Alterian PLC

Half Year Results

RNS Number : 0151T
Alterian PLC
30 November 2011
 



 

 30 November 2011
 
ALTERIAN PLC
 
Half year results and growth strategy
 

Alterian plc, (LSE: ALN, "Alterian" or the "Group"), a leader in customer engagement technology and solutions, is publishing its growth strategy and half year results for the six months ended 30 September 2011.

Highlights
 
·         100-day transformation programme nears completion
o    Established three product and two territory business lines
o    £10.6m of annualised cost savings (costing £3.5m), global offices consolidated into six main centres
o    Comprehensive financial overhaul completed, including implementation of new revenue recognition policy
·         Half year results: revenue £17.2m (2010: £18.3m) and underlying operating loss* of £0.9m (2010: profit £2.9m). Reported operating loss of £18.6m (2010: profit £0.6m)
·         Strategy: focus on cash generation and profits by aligning software with key vertical markets
·         £23.3m of deferred and recurring revenues  from 2012 onwards
·         Cash of £1.9m at 30 September 2011 and renewed banking facility of £2.0m
·         The business continues to trade in line with the Board’s expectations
 
 
Heath Davies, Alterian Chief Executive, commented:
 
"As our 100-day transformation programme nears completion, we are now in good shape to focus on generating cash and growing profits and providing the platform for future organic growth.
 
"We are clearly focused on providing must-have software solutions to a range of international marketing partners and customers in specific vertical markets, including retail, financial, leisure & travel and TMT. 
 
"We are now gaining real momentum.  With some £23.3m of forward visibility, 800 active customers, a global footprint and market leading IP, the Board is increasingly confident about the Group's prospects."
 
Phil Cartmell, Alterian Chairman, said:
 
"The hard work by the new management team over the last few months has stabilised and revitalised the business.  Although we are now in an offer period which may or may not result in a firm offer for the Group, we have now established an excellent platform from which Alterian can build and prosper."
 
* Underlying operating loss is operating loss before amortisation of intangibles and exceptional items.
 
Enquiries:
 

Alterian plc
+44 (0)117 970 3200
Phil Cartmell, Chairman

Heath Davies, Chief Executive Officer
Guy Millward, Finance Director



Canaccord Genuity
+44 (0)20 7050 6500 
Simon Bridges/Cameron Duncan



College Hill
+44 (0)20 7457 2020 
Adrian Duffield/Kay Larsen/Rozi Morris

 
Operational review
 
Overview and transformation plan
 
On 5 September 2011, the newly appointed Chief Executive, Heath Davies, working with the new Chairman, Phil Cartmell and Finance Director, Guy Millward, accelerated the existing review of the business and initiated a 100-day transformation programme.
 
The review of the individual businesses has now been completed.  This review included a comprehensive and detailed analysis of the business operating model, product status, customer sentiment, staff skills and internal processes.

Now at day 87, the transformation programme is scheduled to complete on 13 December 2011.

The Group has already implemented a number of substantial changes, including:
·         Establishing three product and two territory business lines, each managed by an Executive Vice President (“EVP”) with full P&L responsibility
·         Consolidating the global office environment to six main sales and marketing centres in Bristol, Hilversum, Denver, Seattle, Sydney and Singapore; and centred core development in Bristol, Valencia (California) and Seattle, with additional support from Bangalore
·         Closing five non-core offices
·         Completing a detailed data centre audit – the result of which is implementation of a three centre capability within the revised office environment
·         Reducing the Group headcount to 275 staff
·         Completing the re-statement of its revenue recognition policy to ensure compliance with best practice going forward
·         Changing its year-end from 31 March to 31 December to remove the make or break March year end, where historically over 40% of new business was signed
·         Impairing the goodwill by £12.7m
 
 
Growth strategy
In the short term, the Group's focus is to return Alterian to profitable, cash generative growth.  In the medium term the Board aims to show organic revenue CAGR of 15%.
 
A key part of Alterian's new strategy is to align the Group's software solutions against the specific vertical markets served by its existing global customer base, to provide them with the compelling software capabilities required to create relevant, effective and engaging experiences with their audiences on a personal level. 
 
The Group's primary vertical markets are retail, financial, leisure & travel for Campaign Management and Analytics (CMA) and technology, media and telecoms (TMT) and fast moving consumer goods (FMCG) for the Social Media and Insight (SMI) products.  Going forward Alterian's emphasis will be on its geographic centres in the US, Asia and Europe.  The US is currently the largest market; Asia is the fastest growing and Europe provides a solid and stable base.
 
The Group has now established four main revenue streams with several tier one partners generating in excess of £2m, several tier two partners generating between £1m-£2m, and tier three partners at lower revenue levels, plus substantial revenues from direct sales.
 
Products 

The EVP responsible for R&D and Support has aligned the Group's resources around three key product offerings: 

·         Campaign Management and Analytics (CMA): embracing email marketing and analytics through Alterian Alchemy™ technology and representing approximately 55% of sales. These products enable marketing services providers (MSP’s) and their customers to analyse, create, test, refine and execute the most appropriate campaigns for their customers. 
The sales and marketing engine for this business unit will now be based in Denver, Colorado, alongside the newly appointed EVP for this product line. The core development of this platform will continue out of Bristol and Valencia (California) with offshore support in Bangalore for testing. 
·         Social Media and Insight (SMI):  representing approximately 18% of sales. The SM2 products enable organisations to monitor conversations around their brand, clients and competitors alike. The recently launched Product Commitment Score (PCS) further enhances an organisation’s ability to successfully launch new products through the use of near-time social data analytics.  
The core development of this platform will now be based in Seattle close to the sales and marketing leadership team. Vietnam will continue to operate as an “insight centre” processing all of the Group’s social media data and classifying the content for end user consumption.

·         Web Content Management (WCM): representing approximately 27% of sales. The Alterian Content Management 7 (ACM7) product allows organisations to exploit the potential for their websites to engage with their audiences by transforming the complex task of building and maintaining websites into an easy day-to-day business user task.

The sales and marketing effort will henceforth be based out of Bristol. The core development of this platform will move to Bristol and will continue to be supported out of Bangalore for testing and support.

Each of these product suites will be supported from the Group’s three co-located data centres located in Bristol, Denver and Sydney.

