Interim Results
Canisp PLC
14 December 2007
Canisp plc
('Canisp' or the 'Group')
Unaudited Interim Results
for the six month period ended 30 September 2007
I present the Company's interim results for the period ended 30 September 2007.
Trading results
In the last annual accounts issued in mid September 2007, I reported on the
competitiveness of the trading environment and on the price pressures faced by
our core business. Our strategy remains to build customer relationships through
focus on improved administration and service and we remain focused on product
innovation. During September, we launched a Voice Over Internet Protocol ('VOIP
') offering which has initially been offered to a limited number of our
customers and early trials are progressing well. Based on the outcome of these
trials, we intend to offer this product range to a wider customer base in due
course, though it is anticipated that significant revenues will not be obtained
from this business until after the current financial year.
We remain committed to maintaining a very lean head office operation and
overhead costs are in line with expectations. In the period under review, the
Company recorded a loss before and after tax of £197,000 (2006: £262,000). No
dividend is proposed.
Borrowings
The Group's reliance on bank borrowings has been significantly reduced with the
balance owing on the term loan standing at £117,000 at the period-end (2006:
£533,000) and the overdraft amounting to £302,000 (2006: £114,000). The Board
would like to extend its thanks to Corvus Capital Inc for its continued
financial support of the Group.
Outlook
The ability to drive down overheads further is limited but the success of the
historical exercise has provided a solid base for the Group's operations and we
continue to maintain a very tight control of costs. The work undertaken to
improve the service range and administrative support together with the
development of new product offerings continues. Whilst we believe these to be
the right ways to approach the future, we have always recognised that this will
be a slow and, at times, difficult process and so we also remain open to
strategic solutions to the recovery of shareholder value.
Mike Hirschfield
Chairman
14 December 2007
CANISP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Note Unaudited six Unaudited six Unaudited
months ended 30 months ended 30 year ended
September 2007 September 2006 31 March 2007
£'000 £'000 £'000
Sales revenue 1,306 1,429 2,805
Cost of sales (974) (1,007) (2,032)
Gross profit 332 422 773
Administrative expenses (409) (407) (754)
Amortisation of intangibles (95) (225) (451)
Impairment of intangibles and goodwill - - (1,447)
Loss from operations (172) (210) (1,879)
Finance costs (25) (52) (200)
Loss for the period before taxation (197) (262) (2,079)
Taxation expense - - -
Loss for the period (197) (262) (2,079)
Basic and diluted loss per ordinary share 5 (0.19)p (0.45)p (2.55)p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Profit and
Share Share Other loss Total
capital premium reserves account equity
£'000 £'000 £'000 £'000 £'000
At 1 April 2005 182 3,766 - (3,946) 2
Issue of share capital 14 281 - - 295
Loss for the year - - - (469) (469)
At 31 March 2006 196 4,047 - (4,415) (172)
Issue of share capital 858 - - - 858
Cost of issue of share capital - (30) - - (30)
Loss for the year - - - (2,079) (2,079)
On conversion of loan - - 129 - 129
At 31 March 2007 1,054 4,017 129 (6,494) (1,294)
Loss for the period - - - (197) (197)
At 30 September 2007 1,054 4,017 129 (6,691) (1,491)
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2007
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 755 2,523 850
Property, plant and equipment 15 - -
770 2,523 850
Current assets
Trade and other receivables 6 315 378 316
Total current assets 315 378 316
Total assets 1,085 2,901 1,166
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 7 2,048 2,507 1,932
Financial liabilities at fair value through profit 8 528 - 528
or loss
Total current liabilities and total liabilities 2,576 2,507 2,460
Equity
Share capital 9 1,054 1,054 1,054
Share premium 4,017 4,017 4,017
Other reserves 129 - 129
Profit and loss account (6,691) (4,677) (6,494)
Total equity attributable to equity holders (1,491) 394 (1,294)
Total equity and liabilities 1,085 2,901 1,166
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD 30 SEPTEMBER 2007
Unaudited six Unaudited six Unaudited
months ended months ended year ended
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Cash flows from operating activities
Loss before taxation (197) (262) (2,079)
Amortisation of intangibles 95 225 451
Impairment of intangibles and goodwill - - 1,447
On conversion of loan - - 129
Finance cost 25 59 219
Interest income - (7) (19)
Decrease in trade and other receivables 1 112 173
Increase/(decrease) in trade and other payables 54 15 (397)
Net cash (outflow)/inflow from operating activities (22) 142 (76)
Cash flows from investing activities
Purchase of property, plant and equipment (15) - -
Finance cost (25) (59) (219)
Interest income - 7 19
Net cash used in investing activities (40) (52) (200)
Cash flows from financing activities
Proceeds from issue of share capital - 600 600
Share issue costs - (30) (30)
New loans 128 - 528
Repayment of loans (208) (509) (717)
Capital element of hire purchase liabilities - (5) (5)
Net cash (outflow)/inflow from financing activities (80) 570 376
Net change in cash and cash equivalents (142) 56 100
Cash and cash equivalents at beginning of period (160) (260) (260)
Cash and cash equivalents at end of period (302) (114) (160)
NOTES TO THE INTERIM REPORT
FOR THE PERIOD ENDED 30 SEPTEMBER 2007
1 GENERAL INFORMATION
The information for the period ended 30 September 2007 does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
figures for the year ended 31 March 2007 have been extracted from the 2006
statutory financial statements prepared under UK GAAP and adjusted where
necessary in order to comply with International Financial Reporting Standards as
adapted by the EU (IFRS) as shown in note 3. The auditors' report on those
accounts was unqualified and did not contain a statement under section 237(2) of
the Companies Act 1985.
