TIDMADT
RNS Number : 2212V
AdEPT Telecom plc
07 July 2009
AdEPT Telecom plc
("AdEPT" or the "Company")
Final results for the year ended 31 March 2009
AdEPT, a leading independent provider of award-winning telecommunications
services for fixed line, mobile and data connectivity, announces its results for
the year ended 31 March 2009.
Financial Highlights
* Revenue increasing by 21% to GBP28.6 million driven by the acquisitions made
during the previous period
* EBITDA excluding non-recurring costs increasing by 6% to GBP3.5 million (2008:
GBP3.3m)
* Excellent cash generation with free cash flow of GBP2.1m (2008: GBP0.8m)
* 103% of EBITA (GBP2.0m) converted into cash generated from operating activities
(GBP2.1m) (103% in 2008)
* Net debt reduction of GBP0.5m year on year, despite significant non-recurring
costs of GBP1.3m
* Adjusted earnings per share, after adding back amortisation and non-recurring
costs of 10.44p per share (2008: 11.43p)
Operational Highlights
* Achieved a higher mix of business customers with total business revenue of 95%
of the total this year (2008: 93%), increasing stability of overall customer
base
* Excellent progress in increasing revenue from fixed monthly charges, with line
rental revenues at March 2009 up 45% at GBP11.3m (2008: GBP7.8m)
* Line rental and data products represented 44% of total revenues at March 2009
(35% March 2008)
* Overhead costs (excluding commissions and one-off restructuring costs) decreased
to 17% of revenue (2008: 18%)
* 81% of revenue generated from customers taking more than one product or service
(2008: 78%)
* Significant improvement to credit collection processes and debt management with
year end debtor days of 34 (2008: 53 days)
Commenting upon these results Chairman Roger Wilson said:
"The business continues to perform well despite challenging economic conditions
and be highly cash generative with an EBITA : Sales ratio amongst the sector
leaders. AdEPT has no further acquisition payments to meet and therefore we look
forward to a period of providing added investor value through deleveraging from
continued strong operating cash generation."
Enquiries:
+-------------------------------------------------+--------------------------+
| AdEPT Telecom Plc | 07786 111 535 |
| Roger Wilson, Chairman | 01892 550 225 |
| Ian Fishwick, Managing Director | 01892 550 243 |
| John Swaite, Finance Director | |
| | |
+-------------------------------------------------+--------------------------+
| Astaire Securities Plc | 020 7448 4400 |
| Shane Gallwey | |
+-------------------------------------------------+--------------------------+
CHAIRMAN'S STATEMENT
It is with great pleasure that I announce our annual results.
For the year ended 31 March 2009 AdEPT Telecom plc ("AdEPT" or the "Company")
delivered another strong trading performance.
Review of Operations
The business was established to be a consolidator of the highly fragmented UK
fixed line reseller sector which is estimated to include approximately 700,
mostly smaller telecom businesses. To date AdEPT has acquired 16 competitors
and/or their customer bases.
A critical part of the acquisition strategy is the ability to integrate the
acquired customer bases into AdEPT's systems within six weeks thus achieving
economies of scale and cost efficiencies. However, this route to growth is
increasingly being complemented by organic sales which have grown significantly
in the past two years.
Achievements
Our retention and customer service teams have reduced customer churn
substantially in the year. Our indirect sales channel of independent business
partners continues to grow with over 60 partners active in bringing us new
customers in the year. We have seen an increase in the size of new customers
with important wins such as eleven more of the regional Probation Services (we
now have 20 in total, representing over half of the Probation Services in the
UK), the Italian restaurant chain Carluccio's and a 3000+ site data solution for
the national gaming machine operator Gamestec.
Growing line rental revenues has been a key objective and we are delighted to
report line rental revenues increased 45% to GBP11.3m compared to GBP7.8m in the
prior year. Our revenue is becoming more stable as we reduce our reliance on
variable monthly call charges, replacing them with fixed monthly line rentals.
Employees
As a Company we are immensely proud of the track record we have created in a
relatively short period of time. Our success is a result of the efforts of all
our employees and on behalf of the Board I would like to take this opportunity
to thank them for all their hard work.
I would also like to take this opportunity to thank the former directors and
non-executive directors who stepped down during the year for their substantial
contributions to AdEPT and to wish them all the best for the future.
Shareholder Benefits Scheme
During the year AdEPT launched a new shareholder benefits scheme, which is
available to all shareholders owning a minimum of 1,000 shares. Shareholders who
register with the scheme are entitled to free residential line rental worth
approximately GBP120 per annum for as long as they remain eligible shareholders.
Outlook
The past year has seen an almost unprecedented turmoil in the financial and
credit markets, which has had an inevitable knock-on effect into the real world.
However, management took early action at the half-year point to reduce overheads
and tighten credit management. This has enabled the Company to increase its
EBITDA levels despite the economic downturn - no mean achievement under the
circumstances. Management also took steps at the end of 2008 to renegotiate and
extend our banking facilities for a three year term, giving us certainty of
funding going forward. The business focus for this coming year will remain on
developing organic sales, improving customer retention, generating cash and
paying down debt. We will therefore continue to grow our organic sales channels,
invest in new products and complement this with continued investment in
retention activities to retain more customers.
We need to guard against complacency given the continued uncertainty in the
economic outlook, but I am confident that the business is in a much stronger
position than before with a more stable customer base, a higher proportion of
fixed monthly revenues and increased focus on customers paying by direct debit.
We will also continue to focus very closely on our debtors to ensure payment
terms do not get extended.
Roger Wilson
Non-executive Chairman
FINANCIAL AND BUSINESS REVIEW
SUMMARY of three year financial performance:
+-------------------------+------------+--------------+----------+--------------+----------+
| | Year ending March |
+-------------------------+----------------------------------------------------------------+
| | 2009 | Year-on-Year | 2008 | Year-on-Year | 2007 |
| | GBP'000 | Growth % | GBP'000 | Growth % | GBP'000 |
+-------------------------+------------+--------------+----------+--------------+----------+
| | | | | | |
+-------------------------+------------+--------------+----------+--------------+----------+
| Revenue | 28,567 | 21% | 23,618 | 25% | 18,827 |
+-------------------------+------------+--------------+----------+--------------+----------+
| Gross margin | 10,341 | 18% | 8,754 | 20% | 7,291 |
+-------------------------+------------+--------------+----------+--------------+----------+
| EBITDA* | 3,490 | 6% | 3,280 | 32% | 2,490 |
+-------------------------+------------+--------------+----------+--------------+----------+
| Net debt | 10,843 | | 11,295 | | 2,910 |
+-------------------------+------------+--------------+----------+--------------+----------+
* excluding non-recurring costs
REVENUE
Group revenue increased by 21% to GBP28.6m (2008: GBP23.6m) with growth
primarily derived from the full twelve month contribution from the two
acquisitions completed during 2008. The proportion of revenue derived from
business customers has increased to 95% (2008: 92%).