Sales and marketing

 

Sales and marketing within the three product suites will now be focused on building specific vertical industry solution frameworks that will allow both the Group and its partners to differentiate themselves from the competition.

 

Each product line has a specific market focus based on its experience and existing customer base.

 

·      The CMA team will be focusing on retail, finance and travel & tourism. These three sectors today represent over 66% of the business won by this product line. The focus on marketing services providers which represent over 90% of the sales channel will continue and will be reinforced with a deeper relationship structure around partnership tiers.

·      The SMI team will be focusing on TMT and FMCG using their existing references to further enhance the new win ratio, providing framework solutions that meet over 80% of the client need.

·      The WCM team will continue to focus on its solid installed base and seek new opportunities around public sector, financial services and pharmaceutical companies.

Outlined below are the key principles supporting the sales strategy by line of business:

 

·      CMA is predominately a partner strategy model with over 90% of the Group's business being signed through existing relationships.

The target for H1 2012 is to deepen the existing partner relationships and to become more tightly integrated around select vertical markets. Each existing partner relationship will be classified with a tier ranking. The ranking level will be related to the relationship potential.  Partners that align globally around key vertical markets will be classified as strategic tier one, domestically focused partnerships working on key verticals tier two and tactical partnerships will be tier three. 

Direct sales will be used to support partners and further expand the Group's sales effort in non-partner centric deals.

·      SMI will be a direct sales model. In certain non-core verticals, partners will be signed on the basis of their market knowledge and reach.

·      WCM will continue to be sold directly and through partners in the UK and Europe.  A new channel strategy is being developed to target the US market, which represents the largest addressable market for the WCM technology. This will be rolled out in H2 2012.

Geographies

 

The Group's product offering will now be aligned to the following geographies:

 

·      UK (Bristol) and mainland Europe (Hilversum, Netherlands): representing approximately 51% of today's deferred and renewal revenue.  This region will focus on its existing relationships with all three product lines. The expectation from this market is to continue to provide a stable platform with limited growth opportunities as the Group enters 2012.

·      USA (Denver, Seattle): representing approximately 39% of the Group's deferred and renewal revenue but importantly is the largest market opportunity for the Group today.  The realignment of the management teams for SMI and CMA will ensure a renewed energy and push to further the Group's market share. Analyst firms Forrester and Gartner have predicted a five year global CAGR (ending 2014) with a growth rate range of 17% and 34% for the CMA and SMI markets respectively.

·      Asia Pacific (Singapore, Sydney): is the fastest growth market for the Group's product portfolio. All three product lines will be supported from the two main centres.  Alterian already has a substantial client footprint in Asia with 10% of the Group's deferred and renewal revenue currently coming from the region.


2012 and beyond

Alterian is now poised to start 2012 from a solid foundation. The Group is expected to enter 2012 with £23.3m of deferred and renewal revenues, more than 800 active customers (including 200 new customers secured this year), three new products and a geographic footprint which encompasses the world's largest and highest growth markets.   

 

Whilst the focus for the next financial year will be on cash and profitability, there is good opportunity for significant growth from the Group's existing network of partnerships and clients.  This will be the essential baseline from which a stabilised business can emerge, providing a sound platform for growth in subsequent years.

 

Financial review

As part of the transformation programme, the Group has made further substantial cuts to its operational cost base in addition to those announced in May 2011 and completed reviews of revenue recognition and goodwill, and other intangible assets. 

The results for the six months to, and the financial position at, 30 September 2011 reflect the results of the reviews and the cost reductions made in May 2011.  Further cost reductions have been made after that period and the cost of this, of around £3.5m, will be reflected in the financial statements for the period ending 31 December 2011.  

As part of the review, the Group changed its year end from 31 March to 31 December to take into account changes in financial measurement and customer contracts. The new business plans will be measured from January 2012.

Revenue

 

A full review of the revenue recognition policy has been completed following the review of customer contracts announced in May 2011 and subsequent discussions with customers.  The review has included consultation with the Group's new independent auditors, PricewaterhouseCoopers LLP. 

 

The process involved the review of tens of thousands of historic transactions over the last four and a half years and the restatement of each applicable transaction in line with the new policy. 

 

Term licences, partner fees and minimum commitments are now recognised over the period to which they relate, rather than recognising a large proportion of the revenue upfront on contract signature.  The effect of this change has been to rebase the Group's revenue figures completely by spreading revenue recognised in prior years into future years, greatly increasing revenue deferred at 30 September 2011.  Prior year errors found during the review have been corrected.  See note 2 for details.

 

Revenue for the six months to 30 September 2011, under the new policy, was down 6% to £17.2 million (2010: £18.3 million).  

 

Trading in the CMA products was affected by the latest suite of products for campaign management and analytics called Alterian Alchemy™, known as 'Alchemy', not being fully rolled out in the time originally planned.  This has held back revenue growth in all territories.  Alchemy is now live and being used in marketing campaigns. 

 

Trading in WCM products has been slower than expected following the introduction of the new Content Manager product in March. The WCM business has released ACM7, which won its first new client last month with the internet aggregator GoCompare.  The WCM business is supported by a strong recurring and repeat revenue base of approximately £7.0m per year.

 

Trading in SMI software has continued in line with last year's levels.  Trading in social media analytics services has reduced on the second half of last year due to the transition of the services from traditional market research activity to packaged solutions.  This business was acquired at the end of the first half last year.  The SMI business has now released its social suite of products, Alterian PCS.  The products are in production and a sales pipeline is actively being built.

 

The level of seasonality in the Group's revenues is hard to assess following the rebasing of the revenue over the past four and a half years.  It will only become apparent next year.

 

Cost reductions

 

As previously reported, the cost base of the Group substantially increased in the year to March 2011.  The cost increases included sales and distribution costs, product development costs for the new products and the significant expense of introducing managed service activities in the USA.  The increased costs were not matched by growth in revenues.

 

In May 2011 the Group announced a reduction of these costs by £6.2 million per annum which reduced the annual cost base of the business to £38.5 million.  This cost base has been further reduced by cost savings recently announced of £10.6 million per annum. 