2 ACCOUNTING POLICIES
BASIS OF PREPARATION
This interim financial report has been prepared under the historical cost
convention and in accordance with International Accounting Standard 34 'Interim
Financial Reporting' and the requirements of International Financial Reporting
Standard 1 'First Time Adoption of International Reporting Standards' relevant
to interim reports.
The transition to IFRS reporting has resulted in a number of changes in the
reported financial statements, notes thereto and accounting policies compared to
the previous annual report. Note 3 provides further details on the transition
from UK GAAP to IFRS.
The principal accounting policies of the Group are set out below.
GOING CONCERN
The Directors have prepared cash flow. The Directors secured confirmation from
Corvus Capital Inc. (Corvus), a significant shareholder in the Company, that
they would not seek repayment of the debt due to them within twelve months and,
in addition, that a further working capital facility of up to £500,000 will be
provided if required. The forecasts supported by the agreement and facility
from Corvus, together with existing bank facilities, demonstrate that the Group
has sufficient finance facilities available to allow it to continue in business.
BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the Company and all of its
subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are
entities over which the Group has the power to control the financial and
operating policies so as to obtain benefits from their activities. The Group
obtains and exercises control through voting rights.
Unrealised gains on transactions between the Company and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Amounts reported
in the financial statements of subsidiaries have been adjusted where necessary
to ensure consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase
method involves the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the
bases for subsequent measurement in accordance with the Group accounting
policies. Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition cost over the fair value
of the Group's share of the identifiable net assets of the acquired subsidiary
at the date of acquisition.
REVENUE
The Group follows the principles of IAS18, Revenue, in determining the
appropriate revenue recognition policies. In principle, therefore revenue is
recognised to the extent that the Group has obtained the right to consideration
through its performance.
Revenue excluding VAT comprises revenue arising from calls made by customers and
elapsed rental periods during the period.
GOODWILL
Goodwill arising on acquisition prior to 31 March 2004
Goodwill arising on acquisition of a subsidiary for which the agreement date is
before 31 March 2004 represents the excess of the cost of acquisition over the
Group's interest in fair value of the identifiable assets and liabilities of the
relevant subsidiary at the date of acquisition.
Such goodwill is stated after any accumulated amortisation and impairment.
Under the transitional provisions in IFRS 3 'Business Combinations', the
goodwill can only be amortised up to 31 March 2006 and the accumulated
amortisation and impairment as at 1 April 2006 has been eliminated with a
corresponding decrease in the cost of respective goodwill and, since then, any
carrying amount of the goodwill is tested at each balance sheet date for
impairment as well as when there are indications of impairment.
Goodwill arising on acquisition on or after 31 March 2004
Goodwill arising on acquisition of a subsidiary for which the agreement date is
on or after 31 March 2004 represents the excess of the cost of acquisition over
the Group's interest in the fair value of the identifiable assets and
liabilities and contingent liabilities of the acquired subsidiary at the date of
acquisition. Such goodwill is tested annually for impairment and carried at
cost less accumulated impairment losses. Goodwill is allocated to
cash-generating units for the purpose of impairment testing.
On subsequent disposal of the subsidiary the attributable amount of goodwill
capitalised is included in the determination of the amount of gain or loss on
disposal.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated according
to the tax rates and tax laws applicable to the fiscal periods to which they
relate, based on the taxable result for the year. All changes to current tax
assets or liabilities are recognised as a component of tax expense in the income
statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. In addition, tax losses available to be carried forward as well as other
income tax credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component
of tax expense in the income statement. Only changes in deferred tax assets or
liabilities that relate to a change in value of assets or liabilities that is
charged directly to equity are charged or credited directly to equity.