The proportion of revenue, which is fixed monthly values, represent 44% of total
revenue for the year ended March 2009 (2008: 34%) following the continued focus
on multi-product sales (calls and line rental) and the introduction of a broad
range of data connectivity products in 2008. The proportion of revenue generated
from customers taking more than one product or service has increased to 81% for
the year ended March 2009 (2008: 78%) which should provide a more stable future
revenue stream.
Average customer monthly spend increased year-on-year by 3.8% to GBP72.49 in
March 2009 reflecting the Group's success in gaining contracts with higher
spending customers and an increasing proportion of higher spending business
customers.
GROSS MARGIN
Overall Group gross margin has increased by 18% year-on-year from GBP8.75m to
GBP10.34m. Margins for calls, lines, data connectivity and broadband have
remained broadly stable despite pressures arising from a highly competitive
market, however, the net impact on overall margin arising from the changing
sales mix is a decrease to 36.2% (2008: 37.1%) as lower margin line rental, data
connectivity and broadband revenue is an increased proportion of the total.
ADMINISTRATION COSTS
Administration costs (excluding depreciation, amortisation and non-recurring
costs) increased to GBP6.9m which is 24% of revenue (2008: 23%). Administration
costs include commissions payable to business partners, the proportion of which
increased significantly with the Telecom Direct acquisition. Excluding partner
commissions, underlying administration costs have reduced by 1% in the year,
from 18% to 17% of revenue. We believe that we remain one of the lowest cost
operators in the industry.
The non-recurring costs are those incurred in the Telecom Direct division and
restructuring costs which will not recur next year. The bulk of these costs are
represented by staff, property and leases, which when stripped out leave the
underlying administrative costs for the business. The close-out of the Telecom
Direct division was completed during the year.
EBITDA
Excluding non-recurring costs EBITDA has increased by GBP0.2m during the year.
Revenue growth has been absorbed in part by the margin reduction arising from
changes in the sales mix towards lower margin revenue streams combined with the
full year cost of partner commissions associated with the prior period
acquisitions.
EARNINGS PER SHARE
Adjusted earnings per share, based on retained earnings adding back amortisation
and non-recurring costs (see note 5), has reduced by 9% to 10.44p per share
(2008: 11.43p). This arises largely due to lower EBITA margin, driven by gross
margin movement from changes to the sales mix, combined with a higher interest
cost arising from a full year's interest charge for the debt increase associated
with the Telecom Direct acquisition.
CASH FLOW
The Group benefits from an excellent operating cash model, with EBITA turning
into cash. Adjusted EBITA turned into net cash from operating activities is 99%
(2008: 79%). Working capital movement during the year was neutral. The Group has
focussed on managing its credit risk in the current economic climate and with
the introduction of new processes collections of trade receivables were
significantly improved during the year with a reduction of customer collection
periods to 34 days (2008: 53 days) resulting in an absolute reduction of GBP0.8m
to trade receivables being achieved.
After servicing its debt the Group achieved an increase in cash and cash
equivalents of GBP0.6m during the year. All acquisitions have been paid for and
no further earn-out payments are due.
CAPITAL EXPENDITURE
The Group has low capital requirements and therefore expenditure on tangible
assets is low at 0.1% of revenue (2008: 0.8%). Expenditure on intangible assets
was GBP0.1m (2008: GBP7.4m), which is significantly lower than the prior year
comparative which includes the investment in the two customer bases acquired
during 2008.
NET DEBT
Net debt, which comprises cash balances and bank borrowings, improved by GBP0.5m
to GBP10.8m (2008: GBP11.3m). This reduction to net debt was achieved through
strong cash flow and despite significant non-recurring costs of GBP1.3m during
the year from the close-out of Telecom Direct Limited, restructuring costs and
the bank arrangement fees in relation to the new facilities.
The Group continues to manage its exposure to interest rate risks arising from
financing activities. After the year end the Group entered an agreement to
manage the interest rate risk on 100% of the Group's fixed term debts through to
December 2011 at a more favourable rate than that which it replaced.
KEY PERFORMANCE INDICATORS (KPIs)
The KPIs outlined below are intended to provide useful information when
interpreting the accounts. The KPIs outline the Group's position as at the final
month of the year, March, which provides an indication of the starting point for
the following financial year.
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Key Performance Indicators (as at 31 March) | | | | |
+-------------------------------------------------------+-----------+----------+----------+----------+
| | Residential | Business | Total |
+---------------------------------+---------------------+----------------------+---------------------+
| | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| REVENUE BY PRODUCT | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Line rental | 1.3% | 1.1% | 37.7% | 32.1% | 39.0% | 33.2% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Calls | 4.0% | 6.9% | 53.4% | 56.3% | 57.4% | 63.2% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Broadband and data | 0.0% | 0.0% | 2.2% | 1.6% | 2.2% | 1.6% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Mobile | 0.0% | 0.0% | 0.6% | 0.5% | 0.6% | 0.5% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Other | 0.0% | 0.0% | 0.8% | 1.5% | 1.5% | 1.5% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Total | 5.3% | 8.0% | 94.7% | 92.0% | 100.0% | 100.0% |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| Average monthly spend per | GBP11.31 | GBP12.93 | GBP101.47 | GBP95.23 | GBP72.42 | GBP69.76 |
| customer (ex VAT) | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
| | | | | | | |
+---------------------------------+----------+----------+-----------+----------+----------+----------+
Note: analysis only includes those customers who received a bill and customers
are only billed if the bill exceeds GBP2.99.
RESILIENT BUSINESS MODEL
Despite the unprecedented conditions in the UK economy the Board believes that
AdEPT has a number of resilient features and a strong customer proposition which
it is believed will present opportunities in the coming year. These features
include:
* highly cash generative with strong underlying profitability;
* supplies are nearly all business critical - an essential part of the customer's
daily operational requirements;
* highly automated systems provides sector leading labour costs : turnover
productivity;
* low capital investment requirements relative to turnover;
* continued focus on broadening its product range, particularly with regard to
data connectivity;
* customers are spread across all industries, the top ten customers account for
approximately 11% of revenues;
* trade suppliers and partners are all top tier suppliers, providing confidence in
the continuity and reliability of service to customers;
* 65% of the Group's customers pay by monthly direct debit, reducing the Group's
credit risk; and
* the Group has agreed banking facilities through to December 2011. With the
elimination of the excess costs associated with the Telecom Direct acquisition,
the reorganisation and the level of cash generation forecast, the Board expects
the Group's net borrowing position to improve significantly over the next twelve
months.