 

The Board has taken care not to lose or reduce the Group's intellectual property or its ability to sell and deliver products to customers profitably.  The aim has been to establish a business that can generate sustainable profits and cash while having a solid base from which it can grow revenues. 

 

The cost reductions in May cost £1.7 million. The further cost reductions recently announced will be completed by 13 December 2011 and are expected to cost £3.5 million, around £1.2 million of which will be paid in cash in 2011, with the rest paid over the next year.   The majority of the additional £10.6m of savings are being implemented by reducing the staff numbers to approximately 275 people worldwide.  Other savings are being achieved by office consolidation and the reduction in operational spend, principally travel and marketing.

 

Goodwill impairment and other balance sheet items

 

As part of the review, the Board has assessed the carrying values of all assets on the balance sheet.  This has resulted in a non-cash £12.7m impairment charge in the goodwill recorded on the acquisition of the web content management business in 2008 and a £0.6m impairment against the value of the Group's remaining investments. 

 

These write-offs are not related to the value associated with the current product portfolio which has been heavily invested in during the past two years.  The Group has increased the deferred tax assets recognised on the balance sheet as a result of the revenue recognition policy change.  This reflects the fact that increased losses have now been made in prior periods and there is sufficient evidence to expect that they will be recouped in the current and future periods when the restated deferred revenue is finally recognised.

 

Profitability

 

The Group reported an operating loss, before amortisation of intangibles and exceptional items, of £0.9m (2010: profit £2.9m).  The operating loss after amortisation of acquired intangibles, R&D and exceptional items was £18.6m (2010: profit £0.6m).

 

The exceptional item of £15.0m, consists of £12.7m of goodwill impairment, £1.7m of restructuring costs and £0.6m of impairment of investments.

 

Amortisation of intangible assets was £2.7m (2010: £1.8m), due to increased capitalisation of development expenditure in the year to 31 March 2011 and the acquisition of Intrepid in September 2010.  Since 31 March 2011, the Board has decided to cease capitalisation of development expenditure until it is satisfied that the time required to bring new products to market can be more accurately forecasted than has been the case in the past in order to meet the criteria required by accounting standards for the capitalisation of development expenditure. 

 

The Group has a reported loss before tax of £18.6m (2010: profit £0.6m).

 

The Group had a £0.6m tax credit.   Reported loss per share was 29.1p (2010: earnings 0.3p).

 

Cash

 

At 30 September 2011 the Group had cash balances of £1.9m (2010: £8.1m) down from £7.0m at 31 March 2011.  This cash outflow is largely due to costs being in excess of cash-generating revenues for the period. 

 

The Board expects the business to be cash generative in 2012 and to have sufficient resources to meet its liabilities as they fall due on a continuing basis (see note 2). The Group will consider all financing options to support its growth and currently has a £2.0m overdraft facility with HSBC.

 

Indicative non-binding offer from SDL

 

On 24 October 2011, the board of Alterian (the "Board") announced it had rejected a non-binding indicative offer from SDL plc to acquire the entire issued share capital of Alterian ("Alterian Shares") by way of an all cash offer of 80 pence per Alterian Share. 

 

On 7 November 2011, the Board received a revised non-binding indicative offer from SDL to acquire Alterian Shares by way of an all cash offer of 110 pence per Alterian Share (the "Revised Proposal")

 

The Board considered the Revised Proposal to be at a level which it was prepared to engage with SDL.  The discussions with SDL are continuing but the making of any offer is subject to the satisfaction (or waiver by SDL) of certain pre-conditions including, inter alia, the completion of due diligence by SDL, final approval from SDL's board of directors and the recommendation of the Board.

 

As such, the Board would like to emphasise that there can be no certainty that an offer for Alterian will be forthcoming.

 

Due to his involvement with SDL, Alastair Gordon, a non-executive director of the Group, has not participated in the Board's discussions or its decision relating to the Revised Proposal.

 

In accordance with Rule 2.6(a) of the Code, SDL is required by not later than 5.00 p.m. on 5 December 2011, either to announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. 

 

RISKS AND UNCERTAINTIES

 

There are a number of potential risks and uncertainties which could have a material impact on Alterian's long-term performance.

 

Commercial relationships: Alterian's future revenue streams depend on its close long term relationships with its end customers and partner group. Damage to, or loss of, these substantial relationships could cause a detrimental effect on long-term revenue prospects. To manage this risk, working reviews take place with key customers and partners to ensure their needs are met.  Economic and market uncertainty adds a further element of risk to the long-term viability of some customer and partner relationships. A continuous review of these relationships is maintained to mitigate this risk.

 

Restructuring risk: the current restructuring risks could cause disruption to the business resulting in the loss of customers and staff.

 

Liquidity risk: As discussed in more detail in note 2, the Group does not have infinite cash resources and is exposed to the risk of running out of cash should its new business revenues prove insufficient to cover its cost base.

 

Other financial risks: Changes in assumptions underlying the carrying value of certain Group assets is a risk that affects financial performance. The assumptions are discussed in the notes to these financial statements and include discount rates, long-term growth rates and the level of future profitability. Due to the Group's substantial carrying value of goodwill and other intangible assets, the revision of any of these assumptions could lead to an impairment in the carrying value of certain assets in the Group.  Also a takeover bid may expose the Group to the very significant cost of either defending or accepting an offer, these costs can run into millions of pounds payable mainly to advisors.

 

Economic uncertainty: The continuing global economic problems cause uncertainty in forecasting and assessing future levels of business as well as increased credit risks and risks of misstatement when determining the carrying value of capitalised research and development costs, investments, intangible assets and deferred tax assets. Alterian continues to review costs and its relationships to minimise the impact of this economic risk. In addition the Company is focused on developing technology that leads the market in fast growing sectors.

 

Competitor risks: Alterian's blend of the strength of its technology, allied to the broadening platform of its applications, is a strong offering to the market. Competition exists for elements of its offering from internally generated solutions as well as other software providers. If one or more of these competitors is successful in developing solutions that are faster and more economical than Alterian's, and can build the necessary relationships with providers of services to marketers, then Alterian's long-term revenue streams will be reduced. To minimise this risk, Alterian continues to invest in market relevant applications and the quality of its core products as well as its relationships with its extensive business partner community.