INTANGIBLE ASSETS
Assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible asset acquired in
a business combination is deemed to have a cost to the Group of its fair value
at the acquisition date. The fair value of the intangible asset reflects market
expectations about the probability that the future economic benefits embodied in
the asset will flow to the Group. Where an intangible asset might be separable,
but only together with a related tangible or intangible asset, the group of
assets is recognised as a single asset separately from goodwill where the
individual fair values of the assets in the group are not reliably measurable.
Where the individual fair values of the complimentary assets are reliably
measurable, the Group recognises them as a single asset provided the individual
assets have a similar useful lives.
Customer bases
The costs of acquiring customer bases are capitalised and, subject to impairment
reviews, amortised over the estimated economic life of the customer bases
concerned. Amortisation is calculated so as to write off the cost of an asset
less its estimated residual value on a straight line basis over the useful
economic life of the asset as follows:
Customer bases 7 Years
IMPAIRMENT, TESTING OF GOODWILL, OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND
EQUIPMENT
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which
management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include
goodwill, other intangible assets with an indefinite useful life, and those
intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the other assets
in the cash generating unit. With the exception of goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist
PROPERTY, PLANT AND EQUIPMENT
Measurement bases
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. The cost of an asset comprises its purchase price and
any directly attributable costs of bringing the asset to the working condition
and location for its intended use. Subsequent expenditure relating to property,
plant and equipment is added to the carrying amount of the assets only when it
is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other costs,
such as repairs and maintenance are charged to the income statement during the
period in which they are incurred.
When assets are sold, any gain or loss resulting from their disposal, being the
difference between the net disposal proceeds and the carrying amount of the
assets, is included in the income statement.
Depreciation
Depreciation is calculated so as to write off the cost of property, plant and
equipment, less its estimated residual value, which is reviewed annually, over
its useful economic life on a straight line basis as follows:
Plant and equipment - 4 years
FINANCIAL ASSETS
The Group's financial assets include trade and other receivables.
All financial assets are recognised on their settlement date. All financial
assets are initially recognised at fair value, plus transaction costs.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognised in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Trade and other receivables are provided against when objective evidence is
received that the Group will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the
write-down is determined as the difference between the asset's carrying amount
and the present value of estimated future cash flows.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand, bank deposits
repayable on demand and other short-term highly liquid investments with original
maturities of three months or less.
EQUITY
Share capital is determined using the nominal value of shares that have been
issued.
The share premium account represents premiums received on the initial issuing of
the share capital. Any transaction costs associated with the issuing of shares
are deducted from share premium, net of any related income tax benefits.
Profit and loss account includes all current and prior period results as
disclosed in the income statement.
Other reserves include the cost of conversion of the convertible loans.
FINANCIAL LIABILITIES
The Group's financial liabilities include trade and other payables and financial
liabilities at fair value through profit or loss..
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest related charges are
recognised as an expense in 'finance cost' in the income statement.
Trade payables are recognised initially at their nominal value and subsequently
measured at amortised cost less settlement payments.
Dividend distributions to shareholders are included in 'other short term
financial liabilities' when the dividends are approved by the shareholders'
meeting.
Financial liabilities at fair value through profit or loss include embedded
derivatives which have been separated from their host contracts and financial
liabilities that are designated by the Group to be carried at fair value through
profit or loss upon initial recognition.
Where a contract contains one or more embedded derivatives, the entire hybrid
contract may be designated as a financial liability at fair value through profit
or loss, except where the embedded derivative does not significantly modify the
cash flows or it is clear that separation of the embedded derivative is
prohibited.
Financial liabilities may be designated at initial recognition as at fair value
through profit or loss if the following criteria are met:
• the designation eliminates or significantly reduces the inconsistent
treatment that would otherwise arise from measuring the liabilities or
recognising gains or losses on them on a different basis; or
• the liabilities are part of a group of financial liabilities which are
managed and their performance evaluated on a fair value basis, in accordance
with a documented risk management strategy; or
• the financial liability contains an embedded derivative that would need to
be separately recorded.
Subsequent to initial recognition, the financial liabilities included in this
category are measured at fair value with changes in fair value recognised in the
income statement. Financial liabilities originally designated as financial
liabilities at fair value through profit or loss may not subsequently be
reclassified.
OTHER PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Group and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example, legal disputes or onerous contracts.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including the risks and uncertainties associated with the present
obligation. Any reimbursement expected to be received in the course of
settlement of the present obligation is recognised, if virtually certain as a
separate asset, not exceeding the amount of the related provision. Where there
are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as
a whole. In addition, long term provisions are discounted to their present
values, where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
balance sheet.
Probable inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets.
SEGMENTAL REPORTING
A segment is a distinguishable component of the Group that is engaged either in
a particular business (business segment) or conducting business in a particular
geographical area (geographical segment), which is subject to risks and rewards
that are different from those of other segments.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next accounting period are discussed below.