John Swaite
Finance Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2009
+------------------------------------------------+---+--------+-----------+-----------+
| | | | 2009 | 2008 |
+------------------------------------------------+---+--------+-----------+-----------+
| | | Note | GBP'000 | GBP'000 |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| REVENUE | | 4 | 28,567 | 23,618 |
+------------------------------------------------+---+--------+-----------+-----------+
| Cost of sales | | | (18,226) | (14,864) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| GROSS PROFIT | | | 10,341 | 8,754 |
+------------------------------------------------+---+--------+-----------+-----------+
| Administrative expenses | | | (10,451) | (8,843) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| OPERATING LOSS | | | (110) | (89) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Total operating profit - analysed: | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Operating profit before non-recurring costs, | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| depreciation and amortisation | | | 3,490 | 3,280 |
+------------------------------------------------+---+--------+-----------+-----------+
| Non-recurring costs | | | (1,314) | (1,381) |
+------------------------------------------------+---+--------+-----------+-----------+
| Depreciation of tangible fixed assets | | | (160) | (119) |
+------------------------------------------------+---+--------+-----------+-----------+
| Amortisation of intangible fixed assets | | | (2,126) | (1,869) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Total operating loss | | | (110) | (89) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Finance costs | | 7 | (1,294) | (653) |
+------------------------------------------------+---+--------+-----------+-----------+
| Finance income | | | 1 | 4 |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| LOSS BEFORE INCOME TAX | | | (1,403) | (738) |
+------------------------------------------------+---+--------+-----------+-----------+
| Income tax credit/(expense) | | 10 | 162 | (105) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| RETAINED EARNINGS (ACCUMULATED LOSSES) | | 19 | (1,241) | (843) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Attributable to: | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Equity holders of the parent | | | (1,241) | (843) |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Earnings per share | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
| Basic earnings per share | | 26 | (5.89)p | (4.00)p |
+------------------------------------------------+---+--------+-----------+-----------+
| Diluted earnings per share | | 26 | (5.89)p | (4.00)p |
+------------------------------------------------+---+--------+-----------+-----------+
| | | | | |
+------------------------------------------------+---+--------+-----------+-----------+
All amounts relate to continuing operations. Notes 1 to 28 form part of these
financial statements.
CONSOLIDATED BALANCE SHEET
As at 31 March 2009
+----------------------------------------------------+-------+------------+-----------+
| | | 31 March | 31 March |
+----------------------------------------------------+-------+------------+-----------+
| | | 2009 | 2008 |
+----------------------------------------------------+-------+------------+-----------+
| | Note | GBP'000 | GBP'000 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| ASSETS | | | |
+----------------------------------------------------+-------+------------+-----------+
| Non-current assets | | | |
+----------------------------------------------------+-------+------------+-----------+
| Intangible assets | 11 | 20,532 | 22,514 |
+----------------------------------------------------+-------+------------+-----------+
| Property, plant and equipment | 12 | 135 | 280 |
+----------------------------------------------------+-------+------------+-----------+
| Deferred income tax | 13 | 799 | 713 |
+----------------------------------------------------+-------+------------+-----------+
| | | 21,466 | 23,507 |
+----------------------------------------------------+-------+------------+-----------+
| CURRENT ASSETS | | | |
+----------------------------------------------------+-------+------------+-----------+
| Trade and other receivables | 15 | 3,218 | 4,304 |
+----------------------------------------------------+-------+------------+-----------+
| Income tax receivable | | 50 | - |
+----------------------------------------------------+-------+------------+-----------+
| Cash and cash equivalents | | 733 | 155 |
+----------------------------------------------------+-------+------------+-----------+
| | | 4,001 | 4,459 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL ASSETS | | 25,467 | 27,966 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| CURRENT LIABILITIES | | | |
+----------------------------------------------------+-------+------------+-----------+
| Trade and other payables | 16 | 5,288 | 6,597 |
+----------------------------------------------------+-------+------------+-----------+
| Income tax | | - | 103 |
+----------------------------------------------------+-------+------------+-----------+
| Short-term borrowings | | 1,474 | 923 |
+----------------------------------------------------+-------+------------+-----------+
| | | 6,762 | 7,623 |
+----------------------------------------------------+-------+------------+-----------+
| NON-CURRENT LIABILITIES | | | |
+----------------------------------------------------+-------+------------+-----------+
| Long-term borrowings | 17 | 10,103 | 10,527 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL LIABILITIES | | 16,865 | 18,150 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| NET ASSETS | | 8,602 | 9,816 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE | | | |
| PARENT | | | |
+----------------------------------------------------+-------+------------+-----------+
| Share capital | 18 | 2,107 | 2,107 |
+----------------------------------------------------+-------+------------+-----------+
| Share premium | 19 | 7,965 | 7,965 |
+----------------------------------------------------+-------+------------+-----------+
| Retained earnings | 19 | (1,470) | (256) |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL EQUITY | | 8,602 | 9,816 |
+----------------------------------------------------+-------+------------+-----------+
The financial statements were approved and authorised for issue by the Board on
6 July 2009 and signed on its behalf.
Ian Fishwick
Director
Notes 1 to 28 form part of these financial statements.