 

Foreign exchange and treasury risks: The Group operates predominantly within the UK and the US. Currency exposures are regularly monitored and decisions taken on whether to hedge only when specific cash exposures are contracted. Translational accounting exposure is not hedged.

 

Integration risks: Alterian's strategy is to broaden its product range to generate further revenue through continued investment in Research and Development and to seek appropriate, selective acquisitions of technology companies or intellectual property in high growth areas. As Alterian expands, successful integration of acquired companies is essential in ensuring that such acquisitions do not undermine the core business. To manage this risk, Alterian ensures adequate and appropriate resources are available to focus on an effective and efficient integration of new companies into the Group. 

 

The risk of losing key staff: The management of the Group's businesses relies heavily on staff and loss of key staff is a significant risk to the business. Remuneration and people management processes are in place to minimise attrition.

 

RESPONSIBILITY STATEMENT

 

We confirm that to the best of our knowledge:

 

a)   the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting':

b)   the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c)   the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

 

By order of the Board

 

Heath Davies - Chief Executive

Guy Millward - Group Finance Director

 

 

Canaccord Genuity Limited ("Canaccord Genuity"), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Alterian and no one else in connection with the Possible Offer and will not be responsible for anyone other than Alterian for providing the protections afforded to clients of Canaccord Genuity or for providing advice in relation to the Possible Offer, or any matter referred to herein.

 

The directors of Alterian accept responsibility for the information contained in this announcement.  To the best of the knowledge and belief of the directors of Alterian (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

 

Disclosure requirements of the City Code on Takeovers and Mergers (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.  An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s).  An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any paper offeror is first identified.  Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

 

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror.  A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

 

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

 

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

 

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified.  If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.

 

Cautionary note regarding forward looking statements

This announcement contains certain forward looking statements with respect to the financial condition, results of operations and business of Alterian or the Alterian Group and certain plans and objectives of the Alterian Board.  These forward looking statements can be identified by the fact that they do not relate to historical or current facts.  Forward looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other words of similar meaning.  These statements are based on assumptions and assessments made by the Alterian Board in the light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate.  By their nature, forward looking statements involve risk and uncertainty and the factors described in the context of such forward looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward looking statements.

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this announcement.  Except as required by the Financial Services Authority ("FSA"), the London Stock Exchange plc, the Listing Rules of the FSA or any other applicable law, Alterian assumes no obligation to update or correct the information contained in this announcement.

 

No profit forecast

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of Alterian for the current or future financial years would necessarily match or exceed the historical published earnings per share of Alterian.

 

Publication on website

A copy of this announcement is available free of charge at Alterian's website at www.alterian.com.

For the avoidance of doubt, the content of the website referred to above is not incorporated into and does not form part of this announcement.

 

 

 

 

 

 



 

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

SIX MONTHS ENDED 30 SEPTEMBER 2011

 



6 months

ended

30 September

2011

 

6 months

ended

30 September

2010

 Restated

Year

ended

31 March

2011

Restated


Note

£000

£000

£000






Revenue

3

17,174

18,324

38,701






Operating costs


(35,799)

(17,753)

(41,332)






Operating (loss)/profit


(18,625)

571

(2,631)






Analysed as:





Operating (loss)/profit before amortisation of acquired intangibles, R&D and exceptional items costs


 

 

(949)

 

 

2,908

 

 

4,630

Amortisation of acquired intangibles and R&D

4

(2,708)

(1,771)

(3,975)

Exceptional items

4

(14,968)

(566)

(3,286)






Operating (loss)/profit


(18,625)

571

(2,631)











Investment revenues


6

31

45

Finance costs


(2)

(1)

(22)

(Loss)/profit before taxation


(18,621)

601

(2,608)






Tax


610

(373)

227

(Loss)/profit for the period


(18,011)

228

(2,381)

Attributable to equity holders of the parent


 

(18,011)

 

228

 

(2,381)






Basic (loss)/profit per ordinary share

5

(29.1)p

0.3p

 

(4.0)p

Diluted (loss)/profit per ordinary share

5

(29.1)p

0.3p

 

(4.0)p

 

 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SIX MONTHS ENDED 30 SEPTEMBER 2011

 


6 months

ended

30 September

 2011

 

£000

6 months

ended

30 September

 2010

Restated

£000

Year

ended

31 March

2011

Restated

£000

(Loss)/profit for the period

(18,011)

228

(2,381)

Exchange differences on translation of foreign operations

 

(1,207)

 

1,372

 

775

Other comprehensive income for the period

(1,207)

1,372

775

Total comprehensive income for the period

(19,218)

1,600

(1,606)

Total recognised income and expense for the period attributable to equity holders of the Parent Company

 

 

(19,218)

 

 

1,600

 

 

(1,606)



 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

30 SEPTEMBER 2011

 



At 30 September

At 30 September


At 31 March


At 31 March



2011

2010

Restated

2011

Restated

2010

Restated


Note

£000

£000

£000

£000

Non-current assets






Goodwill

6

18,592

31,281

31,281

24,847

Other intangible assets

6

10,189

12,053

12,956

10,233

Property, plant and equipment


2,091

2,071

2,252

1,934

Available for sale investments


-

812

592

812

Deferred tax asset


4,500

4,882

4,671

5,427

Total non-current assets


35,372

51,099

51,752

43,253

 






Current assets






Trade and other receivables


13,728

22,062

22,629

23,001

Cash and cash equivalents


1,896

8,101

7,005

11,179

Total current assets


15,624

30,163

29,634

34,180

Total assets


50,996

81,262

81,386

77,433

 

 

 

 

 

 

Current liabilities






Trade and other payables


(4,960)

(6,528)

(8,477)

(7,467)

Obligations under finance leases

 

(341)

(274)

(333)

(275)

Deferred revenue

 

(16,671)

(20,361)

(21,868)

(23,509)

Provisions

 

(690)

-

(612)

-

Contingent consideration

 

(830)

(1,241)

(1,448)

(2,160)

Total current liabilities


(23,492)

(28,404)

(32,738)

(33,411)

 






Net current assets/(liabilities)


 

(7,868)

 

1,759

 

(3,104)

 

769

 
Non-current liabilities






Deferred tax liabilities


(1,306)

