial
effect of the two non adjusting post balance sheet events detailed below as if
they had taken place as at 31 March 2010.

                    Group statement Effect of Net  Effect of CVA Pro-forma Group
                    of financial    Dimensions                   statement of
                    position as at  sale                         financial
                    31 March 2010                                position at 31
                                                                 March 2010

                    £               £              £

   Non-Current      456,705         -              -             456,705
Assets


   Current Assets   608,885         (4,000)        -             604,885


Total Assets        1,065,590       (4,000)        -             1,061,590


   Non-Current      131,960         -              264,000       395,960
Liabilities



   Current          1,373,752       (263,000)      (704,000)     406,752
Liabilities
(excluding deferred
income liabilities)



   Deferred income  409,824         (234,000)      -             175,824
liabilities


Total Liabilities   1,915,536       (497,000)      (440,000)     978,536


Net Assets          (849,946)       493,000        440,000       83,054


Equity

Share capital and   2,429,065       100,000        -             2,529,065
share premium

Profit and loss     (3,279,011)     393,000        440,000       (2,446,011)
account


Total Equity        (849,946)       493,000        440,000       83,054






NetDimensions sale
As further detailed in the chairman's statement in April 2010 Intellego sold the
UK distribution rights for the EKP range of Learning Management software back to
NetDimensions Limited. This included the business and assets including the
goodwill and customer list. Intellego will continue as an affiliate of
NetDimensions and will receive commissions on the sale of its products. As an
affiliate of NetDimensions Intellego will continue to sell EKP or introduce EKP
sales leads to NetDimensions but be much less involved in the sale and technical
implementation and after-sale processes. The value of the sale was £464,000,
with £276,000 being payable on completion which was offset against the balance
owing to NetDimensions of £263,000 (net cash received of £14,000), and
performance based payments of up to £94,000 on the next two anniversaries of the
sale. Further net liabilities of £117,000 (deferred income liabilities of
£234,000 less £117,000 deferred cost accrual disclosed in other receivables)
associated with this business were also released. In May 2010 NetDimensions also
invested £100,000 in the ordinary shares of Intellego representing a 13.7% stake
in the group. The financial effect on the 31 March 2010 balance sheet position
of the £100,000 investment, £14,000 cash received and £379,000 liability release
has been illustrated above as if it had taken place at the year end. There were
no assets held in the year end balance sheet in respect of the business sold
i.e. goodwill and intangible assets.


Company Voluntary Arrangement (CVA)

As further detailed in the chairman's statement both Intellego Group Limited and
Intellego Holdings Plc entered into a CVA with their creditors in June 2010 and
July 2010 respectively. The CVA of Intellego Holdings Plc is expected to be
complete in six months from the date of approval of 8 July 2010. The CVA for
Intellego Group Limited is for the Company to make payments totaling up to
£340,000 (including £28,000 CVA costs) to the supervisor of the CVA over 60
months which will be distributed to the creditors of Intellego Group Limited and
Intellego Holdings Plc. Creditors at the date of the CVAs totalled £748,682,
being £305,250 trade and expense creditors and £443,432 HMRC liabilities.
Together this will result in the release to the profit and loss account in the
2011 accounts of approximately £409,000. Based on creditors as at 31 March 2010
(excluding NetDimensions creditor) this would have resulted in an approximate
£440,000 release to the profit and loss account if the CVA had taken place at
the year end. The effect of this is illustrated above.

Notes to the announcement:

 1. The following statement was contained in the report of the independent
    auditors to the members of Intellego Holdings Plc:

"Emphasis of matter - Going concern

In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of the disclosure made in note 1 to the financial
statements concerning the group and parent company's ability to continue as a
going concern. The group incurred a net loss of £1,043,815 during the year ended
31 March 2010 and, at that date, the group's current liabilities exceeded its
total assets by £717,986.

As explained in note 1, the parent company and its principal trading subsidiary,
Intellego Group Limited, entered into Company Voluntary Arrangements (CVAs) with
their creditors after the year end which resulted in a reduction in liabilities
as set out in note 24. The CVAs require payment schedules to be adhered to over
a 6 month and 60 month period by the parent company and Intellego Group Limited
respectively. If the terms of the CVAs are not adhered to the protection from
the group's creditors may be removed.

These conditions, along with the other matters explained in note 1 to the
financial statements, indicate the existence of a material uncertainty which may
cast significant doubt about the group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the
company was unable to continue as a going concern."

2 Basis of preparation

The financial information in this preliminary announcement has been prepared
under the historical cost convention and in compliance with International
Financial Reporting Standards (IFRS) and International Financial Reporting
Interpretations Committee (IFRIC) interpretations as adopted by the European
Union as at 31 March 2010.

3 Summary accounts

The summary accounts set out above do not constitute statutory accounts as
defined by Section 434 of the UK Companies Act 2006. The summarised statement of
financial position for the year ended 31 March 2010, the summarised consolidated
statement of comprehensive income, the summarised consolidated statement of
changes in equity and the summarised consolidated statement of cash flows for
the year then ended have been extracted from the Group's statutory financial
statements for the year ended 31 March 2010 upon which the auditors' opinion is
unqualified and did not contain a statement under either sections 498(2) or
498(3) of the Companies Act 2006. The audit reports for the year ended 31 March
2009 did not contain statements under Section 237(2) or Section 237(3) of the
Companies Act 1985. The statutory financial statements for the year ended 31
March 2009 have been delivered to the Registrar of Companies. The 31 March 2010
accounts were approved by the directors on 2 September 2010, but have not yet
been delivered to the Registrar of Companies.








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