COMPANY BALANCE SHEET
As at 31 March 2009
+----------------------------------------------------+-------+------------+-----------+
| | | 31 March | 31 March |
+----------------------------------------------------+-------+------------+-----------+
| | | 2009 | 2008 |
+----------------------------------------------------+-------+------------+-----------+
| | Note | GBP'000 | GBP'000 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| ASSETS | | | |
+----------------------------------------------------+-------+------------+-----------+
| Non-current assets | | | |
+----------------------------------------------------+-------+------------+-----------+
| Intangible assets | 11 | 20,532 | 22,514 |
+----------------------------------------------------+-------+------------+-----------+
| Property, plant and equipment | 12 | 135 | 280 |
+----------------------------------------------------+-------+------------+-----------+
| Deferred income tax | 13 | 799 | 713 |
+----------------------------------------------------+-------+------------+-----------+
| | | 21,466 | 23,507 |
+----------------------------------------------------+-------+------------+-----------+
| CURRENT ASSETS | | | |
+----------------------------------------------------+-------+------------+-----------+
| Trade and other receivables | 15 | 3,218 | 4,304 |
+----------------------------------------------------+-------+------------+-----------+
| Income tax receivable | | 50 | - |
+----------------------------------------------------+-------+------------+-----------+
| Cash and cash equivalents | | 733 | 155 |
+----------------------------------------------------+-------+------------+-----------+
| | | 4,001 | 4,459 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL ASSETS | | 25,467 | 27,966 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| CURRENT LIABILITIES | | | |
+----------------------------------------------------+-------+------------+-----------+
| Trade and other payables | 16 | 5,288 | 6,597 |
+----------------------------------------------------+-------+------------+-----------+
| Income tax | | - | 103 |
+----------------------------------------------------+-------+------------+-----------+
| Short-term borrowings | | 1,474 | 923 |
+----------------------------------------------------+-------+------------+-----------+
| | | 6,762 | 7,623 |
+----------------------------------------------------+-------+------------+-----------+
| NON-CURRENT LIABILITIES | | | |
+----------------------------------------------------+-------+------------+-----------+
| Long-term borrowings | 17 | 10,103 | 10,527 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL LIABILITIES | | 16,865 | 18,150 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| NET ASSETS | | 8,602 | 9,816 |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE | | | |
| PARENT | | | |
+----------------------------------------------------+-------+------------+-----------+
| Share capital | 18 | 2,107 | 2,107 |
+----------------------------------------------------+-------+------------+-----------+
| Share premium | 19 | 7,965 | 7,965 |
+----------------------------------------------------+-------+------------+-----------+
| Retained earnings | 19 | (1,470) | (256) |
+----------------------------------------------------+-------+------------+-----------+
| | | | |
+----------------------------------------------------+-------+------------+-----------+
| TOTAL EQUITY | | 8,602 | 9,816 |
+----------------------------------------------------+-------+------------+-----------+
The financial statements were approved and authorised for issue by the Board on
6 July 2009 and signed on its behalf.
Ian Fishwick
Director
Notes 1 to 28 form part of these financial statements.
GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2009
+---------------------------------------------+----------+----------+----------+----------+
| | Attributable to equity holders of the |
| | parent |
+---------------------------------------------+-------------------------------------------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| | Share | Share | Retained | Total |
+---------------------------------------------+----------+----------+----------+----------+
| | capital | Premium | earnings | equity |
+---------------------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| Equity at 1 April 2007 | 2,107 | 7,965 | 552 | 10,624 |
+---------------------------------------------+----------+----------+----------+----------+
| Loss for the year | - | - | (843) | (843) |
+---------------------------------------------+----------+----------+----------+----------+
| Share-based payments | - | - | 35 | 35 |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| Net income/(expense) recognised directly in | 2,107 | 7,965 | (256) | 9,816 |
| equity | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| Equity at 31 March 2008 | 2,107 | 7,965 | (256) | 9,816 |
+---------------------------------------------+----------+----------+----------+----------+
| Loss for the year | - | - | (1,241) | (1,241) |
+---------------------------------------------+----------+----------+----------+----------+
| Share-based payments | - | - | 27 | 27 |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| Net income/(expense) recognised directly in | 2,107 | 7,965 | (1,470) | 8,602 |
| equity | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
| Equity at 31 March 2009 | 2,107 | 7,965 | (1,470) | 8,602 |
+---------------------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------------------+----------+----------+----------+----------+
Notes 1 to 28 form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2009
+----------------------------------------------------+--+------+----------+----------+
| | | | 2009 | 2008 |
+----------------------------------------------------+--+------+----------+----------+
| | | | GBP'000 | GBP'000 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from operating activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Loss before income tax | | | (1,403) | (738) |
+----------------------------------------------------+--+------+----------+----------+
| Depreciation and amortisation | | | 2,286 | 1,989 |
+----------------------------------------------------+--+------+----------+----------+
| Profit on sale of property, plant and equipment | | | (1) | - |
+----------------------------------------------------+--+------+----------+----------+
| Profit held in trust | | | - | (31) |
+----------------------------------------------------+--+------+----------+----------+
| Share-based payments | | | 27 | 35 |
+----------------------------------------------------+--+------+----------+----------+
| Net finance costs | | | 1,293 | 644 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Operating cash flows before movements in working | | | 2,202 | 1,899 |
| capital | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Decrease in trade and other receivables | | | 787 | 79 |
+----------------------------------------------------+--+------+----------+----------+
| Decrease in trade and other payables | | | (920) | (138) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash generated from operations | | | 2,069 | 1,840 |
+----------------------------------------------------+--+------+----------+----------+
| Income taxes paid | | | (79) | (709) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash from operating activities | | | 1,990 | 1,131 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from investing activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Interest received | | | 1 | 4 |
+----------------------------------------------------+--+------+----------+----------+
| Interest paid | | | (995) | (665) |
+----------------------------------------------------+--+------+----------+----------+
| Acquisition of subsidiary, net of cash acquired | | | - | (5,144) |
+----------------------------------------------------+--+------+----------+----------+
| Purchase of intangible assets | | | (762) | (2,009) |
+----------------------------------------------------+--+------+----------+----------+
| Purchase of property, plant and equipment | | | (14) | (196) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash used in investing activities | | | (1,770) | (8,010) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from financing activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Repayment of finance leases | | | (47) | (6) |
+----------------------------------------------------+--+------+----------+----------+
| Repayment of borrowings | | | (1,350) | (1,500) |
+----------------------------------------------------+--+------+----------+----------+
| Increase of bank loan | | | 1,755 | 7,200 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash from financing activities | | | 358 | 5,694 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net increase/(decrease) in cash and cash | | | 578 | (1,185) |
| equivalents | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash and cash equivalents at beginning of year | | | 155 | 1,340 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash and cash equivalents at end of year | | | 733 | 155 |
+----------------------------------------------------+--+------+----------+----------+
+----------------------------------------------------+--+------+-----------+-----------+
| Cash and cash equivalents : | | | | |
+----------------------------------------------------+--+------+-----------+-----------+
| Cash at bank and in hand | | | 733 | 155 |
+----------------------------------------------------+--+------+-----------+-----------+
| Bank overdrafts | | | - | - |
+----------------------------------------------------+--+------+-----------+-----------+
| | | | | |
+----------------------------------------------------+--+------+-----------+-----------+
| Cash and cash equivalents | | | 733 | 155 |
+----------------------------------------------------+--+------+-----------+-----------+
Notes 1 to 28 form part of these financial statements.