(1,666)

(1,455)

(1,577)

Obligations under finance leases


(201)

(369)

(363)

(468)

Deferred revenue


(4,299)

(7,334)

(6,668)

(7,131)

Contingent consideration


(2,949)

(4,033)

(3,795)

-

Total non-current liabilities


(8,755)

(13,402)

(12,281)

(9,176)

 






Net assets


18,749

39,456

36,367

34,846

 






Equity






Share capital

7

15,539

15,211

15,226

14,648

Capital reserves


47,326

46,195

46,224

43,834

Other reserves


2,301

3,848

3,361

2,362

Own shares


(522)

(523)

(560)

(495)

Retained earnings


(45,895)

(25,275)

(27,884)

(25,503)

 






Total equity


18,749

39,456

36,367

34,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SIX MONTHS ENDED 30 SEPTEMBER 2011

 

 


Share capital

 Capital

Reserves

Other reserves

Own shares

Retained earnings

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 1 April 2011 (restated)

 

 

15,226

 

 

46,224

 

 

3,361

 

 

(560)

 

 

(27,884)

 

 

36,367

 

-

 

-

 

-

 

-

 

(18,011)

 

(18,011)

Exchange differences on translation of foreign operations

 

-

 

-

 

(1,207)

 

-

 

-

 

(1,207)

 

Issue of share capital for the Intrepid acquisition

 

313

 

1,102

 

-

 

-

 

-

 

1,415

 

Own shares disposed of in the period

 

 

-

 

 

-

 

 

-

 

 

38

 

 

-

 

 

38

Credit to equity for equity-settled share based payments

 

-

 

-

 

147

 

-

 

-

 

147

Balance as at 30 September 2011

 

15,539

 

47,326

 

2,301

 

(522)

 

(45,895)

 

18,749

 

 


Share capital

 Capital

reserves

Other reserves

Own shares

Retained earnings

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 1 April 2010 (restated)

 

 

14,648

 

 

43,834

 

 

2,362

 

 

(495)

 

 

(25,503)

 

 

34,846

 

-

 

-

 

-

 

-

 

228

 

228

Exchange differences on translation of foreign operations (restated)

 

-

 

-

 

1,372

 

-

 

-

 

1,372

 

Issue of share capital

 

563

 

2,361

 

-

 

-

 

-

 

2,924

 

Own shares acquired in the period

 

-

 

-

 

-

 

(28)

 

-

 

(28)

Credit to equity for equity-settled share based payments

 

-

 

-

 

114

 

-

 

-

 

114

Balance as at 30 September 2010 (restated)

 

15,211

 

46,195

 

3,848

 

(523)

 

(25,275)

 

39,456

 


Share capital

 Capital

reserves

Other reserves

Own shares

Retained earnings

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 1 April 2010 (restated)

 

 

14,648

 

 

43,834

 

 

2,362

 

 

(495)

 

 

(25,503)

 

 

34,846

 

-

 

-

 

-

 

-

 

(2,381)

 

(2,381)

Exchange differences on translation of foreign operations (restated)

 

-

 

-

 

775

 

-

 

-

 

775

 

Issue of share capital

 

578

 

2,390

 

-

 

-

 

-

 

2,968

 

Own shares acquired of in the period

 

 

-

 

 

-

 

 

-

 

 

(65)

 

 

-

 

 

(65)

Credit to equity for equity-settled share based payments

 

-

 

-

 

224

 

-

 

-

 

224

Balance as at 31 March 2011 (restated)

 

15,226

 

46,224

 

3,361

 

(560)

 

(27,884)

 

36,367

 


Share capital

 Capital

reserves

Other reserves

Own shares

Retained earnings

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 1 April 2009 (restated)

 

 

14,321

 

 

43,079

 

 

2,583

 

 

(630)

 

 

(28,767)

 

 

30,586

 

-

 

-

 

-

 

-

 

3,264

 

3,264

Exchange differences on translation of foreign operations (restated)

 

-

 

-

 

(408)

 

-

 

-

 

(408)

 

Issue of share capital

 

327

 

755

 

-

 

-

 

-

 

1,082

 

Own shares acquired in the period

 

-

 

-

 

-

 

135

 

-

 

135

Credit to equity for equity-settled share based payments

 

-

 

-

 

187

 

-

 

-

 

187

Balance as at 31 March 2010 (restated)

 

14,648

 

43,834

 

2,362

 

(495)

 

(25,503)

 

34,846

 





 

UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

SIX MONTHS ENDED 30 SEPTEMBER 2011

 



6 months

ended

30 September

6 months

ended

 30 September

 

Year

ended

31 March



2011

2010

2011


Note

£000

£000

£000

Net cash (used in)/from operations before acquisition costs

Acquisition related items

8

 

(4,458)

 

-

(196)

 

(566)

3,222

 

(612)

Net cash (used in)/from operating activities after acquisition costs

 

 

 

(4,458)

 

(762)

 

2,610

 

Investing activities





Purchases of property, plant & equipment

 

(354)

(535)

(1,011)

Purchases of software licences

 

(372)

(86)

(539)

Receipts from sale of property, plant and equipment

 

-

-

-

Expenditure on product development

 

-

(2,500)

(5,210)

Payments to acquire subsidiary, before cash and cash equivalents acquired

 

 

-

 

(832)

 

(885)

Cash and cash equivalents acquired

 

-

49

49

Payments to acquire subsidiary, after cash and cash equivalents acquired

 

 

-

 

(783)

 

(836)

 

 

 

 

 

Net cash used in investing activities

 

(726)

(3,904)

(7,596)

 

 

 

 

 

Financing activities

 

 

 

 

Repayment of loan acquired

 

-

(58)

(59)

Purchase of own shares

 

(61)

(28)

(65)

Proceeds from issue of shares

 

-

87

135

Repayment of Finance leases

 

(166)

(108)

(272)

 

 

 

 

 

Net cash used in financing activities

 

(227)

(107)

(261)

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(5,411)

(4,773)

(5,247)

Cash and cash equivalents at beginning of period

 

7,005

11,179

11,179

Effect of foreign exchange rate changes


302

1,695

1,073

Cash and cash equivalents at end of period


1,896

8,101

7,005



 

NOTES TO CONDENSED SET OF FINANCIAL STATEMENTS

 

1. GENERAL INFORMATION

 

The information for the year ended 31 March 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

2. ACCOUNTING POLICIES

 

This condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operational Review on pages 2 to 9.  The Group has financial resources together with long-term contractual relationships with a number of customers and suppliers across different geographic areas. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the uncertain economic outlook.