Impairment of assets
The Group conducts impairment reviews of assets when events or changes in
circumstances indicate that their carrying amounts may not be recoverable
annually, or in accordance with the relevant accounting standards. An
impairment loss is recognised when the carrying amount of an asset is lower than
the greater of its net selling price or the value in use. In determining the
value in use, management assesses the present value of the estimated future cash
flows expected to arise from the continuing use of the asset and from its
disposal at the end of its useful life. Estimates and judgments are applied in
determining these future cash flows and the discount rate. The carrying value
of customer bases has been considered by the directors in relation to their net
selling price and they have formed the view no further impairment provision is
required at 30 September 2007.
Critical judgements in applying the Group's accounting policies
The directors in applying the accounting policies, which are described above,
consider that the most significant judgement they have had to make is the fair
value of the convertible loan and whether any impairment provision is required
against the customer bases.
3 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
The transition from UK GAAP to IFRS has been made in accordance with IFRS 1,
'First-time Adoption of International Financial Reporting Standards'. The
Group's interim report for the six months ended 30 September 2007 and the
comparatives presented for the periods ended 30 September 2006 and 31 March 2007
comply with all presentation recognition and measurement requirements of IFRS
applicable for accounting periods commencing on or after 1 April 2007.
The following reconciliations and explanatory notes thereto describe the effects
of the transition at 1 April 2006, 30 September 2006 and 31 March 2007 and on
the periods then ended. All explanations should be read in conjunction with the
IFRS accounting policies of Canisp plc. There is no difference between the
profit and loss reported under UK GAAP for each period and the profit and loss
as reported under IFRS.
The following reclassifications have been made as a consequence of the adoption
of IFRS:
• the goodwill arising on the acquisition of certain customer bases since 31
March 2004 has been redesignated as a separable intangible asset as 1 April
2006, the transition date. The net book value at that date of £2,338,000
has been transferred from goodwill to customer bases without adjustment as
the goodwill was being amortised over the expected useful life of the
customer bases. There has been no impact on the income statement for the
year ended 31 March 2007 as there was no difference in the amortisation
period and impairment under IFRS
• the convertible loan of £528,000 at 31 March 2007 has been redesignated as
a financial liability at fair value through profit or loss. The directors
do not consider the fair value of this convertible loan to be significantly
different to its cost at 31 March 2007.
IFRS 1 permits companies adopting IFRS for the first time to take certain
exemptions from the full requirements of IFRS in the transition period. These
interim financial statements have been prepared on the basis of taking the
following exemption: business combinations prior to 31 March 2004 have not been
restated to comply with IFRS 3 'Business Combinations'. Goodwill arising from
these business combinations has not been restated.
4 SEGMENTAL REPORTING
(a) By business segment (Primary segment)
As defined under International Accounting Standard 14 (IAS 14) the only material
business segment the Group has is that of telecommunications.
(b) By Geographical Segment (Secondary segment)
Under the definitions contained in IAS 14 the only material geographic segment
the Group operates in is the United Kingdom.
5 LOSS PER SHARE
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the period.
Unaudited six Unaudited six Unaudited
months ended months ended year ended
30 September 30 September 31 March
2007 2006 2007
Loss for the period (£'000) (197) (262) (2,079)
Weighted average number of 1p ordinary shares 105,397,275 58,070,772 81,669,193
Loss per share - basic and diluted (0.19)p (0.45)p (2.55)p
6 TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Trade receivables 284 354 308
Prepayments and accrued income 31 24 8
Trade and other receivables, net 315 378 316
Trade and other receivables are usually due within 30 - 60 days and do not bear
any effective interest rate.
The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.
7 TRADE AND OTHER PAYABLES
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Bank overdraft 302 114 160
Bank loan 117 533 325
Trade and other payables 204 179 178
Social security and other taxes 45 117 28
Other creditors 988 1,074 854
Accruals and deferred income 392 490 387
Trade and other payables 2,048 2,507 1,932
The fair value of trade and other payables has not been disclosed as, due to
their short duration, management considers the carrying amounts recognised in
the balance sheet to be a reasonable approximation of their fair value.
8 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
The financial liability at fair value through profit or loss is a convertible
loan, which is convertible at the option of the holder into a variable number of
ordinary shares in the Company. The option to convert may be exercised in
respect of all or part of this balance until 10 July 2008. No interest is
payable on this loan. The Directors have considered the fair value of this
convertible loan and do not consider it to be significantly different from its
original cost.
9 SHARE CAPITAL
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Authorised
500,000,000 ordinary shares of 1p 5,000 5,000 5,000
Allotted, issued and fully paid
105,397,275 (30 September 2006 and 31 March 2007: 1,054 1,054 1,054
105,397,275) ordinary shares of 1p
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