COMPANY CASH FLOW STATEMENT
For the year ended 31 March 2009
+----------------------------------------------------+--+------+----------+----------+
| | | | 2009 | 2008 |
+----------------------------------------------------+--+------+----------+----------+
| | | | GBP'000 | GBP'000 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from operating activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Loss before income tax | | | (1,403) | (738) |
+----------------------------------------------------+--+------+----------+----------+
| Depreciation and amortisation | | | 2,286 | 1,989 |
+----------------------------------------------------+--+------+----------+----------+
| Profit on sale of property, plant and equipment | | | (1) | - |
+----------------------------------------------------+--+------+----------+----------+
| Profit held in trust | | | - | (31) |
+----------------------------------------------------+--+------+----------+----------+
| Share-based payments | | | 27 | 35 |
+----------------------------------------------------+--+------+----------+----------+
| Net finance costs | | | 1,293 | 644 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Operating cash flows before movements in working | | | 2,202 | 1,899 |
| capital | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Decrease in trade and other receivables | | | 787 | 79 |
+----------------------------------------------------+--+------+----------+----------+
| Decrease in trade and other payables | | | (920) | (138) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash generated from operations | | | 2,069 | 1,840 |
+----------------------------------------------------+--+------+----------+----------+
| Income taxes paid | | | (79) | (709) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash from operating activities | | | 1,990 | 1,131 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from investing activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Interest received | | | 1 | 4 |
+----------------------------------------------------+--+------+----------+----------+
| Interest paid | | | (995) | (665) |
+----------------------------------------------------+--+------+----------+----------+
| Acquisition of subsidiary, net of cash acquired | | | - | (5,144) |
+----------------------------------------------------+--+------+----------+----------+
| Purchase of intangible assets | | | (762) | (2,009) |
+----------------------------------------------------+--+------+----------+----------+
| Purchase of property, plant and equipment | | | (14) | (196) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash used in investing activities | | | (1,770) | (8,010) |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash flows from financing activities | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Repayment of finance leases | | | (47) | (6) |
+----------------------------------------------------+--+------+----------+----------+
| Repayment of borrowings | | | (1,350) | (1,500) |
+----------------------------------------------------+--+------+----------+----------+
| Increase of bank loan | | | 1,755 | 7,200 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net cash from financing activities | | | 358 | 5,694 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Net increase/(decrease) in cash and cash | | | 578 | (1,185) |
| equivalents | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash and cash equivalents at beginning of year | | | 155 | 1,340 |
+----------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------------+--+------+----------+----------+
| Cash and cash equivalents at end of year | | | 733 | 155 |
+----------------------------------------------------+--+------+----------+----------+
+----------------------------------------------------+--+------+-----------+-----------+
| Cash and cash equivalents : | | | | |
+----------------------------------------------------+--+------+-----------+-----------+
| Cash at bank and in hand | | | 733 | 155 |
+----------------------------------------------------+--+------+-----------+-----------+
| Bank overdrafts | | | - | - |
+----------------------------------------------------+--+------+-----------+-----------+
| | | | | |
+----------------------------------------------------+--+------+-----------+-----------+
| Cash and cash equivalents | | | 733 | 155 |
+----------------------------------------------------+--+------+-----------+-----------+
Notes 1 to 28 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND GENERAL INFORMATION
AdEPT Telecom plc is one of the UK's leading independent providers of voice and
data telecommunications services with award winning customer service. The Group
is focused on delivering a complete telecommunications service for small and
medium sized business customers with a targeted product range including landline
calls, line rental, broadband, mobile and data connectivity services.
AdEPT Telecom plc is the Group's ultimate parent Company and is incorporated and
domiciled in the UK. The Company's shares are listed on the Alternative
Investment Market (AIM) of the London Stock Exchange.
The Group's statutory financial statements for the year ended 31 March 2008,
prepared under International Financial Reporting Standards, have been filed with
the Registrar of Companies. The auditors' report on those financial statements
was unqualified and did not contain a statement under Section 237(2) or (3) of
the Companies Act 1985.
2. ACCOUNTING POLICIES
Basis of preparation of financial statements
The consolidated financial statements have been prepared in accordance with
applicable International Financial Reporting Standards (IFRS) as adopted by the
EU, as issued by the International Accounting Standards Board.
The date of transition to IFRS was 1 April 2007 (transition date).
The Company has taken advantage of s230 CA 1985 to not present a Company income
statement. The loss for the year dealt with in the holding Company, which has
been approved by the Board, was GBP1,462,216 (2008: GBP842,743).
Certain new standards, amendments and interpretations of existing standards that
have been published and which are effective for the Group's accounting periods
beginning on or after 1 July 2008 and which are applicable to the Group, but
which have not been adopted early are:
* IAS 1 Presentation of Financial Statements (revised 2007)
* IFRS 8 Operating segments: Disclosure
* IAS 23 Borrowing costs (revised)
* IFRS 3 Business combinations
* IAS 39 Financial instruments: Recognition and measurement (amendment)
* IFRS 7 Improving disclosures about financial instruments (amendments and
disclosures)
The adoption of these standards, amendments and interpretations is not expected
to have a material impact on the Company's profit for the year or equity.
Application of these standards will result in some changes in presentation of
information within the consolidated financial statements.
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its
subsidiary undertakings drawn up to 31 March 2009. Subsidiaries are entities
over which the Group has the power to control the financial and operating
policies so as to obtain benefits from its 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
basis for subsequent measurement in accordance with the Group's 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 (including intangibles) of
the acquired subsidiary at the date of acquisition.
Revenue
Revenue is measured by reference to the fair value of consideration received or
receivable by the Group for goods supplied and services provided, excluding VAT
and trade discounts. Revenue is recognised upon the performance of services or
transfer of the risks and rewards of ownership to the customer.
Revenue comprises of both invoiced and un-invoiced amounts for performance of
network services supplied by the Group during the year. The network services,
which include call revenues (billing for call minutes) and fixed charges such as
line rental or broadband, are generally billed monthly in arrears. The revenue
is recognised in the month to which the calls relate. Revenue from mobile
commissions is recognised when the customers are connected to the relevant
network.
Investments
Shares in the subsidiaries are valued at cost less provision for permanent
impairment.
Intangible fixed assets acquired as part of a business combination and
amortisation
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.
Intangible fixed assets continue to be subject to an impairment review on the
first anniversary after acquisition, when appropriate lives are selected.