 

Future cash flows have been forecast using detailed expected receipts and payments information for the next 3 month period and then on a budgeted basis for a further 12 months.  These cash flows have been adjusted for the restructuring activity currently underway and allow for the cost of this activity and the savings from it.   After carefully reviewing the anticipated future cash flows of the Group and assessing the risks specific to the business, the external facilities available to the Group and also in the context of the global economic downturn and the Group results for the period to September 2011, the Directors have at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.  Should resources prove insufficient, there are several mitigating actions that the Group could take including seeking further cost reductions, generating cash through the disposal of assets and entering into negotiations with debt providers.

 

The same accounting policies, presentation and methods of computation are followed in this condensed set of financial statements as were applied in the preparation of the Group's annual audited financial statements for the year ended 31 March 2011 except for as described below:

 

Change in accounting policy for revenue recognition

 

The review of the Group's contracting procedures with customers, announced in May 2011, has been completed.  The review looked at customer buying preferences as well as contract procedures and terms and the resulting revenue recognition and included numerous discussions with customers and the independent auditors.  The review included analysis of all revenue transactions from 1 April 2007.

 

The Group's revenue recognition policy for software licences that were sold on a time-related basis (term licences - annually renewable or otherwise related to a specific period of time) or for a minimum commitment over a period of time, which conforms with International Financial Reporting Standards ('IFRS'), has been to recognise revenue at the point at which a licence is sold.   This policy has been changed to better reflect the commercial substance of the transactions contracted and better reflects global industry practice and customers' understanding of what they have purchased and therefore provides more relevant and reliable financial information.  Perpetual licences are still recognised on delivery of software provided there are no further on-going obligations.

 

This policy change requires a restatement of comparative figures and has no cash impact.  Term licences are now recognised over the period to which they relate rather than recognising a large proportion of the revenue upfront on contract signature.  This change has been reflected in the financial statements contained within this document.  The effect of the change has been to increase revenue in the six months to 30 September 2010 by £2.0m, increase revenue in the year to 31 March 2011 by £1.7m and decrease the revenue in the year to 31 March 2010 by £4.7m.

 

The effect of this change has also been to increase deferred revenue balances over the periods. In the six months to September 2011 deferred revenue increased by £14.5m. In the year to 31 March 2011 it increased by £22.9m. In the six months to September 2010 it increased by £21.9m and in the year to 31 March 2010 it increased by £25.9m.

 

 

 


Revenue

 Profit before tax

Profit after tax

EPS

Total assets

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 30 September 2010

 

 

 






 

16,298

 

(1,425)

 

(1,332)

 

(2.2)p

 

80,358

 

61,086

 

Change in accounting policy

 

2,470

 

2,470

 

2,004

 

3.4p

 

261

 

(21,186)

 

Correction of errors

 

(444)

 

(444)

 

(444)

 

(0.9)p

 

643

 

(444)

 

As restated

 

18,324

 

601

 

228

 

0.3p

 

81,262

 

39,456

 

 


Revenue

Loss before tax

Loss after tax

EPS

Total assets

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 31 March 2011

 

 

 






 

36,959

 

(4,350)

 

(4,290)

 

(7.1)p

 

79,796

 

58,349

 

Change in accounting policy

 

4,236

 

4,236

 

4,403

 

7.3p

 

894

 

(19,488)

 

Correction of errors

 

(2,494)

 

(2,494)

 

(2,494)

 

(4.2)p

 

696

 

(2,494)

 

As restated

 

38,701

 

(2,608)

 

(2,381)

 

(4.0)p

 

81,386

 

36,367

 

 


Revenue

Profit before tax

Profit after tax

EPS

Total assets

 

Total equity


£000

£000

£000

£000

£000

£000

 

Balance as at 31 March 2010

 

 

 






 

38,004

 

6,661

 

7,269

 

12.5p

 

75,963

 

59,971

 

Change in accounting policy

 

(3,908)

 

(3,908)

 

(3,181)

 

(5.5)p

 

727

 

(24,301)

 

Correction of errors

 

(824)

 

(824)

 

(824)

 

(1.4)p

 

743

 

(824)

 

As restated

 

33,272

 

1,929

 

3,264

 

5.6p

 

77,433

 

34,846

 

Correction of errors - revenue

 

The Board have identified one contract in the year to 31 March 2011 where software was licensed to a partner under a minimum commitment agreement which provided the partner the right to a refund in the event that the minimum commitment was not reached. Accordingly, management have determined that revenue should only have been recognised when the right to refund had expired. The effect of the correction is to reduce revenue by £1.25m in the year to 31 March 2011.  A further error was identified in the treatment of revenue for a software product which was sold alongside a data service, the majority of the revenue was recognised immediately on contract signature although the Group had an on-going liability to provide the data service and the software required the data service to function.  This revenue has now been spread over the term of the service contract and the effect of the correction is to reduce revenue by £0.8m in the year to 31 March 2011.

 

Finally, management have identified two contracts where software was licensed to partners under a minimum commitment agreement and revenue was recognised on the basis that it was probable that the benefits would flow to the Company. At 30 September 2011 the debts remains unpaid and in determining whether the receivable should be impaired management have re-considered whether at the date of recognition there was sufficient evidence to conclude that it was probable that economic benefits would result from the transactions. Given the lack of such evidence and that at the time there were other long overdue balances from the same partners, management have determined that the initial revenue recognition was inappropriate. The effect of the correction is to reduce revenue by £181,000 in the year to 31 March 2009, £824,000 in the year to 31 March 2010 and £444,000 in the year to 31 March 2011.

 

Correction of error - financing leases

 

In preparing the interim financial statement, management have analysed operating leases and identified that a number of leases entered into in 2010 and 2011 have a bargain purchase option and the present value of the minimum lease payments are in excess of the 90% of the fair value of the assets. Accordingly these leases which have historically been accounted for as operating leases should have been accounted for as finance leases from their inception. The effect of the correction of the error is to increase gross assets and liabilities by the following amounts Sept 2011 £542,000, March 2011 £696,000, Sept 2010 £643,000 and March 2010 £743,000. The impact on the income statement is considered immaterial, and so no adjustments have been made in this respect.

 

Critical judgements in applying the Group's accounting policies

 

In the process of applying the Group's accounting policies, management has made the following judgments that have the most significant effect on the amounts recognised in the financial statements:

 

Revenue recognition

The Group's revenue recognition policy has been changed and is discussed in detail above.

.

Capitalisation of development costs

In accordance with IAS 38, development project costs are assessed against the key criteria laid down therein. When qualified projects reach a sufficient state of maturity to justify inclusion in the review of capitalisation, the detailed project costs are collated and the projects tested against the probable economic benefits. Only those projects satisfying all six of the IAS 38 criteria are capitalised. All projects are amortised within three years of capitalisation.   The Group has not capitalised any costs in the 6 months to 30 September 2011 as the Board considers the criteria have not been met.

 

Impairment of goodwill

In accordance with IAS 36, goodwill is tested annually in the context of the relevant Cash Generating Unit (CGU) as discussed in note 6 below.

 

Valuation of contingent consideration

In accordance with IAS 32, when valuing the contingent consideration still payable on acquisitions the Group considers various factors including the performance of the company since acquisition together with its expected performance to the end of the earn-out period.

 

Deferred tax

Deferred tax assets have been re-assessed following the change in accounting policy for revenue recognition.  This has resulted in an increase in deferred tax assets at 31 March 2011 of £894,000, at 30 September 2010 £261,000 and at 31 March 2010 £727,000.  At 30 September 2011 a net deferred tax asset of £4,500,000 has been recognised in respect of the value of unused tax losses which are reasonably certain of being offset against future taxable profits. In arriving at this judgment management has assumed a sufficient level of taxable profits arising to utilise these losses.

 

3. SEGMENTAL INFORMATION

 

For management purposes, the Group is currently organised into two operating divisions - UK and international (ROW) and USA.  These divisions are the basis on which the Group reports its segmental information.  The Group does not report on any other basis. As per IFRS 8 paragraph 33 revenues have been disclosed for the UK and ROW separately as the company's' country of domicile is the UK. Revenues are generated in each geographic segment by a sales force dedicated to that region and these primary costs follow the region in which they arise. Research and Development costs are borne principally in the UK. Product transfers between the segments are accounted for at competitive market prices which take into account the allocation of other technical and central costs. These transfers are eliminated on consolidation.

 


6 months
ended
30 September

2011

 

6 months
ended
30 September

2010

restated

 

Year ended
31 March

2011

restated

Geographical analysis of revenue by origin

£000

£000

£000





USA

7,668

8,713

18,444

UK

6,415

7,160

15,046

ROW

3,091

2,451

5,211


17,174

18,324

38,701

 

6 months ended 30 September 2011

ROW

USA

Group


£000

£000

£000





Revenue

9,506

7,668

17,174





Operating (loss)/profit

(19,069)

444

(18,625)

Investment revenues



6

Finance costs



(2)

Loss before tax



(18,621)

Tax



610

Loss after tax



(18,011)

 

 

 

 

 

 








6 months ended 30 September 2010 (restated)

ROW

USA

Group


£000

£000

£000





Revenue

9,611

8,713

18,324





Operating profit/(loss) before acquisition costs

2,041

(904)

1,137

Acquisition costs

(347)

(219)

(566)

Operating profit/(loss) after acquisition costs

1,694

(1,123)

571

Investment revenues



31

Finance costs



(1)

Profit before tax



601

Tax



(373)

Profit after tax



228

 


6 months
ended
30 September

2011

 

6 months
ended
30 September

2010

restated

 

Year ended
31 March

2011

Restated

Segment assets

£000

£000

£000





USA

15,453

30,265

29,749

ROW

59,938

97,000

100,708

Total segment assets

75,391

127,265

130,457

Eliminated

(24,395)

(46,003)

(49,798)

Consolidated total assets

50,996

81,262

81,386

 

From January 2012 the Group will be organised into three operating divisions, WCM, CMA and SMI.  The business has not been measured in this way before and so no profit or asset information is available for these segments.  Revenue for these segments is as follows:

 


6 months

6 months


ended

ended

Year ended

30 September

30 September

31 March

2011

2010

2011


restated

Restated

Product analysis of revenue by origin

£000

£000

£000





CMA

9,372

11,120

22,502

SMI

3,102

1,925

5,448

WCM

4,700

5,279

10,751


17,174

18,324

38,701

 

 

4. AMORTISATION AND EXCEPTIONAL ITEMS

 


6 months
ended
30 September

2011

6 months
ended
30 September

2010

 

Year ended
31 March

2011


£000

£000

£000

Integration costs

-

566

612

Bad Debt charge

-

-

1,652

Impairment of investment

592

-

220

Provision of onerous leases

111

-

612

Other one off charges

-

-

190

Impairment of goodwill

12,689

-

-

Restructuring costs

1,576

-

-

Total

14,968

566

3,286

 

All the items above are recognised within operating expenses.

 

The investment impairment charge in the period ended 30 September 2011 and year ended 31 March 2011 relates to the impairment of overseas investments. The carrying value of all investments is £nil as at 30 September 2011.

 

The goodwill impairment charge in the period to 30 September 2011 is due to the recoverable amount for the WCM CGU being lower than the carrying value of its intangible assets and so an impairment charge of £12.7m has been recorded. 

 

The restructuring costs relate to costs of the restructure of the business that has taken place in the first six months of this year and primarily relate to redundancy costs.

 

Amortisation costs are as follows:

 


6 months
ended
30 September

2011

 

6 months
ended
30 September

2010

 

 

Year ended
31 March

2011

 


£000

£000

£000

Amortisation of development costs

2,087

1,223

2,806

Amortisation of acquired Intangibles

621

548

1,169

Total

2,708

1,771

3,975

 

5. LOSS PER SHARE

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders for the six months ended 30 September 2011 of £(18,011,000) (2010 restated: profit of £228,000) by the weighted average number of ordinary shares in issue during the period of 61,807,221 (2010: 59,054,459).