The intangible asset "customer base" is amortised to the income statement over
its estimated economic life on a reducing balance basis. The average useful
economic life of all the customer bases has been estimated at 12 years (2008: 12
years).
Other intangible assets
Also included within intangible fixed assets are the development costs of the
Group's billing and customer management system plus an individual license. These
other intangible assets are stated at cost, less amortisation and any provision
for impairment. Amortisation is provided at rates calculated to write off the
cost, less estimated residual value of each intangible asset, over its expected
useful life on the following basis:
+-------+-------+-------+-------+-------+-------+------------------+-------+-------+-------+-------+-------+
| | | | | - | 3 years |
| | | | Customer | | straight line |
| | | | management | | |
| | | | system | | |
+---------------+---------------+---------------+--------------------------+---------------+---------------+
| | | | | - | |
| | | | Other | | Contract |
| | | | licences | | licence |
| | | | | | period |
+-------+-------+-------+-------+-------+-------+------------------+-------+-------+-------+-------+-------+
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost, less depreciation and any
provision for impairment. Depreciation is provided on all property, plant and
equipment at rates calculated to write off the cost, less estimated residual
value of each asset, over its expected useful life on the following basis:
+--------+--+---+----------------------------+----+---------------------------------+
| | | | Short term | - | 5 years straight line |
| | | | leasehold | | |
| | | | improvements | | |
+--------+--+---+----------------------------+----+---------------------------------+
| | | | Fixtures and | - | 3 years straight line |
| | | | fittings | | |
+--------+--+---+----------------------------+----+---------------------------------+
| | | | Office equipment | - | 3 years straight line |
+--------+--+---+----------------------------+----+---------------------------------+
| | | | Computer software | - | 3 years straight line |
+--------+--+---+----------------------------+----+---------------------------------+
Leasing and hire purchase commitments
Assets held under finance leases and hire purchase contracts, which are those
where substantially all the risks and rewards of ownership of the asset have
passed to the Company, are capitalised in the balance sheet and depreciated over
their useful lives. The corresponding lease or hire purchase obligation is
treated in the balance sheet as a liability.
The interest element of the rental obligations is charged to the income
statement over the period of the lease and represents a constant proportion of
the balance of capital repayments outstanding.
Rentals under operating leases, where substantially all of the benefits and
risks of ownership remain with the lessor, are charged to the profit and loss on
a straight line basis, even if payments are not made on such a basis.
Pensions
The Group contributes to personal pension plans. The amount charged to the
income statement in respect of pension costs is the contribution payable in the
year.
Capital instruments
The costs incurred directly in connection with the issue of debt instruments are
charged to the income statement on a straight line basis over the life of the
debt instrument.
Income tax
Income tax is the tax currently payable based on taxable profit for the year.
Deferred income tax is generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred income
tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit.
The hive up of intangible assets between Group companies is not considered a
business combination under IFRS 3 (Business Combinations) and therefore deferred
income tax is not provided on the intangible customer base asset thus acquired
by AdEPT Telecom plc.
Deferred income tax on temporary differences associated with shares in
subsidiaries is not provided if reversal of these temporary differences can be
controlled by the Group and it is probable that reversal will not occur in the
foreseeable future. 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 income tax assets.
Deferred income tax liabilities are provided in full, with no discounting.
Deferred income tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be offset
against future taxable income. Current and deferred income tax assets and
liabilities are calculated 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.
Changes in deferred income tax assets, or liabilities are recognised as a
component of income tax expense in the income statement, except where they
relate to items that are charged or credited directly to equity in which case
the related deferred income tax is also charged or credited directly to equity.
Share-based payments
The cost of equity-settled transactions with employees is measured by reference
to the fair value of the award at the date at which they are granted and is
recognised as an expense over the vesting period, which ends on the date at
which the relevant employees become fully entitled to the award. Fair value is
appraised at the grant date and excludes the impact on non-market vesting
conditions such as profitability and sales growth targets, using an appropriate
pricing model for which the assumptions are approved by the directors. In
valuing equity-settled transactions, only vesting conditions linked to the
market price of the shares of the Company are considered.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date, the cumulative expense (as above) is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non market conditions, the
number of equity instruments that will ultimately vest, or in the case of an
instrument subject to a market condition, be treated as vesting described above.
The movement in the cumulative expense since the previous balance sheet date is
recognised in the income statement, with a corresponding entry in equity.
Non-recurring items
Material and non-recurring items of income and expense are separated out in the
income statement. Examples of items which may give rise to disclosure as
non-recurring items include costs of restructuring and reorganisation of
existing businesses, integration of newly acquired businesses and asset
impairments. Non-recurring costs include the current year expense charged to the
income statement in relation to restructuring which has taken place since the
year end to derive the underlying profitability of the Group and Company.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.
Financial instruments
Financial assets and liabilities are recognised on the Group's balance sheet
when the Group becomes a party to the contractual provisions of the instrument.
The Group makes use of derivative financial instruments to hedge its exposure to
interest rate risks arising from financing activities. In accordance with its
treasury policy, the Group does not hold or issue derivative financial
instruments for trading purposes.
Derivative financial instruments are recognised initially at fair value, i.e.
cost. Subsequent to initial recognition derivative financial instruments are
measured at fair value. The gain or loss on re-measurement to fair value is
recognised immediately in the income statement as a component of financing
income or cost.
The fair value of the derivative financial instrument is the estimated amount
that the Group would receive or pay to terminate the instrument at the balance
sheet date, taking into account current interest rates and the current
creditworthiness of the instrument counterparties.
Capital
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in Note 17, cash and cash equivalents, and equity
attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in Notes 18 and 19.
Borrowings and borrowing costs
Borrowings are recorded initially at the proceeds received, net of transaction
costs incurred. Borrowings are subsequently stated at amortised cost. Any
differences between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Borrowing costs are expensed to the income statement as incurred with the
exception of arrangement fees which are deducted from the related liability and
are released over the term of the related liability in accordance with IAS 39.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities with the
next financial year are discussed below.
Impairment of intangible assets
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the 'value in use' of the cash-generating units
to which the intangible value is allocated. Estimating a value in use amount
requires management to make an estimate of the expected future cash flows from
the cash-generating unit and also to choose a suitable discount rate in order to
calculate the present value of those cash flows. More details including carrying
values are included in Note 11.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses and other timing
differences to the extent that it is more likely than not that taxable profit
will be available against which the losses and other timing differences can be
utilised. Management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and level of
future taxable profits together with future tax planning strategies.
Share-based payment
The estimation of the fair value of share options and other equity instruments
at the date of grant requires management to make estimates concerning the number
of employees likely to exercise their options together with the expected
volatility and dividends payable on the underlying shares.
Receivables
Debts are recognised to the extent that they are judged recoverable. Management
reviews are performed to estimate the level of provision required for
irrecoverable debt. Provisions are made specifically against invoices where
recoverability is uncertain.
4. REVENUE
The whole of the revenue is attributable to the provision of voice and data
communication services to both residential and business customers. The directors
regard the Group as having a single business segment. All revenue arose within
the United Kingdom.
5. OPERATING LOSS
The operating (loss)/profit is stated after charging:
+-------------+-------------+-------------+-------------+-------------+-------------+
| | 2009 | 2008 |
+---------------------------+---------------------------+---------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Amortisation of customer | 2,126 | 1,869 |
| base, billing system and | | |
| license | | |
+---------------------------+---------------------------+---------------------------+
| Depreciation of tangible | | |
| fixed assets: | | |
+---------------------------+---------------------------+---------------------------+
| - owned by the Group | 160 | 119 |
+---------------------------+---------------------------+---------------------------+
| Loss on disposal of | (1) | - |
| tangible fixed assets | | |
+---------------------------+---------------------------+---------------------------+
| Share option expense | 27 | 35 |
+---------------------------+---------------------------+---------------------------+
| Minimum operating lease | 192 | 342 |
| payments land and | | |
| buildings | | |
+---------------------------+---------------------------+---------------------------+
| motor vehicles and | 162 | 102 |
| other equipment | | |
+-------------+-------------+-------------+-------------+-------------+-------------+
The operating loss includes non-recurring costs of GBP1,314,069 (2008:
GBP1,481,827), in relation to the costs of restructuring and reorganising
existing businesses, which will not recur next year. The bulk of these costs are
represented by staff, property and leases, which when stripped out leave the
underlying administrative costs for the business. Included within this figure,
is amortisation of GBPNil (2008: GBP100,889), relating to the billing system for
that division.
Included within the share option expense for the year is GBP3,498 relating to
the warrant instrument issued to Barclays Bank plc, see Note 18.
6. AUDITORS' REMUNERATION
+-------------+-------------+------------------+-------------+------------------+-------------+
| | 2009 | 2008 |
+---------------------------+--------------------------------+--------------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| Fees payable to the | | |
| Company's auditor for the | | |
| audit | | |
+---------------------------+--------------------------------+--------------------------------+
| of the Company's annual | 31 | 31 |
| financial statements | | |
+---------------------------+--------------------------------+--------------------------------+
| Fees payable to the | | |
| Company's auditor and its | | |
| associates | | |
+---------------------------+--------------------------------+--------------------------------+
| in respect of : | | |
+---------------------------+--------------------------------+--------------------------------+
| Other services relating | 5 | 5 |
| to taxation | | |
+---------------------------+--------------------------------+--------------------------------+
| Services relating to | - | 20 |
| corporate finance | | |
| transactions | | |
+---------------------------+--------------------------------+--------------------------------+
| All other services | - | 14 |
+-------------+-------------+------------------+-------------+------------------+-------------+
7. FINANCE COSTS
+-------------+-------------+------------------+-------------+------------------+-------------+
| | 2009 | 2008 |
+---------------------------+--------------------------------+--------------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| On bank loans and | 942 | 564 |
| overdrafts | | |
+---------------------------+--------------------------------+--------------------------------+
| Bank fees | 299 | 78 |
+---------------------------+--------------------------------+--------------------------------+
| Finance leases | 4 | 1 |
+---------------------------+--------------------------------+--------------------------------+
| Other interest payable | 49 | 10 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| | 1,294 | 653 |
+-------------+-------------+------------------+-------------+------------------+-------------+
8. EMPLOYEE COSTS
Staff costs, including directors' remuneration, were as follows:
+-------------+-------------+------------------+-------------+------------------+-------------+
| | 2009 | 2008 |
+---------------------------+--------------------------------+--------------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| Wages and salaries | 2,944 | 2,835 |
+---------------------------+--------------------------------+--------------------------------+
| Social security costs | 327 | 279 |
+---------------------------+--------------------------------+--------------------------------+
| Share option expense | 23 | 35 |
+---------------------------+--------------------------------+--------------------------------+
| Other pension costs | 18 | 16 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| | 3,312 | 3,165 |
+-------------+-------------+------------------+-------------+------------------+-------------+
Employee costs include GBP1,016,194 non-recurring costs (Note 5) (2008:
GBP810,796).
The average monthly number of employees, including the directors, during the
year was as follows:
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | 2009 | 2008 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | Number | Number |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | | |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| Non-executive directors | 4 | 4 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| Administrative staff | 74 | 65 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | | |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | 78 | 69 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
Key personnel:
The directors are considered to be the key management personnel of the Company,
having authority and responsibility for planning, directing and controlling the
activities of the Group.
9. DIRECTORS' EMOLUMENTS
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | 2009 | 2008 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | | |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| Emoluments | 848 | 794 |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| | | |
+----------------------------------------------------------+--------------------------------+--------------------------------+
| Group pension contributions to money purchase pension | 13 | 16 |
| schemes | | |
+----------------------------------------------------------+--------------------------------+--------------------------------+
During the year retirement benefits were accruing to 1 director (2008: 1) in
respect of money purchase pension schemes. The highest paid director received
remuneration of GBP231,239 (2008: GBP207,050). Termination benefits of
GBP128,250 were paid to a director during the year.
The value of the Group's contributions paid to a money purchase pension scheme
in respect of the highest paid director amounted to GBP13,971 (2008: GBP15,889).
The share option expense recognised during the year in respect of the directors
was GBP5,000 (2008: GBP8,968).