 


6 months
ended
30 September

2011

 

6 months
ended
30 September

2010

restated

 

Year ended
31 March

2011

Restated


£000

£000

£000

(Loss)/profit attributable to equity holders of the parent

 

(18,011)

 

228

 

(2,381)






No.

No.

No.

Weighted average number of ordinary shares for the purpose of basic  and diluted earnings per share

 

61,807

 

59,054

 

59,971





Basic and diluted (loss)/profit per share

(29.1)p

0.3p

(4.0)p

 

6. GOODWILL AND OTHER intangible assets

 

Goodwill

Total

£000

At 1 April 2010

24,847

Recognised on acquisition of subsidiaries

6,434



At 31 March 2011

31,281

Impairment of Goodwill

(12,689)



At 30 September 2011

18,592

 

The Group has carried out impairment tests on all the Group's intangible assets following the losses made in the period to 30 September 2011.  The Group has restructured its operations in the period and now operates 3 distinct lines of business based on its products.  This has resulted in a re-definition of the Group's cash generating units ('CGU' or 'CGUs') from the whole business to the three lines of business: Campaign Management and Analytics ('CMA'), Social Media and Insights, ('SMI') and Web Content Management ('WCM').  The recoverable amount of each CGU has been determined based on estimates of its fair value less costs to sell which takes into consideration the substantial cost savings that are currently being executed (headcount reductions and office closures).  The fair value of each CGU has been estimated using recent revenue multiples for purchases of similar businesses in the relevant markets.  Profit multiples have not been used because of the lack of transactions involving businesses in the relevant markets that were profitable. 

 

Based on the above, the recoverable amounts for the CMA and SMI CGUs have value in excess of the carrying value of the goodwill and other intangible assets attributed to them, with significant headroom, and there is no impairment at 30 September 2011.   The recoverable amount for the WCM CGU is lower than the carrying value of its intangible assets and an impairment charge of £12.7m has been recorded. 

 

The base case impairment tests have also been subjected to a sensitivity analysis varying revenue multiples used to establish fair value.  The CMA CGU was only impaired when the multiple was reduced to 0.5 (from market multiples of 3 or more) or the revenue estimate was reduced by 50%.  The SMI CGU was only impaired when the revenue multiple was reduced to 2 (from market multiples of 5 or more) or the revenue estimate was reduced by 60%.  To avoid impairment, the WCM CGU required a multiple of 2.8 (against a market multiple of 1).

 

Other Intangible Assets

 

 

Brand

£000

 

Customer

relationships

£000

 

Development costs

£000

IPR and other software licences
£000

 

 

Total
£000

Cost






At 1 April 2011

491

2,745

12,995

7,787

24,018

Additions

-

-

-

365

365

Disposals

-

-

-

(297)

(297)

At 30 September 2011

491

2,745

12,995

7,855

24,086







Accumulated amortisation






At 1 April 2011

92

768

6,420

3,782

11,062

Charge for the period

35

196

2,087

517

2,835

At 30 September 2011

127

964

8,507

4,299

13,897







Carrying amount






At 30 September 2011

364

1,781

4,488

3,556

10,189







At 31 March 2011

399

1,977

6,575

4,005

12,956

 

 

7. SHARE CAPITAL

 

Share capital as at 30 September 2011 amounted to £15.539m (March 2011 £15.226m) (March 2010 £14.648m). During the period the Group issued 485,181 shares at 116p and 767,794 shares at 111p as part consideration for the acquisition of Intrepid Consultants Inc.

 

 

 

8.  NOTES TO THE CASH FLOW STATEMENT

 


6 months ended

6 months ended

 

Year ended


30 September

30 September

31 March


2011

2010

2011



restated

restated


£000

£000

£000





Operating (loss)/profit after exceptional items

(18,625)

571

(2,631)

Adjustments for:




Depreciation of property, plant and equipment

519

392

900

Amortisation of intangible assets

748

579

1,257

Amortisation of development costs

2,087

1,223

2,806

Impairment of Goodwill

12,689

-

-

Impairment of Investment

592


220

Loss on sale of property, plant and equipment

116

-

15

Employee benefit charges

36

29

60

IFRS 2 share based payment charge

157

119

229





Operating cash flows before movements in working capital

(1,681)

2,913

2,856

Decrease in receivables

9,075

474

256

Decrease in payables

(12,157)

(4,177)

(448)

 

Cash (used in) /from operations

 

(4,763)

 

(790)

 

2,704

Net interest received

4

30

22

Tax received/(paid)

301

(2)

(116)





Net cash (used in) / from operating activities before acquisition related items

 

(4,458)

 

(762)

 

2,610





Acquisition items

-

566

612

Net cash (used in) /from operating activities

(4,458)

(196)

3,222

 

 

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash in hand, deposits held at call with banks and other short‑term highly liquid investments with an original maturity of three months or less.

 

The acquisition related items comprise the professional fees and other costs that were incurred in the acquisition of Intrepid Inc.

 

 

9. RELATED PARTY TRANSACTIONs

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.

 


6 months
ended
30 September

2011

6 months
ended
30 September

2010

 

Year ended
31 March

2011


£000

£000

£000





Short-term employee benefits

254

522

1,321

Social security costs

35

67

169

Share-based payment

74

21

43


363

610

1,533

 

10. POST BALANCE SHEET EVENTS

 

On October 24 2011 the Group announced a series of restructuring activities aimed at reducing the Group's cost base and re-organising the business along product lines so that each product group is measured as a separate business.  The cost of this restructuring is expected to be around £3.5m and should save around £10.6m per annum.  The activities, which are mainly staff reductions and office closures, are expected to be complete by 13 December 2011.

 

On October 21 2011 SDL plc submitted a non-binding indicative offer to buy the Group for 80p per share in cash.  The Board rejected this offer as significantly undervaluing the Group.  On October 24 2011 SDL publicly announced the non-binding indicative offer and the fact that it had been rejected.  On 7 November 2011 SDL submitted a further revised non-binding indicative offer to buy the Group for 110p per share in cash.  The Board considered the Revised Proposal to be at a level which it was prepared to engage with SDL.

 

 


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