10. INCOME TAX EXPENSE
+-------------+-------------+-------------+-------------+-------------+-------------+
| | 2009 | 2008 |
+---------------------------+---------------------------+---------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Current tax (see Note | | |
| below) | | |
+---------------------------+---------------------------+---------------------------+
| UK corporation tax credit | (51) | 65 |
| on losses for the year | | |
+---------------------------+---------------------------+---------------------------+
| Adjustments in respect of | (25) | - |
| prior periods | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Total current tax | (76) | 65 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Deferred tax | | |
+---------------------------+---------------------------+---------------------------+
| Origination and reversal | 52 | 40 |
| of timing differences | | |
+---------------------------+---------------------------+---------------------------+
| Adjustments in respect of | (138) | - |
| prior periods | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Total deferred tax (see | (86) | 40 |
| Note 13) | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Total income tax | (162) | 105 |
| (credit)/expense | | |
+-------------+-------------+-------------+-------------+-------------+-------------+
Factors affecting tax charge for year
The relationship between expected tax expense based on the effective tax rate of
AdEPT at 30% (2008: 30%) and the tax expense actually recognised in the income
statement can be reconciled as follows:
+-------------+-------------+------------------+-------------+------------------+-------------+
| | 2009 | 2008 |
+---------------------------+--------------------------------+--------------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| (Loss) before income tax | (1,403) | (738) |
+---------------------------+--------------------------------+--------------------------------+
| Tax rate | 28% | 30% |
+---------------------------+--------------------------------+--------------------------------+
| Expected tax credit | (392) | (221) |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| Expenses not deductible | 7 | 32 |
| for tax purposes | | |
+---------------------------+--------------------------------+--------------------------------+
| Amortisation not | 353 | 303 |
| deductible for tax | | |
| purposes | | |
+---------------------------+--------------------------------+--------------------------------+
| Share option relief | 14 | - |
+---------------------------+--------------------------------+--------------------------------+
| Effect of rate change on | 19 | - |
| losses carried back | | |
+---------------------------+--------------------------------+--------------------------------+
| Adjustments to tax charge | (163) | - |
| in respect of prior | | |
| periods | | |
+---------------------------+--------------------------------+--------------------------------+
| Marginal relief | - | (8) |
+---------------------------+--------------------------------+--------------------------------+
| Other timing differences | - | - |
+---------------------------+--------------------------------+--------------------------------+
| | | |
+---------------------------+--------------------------------+--------------------------------+
| Actual tax | (162) | 105 |
| (credit)/expense net (see | | |
| Note above) | | |
+-------------+-------------+------------------+-------------+------------------+-------------+
There were no material factors that may affect future tax charges.
11. INTANGIBLE FIXED ASSETS
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| | | Computer | Customer | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | License | software | base | Total |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Group and | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| Company | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Cost | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 1 April 2007 | 22 | 458 | 17,171 | 17,651 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Additions | 4 | 204 | 9,425 | 9,633 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Addition from | - | 96 | - | 96 |
| subsidiary | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Retrospective | - | (96) | - | (96) |
| adjustment | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 1 April 2008 | 26 | 662 | 26,596 | 27,284 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Additions | - | 89 | 55 | 144 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 31 March | 26 | 751 | 26,651 | 27,428 |
| 2009 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Amortisation | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 1 April 2007 | 3 | 226 | 2,767 | 2,996 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Charge for the | 3 | 241 | 1,626 | 1,870 |
| year | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Disposals | - | (96) | - | (96) |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 1 April 2008 | 6 | 371 | 4,393 | 4,770 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Charge for the | 3 | 175 | 1,948 | 2,126 |
| year | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 31 March | 9 | 546 | 6,341 | 6,896 |
| 2009 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Net book value | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 31 March | 17 | 205 | 20,310 | 20,532 |
| 2009 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| At 31 March | 20 | 291 | 22,203 | 22,514 |
| 2008 | | | | |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
The Group has no internally generated intangible assets.
The Group acquired a billing system during the year ended 31 March 2008 by way
of a hive up of assets from a subsidiary, with a net book value of GBP96,218 at
the date of hive up. The billing system was required to maintain continuity of
the billing cycle during the transitional period. Following the transition of
the acquired customer base to the AdEPT billing platform the hived up billing
system was disposed of.
12. PROPERTY, PLANT AND EQUIPMENT
+--------+--------+---------+--------+--------+--------+---------+--------+--------+--------+
| | Short | | | |
| | term | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | leasehold | Fixtures | Office | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | improvements | and | equipment | Total |
| | | fittings | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Group and | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| Company | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Cost | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 1 April 2007 | 7 | 47 | 289 | 343 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Additions | - | 73 | 124 | 197 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Addition from | - | 2 | 42 | 44 |
| subsidiary | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 1 April 2008 | 7 | 122 | 455 | 584 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Additions | - | - | 15 | 15 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 31 March | 7 | 122 | 470 | 599 |
| 2009 | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Depreciation | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 1 April 2007 | 5 | 35 | 144 | 184 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Charge for the | 2 | 19 | 99 | 120 |
| year | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 1 April 2008 | 7 | 54 | 243 | 304 |
+-----------------+------------------+-----------------+------------------+-----------------+
| Charge for the | - | 30 | 130 | 160 |
| year | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Disposals | - | - | - | - |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 31 March | 7 | 84 | 373 | 464 |
| 2009 | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| Net book value | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 31 March | - | 38 | 97 | 135 |
| 2009 | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| | | | | |
+-----------------+------------------+-----------------+------------------+-----------------+
| At 31 March | - | 68 | 212 | 280 |
| 2008 | | | | |
+--------+--------+---------+--------+--------+--------+---------+--------+--------+--------+
The Group acquired tangible fixed assets during the year ended 31 March 2008 by
way of a hive up of assets from a subsidiary, with a net book value of GBP44,454
at the date of hive up. These assets are in continuing use within the business.
13. DEFERRED TAXATION
+----------------------------------+------------+------------+-------------------+-------------------+
| | | | 2009 | 2008 |
+----------------------------------+------------+------------+-------------------+-------------------+
| | | | GBP'000 | GBP'000 |
+----------------------------------+------------+------------+-------------------+-------------------+
| | | | | |
+----------------------------------+------------+------------+-------------------+-------------------+
| At 1 April 2008 | | | 713 | 18 |
+----------------------------------+------------+------------+-------------------+-------------------+
| Income statement charge | | | 86 | (40) |
+----------------------------------+------------+------------+-------------------+-------------------+
| Acquired with subsidiary | | | - | 735 |
+----------------------------------+------------+------------+-------------------+-------------------+
| | | | | |
+----------------------------------+------------+------------+-------------------+-------------------+
| At 31 March 2009 | | | 799 | 713 |
+----------------------------------+------------+------------+-------------------+-------------------+
The deferred tax asset is made up as follows:
+--------+--------+--------+--------+--------+--------+----------+--------+----------+--------+
| | | | 2009 | 2008 |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | GBP'000 | GBP,000 |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Capital | | | 121 | 78 |
| allowances | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Tax losses | | | 678 | 621 |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Other timing | | | - | 14 |
| differences | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | 799 | 713 |
+--------+--------+--------+--------+--------+--------+----------+--------+----------+--------+
The deferred tax asset has been recognised as the Group continues to generate
taxable profits against which the asset continues to reverse.
14. FIXED ASSET INVESTMENTS
+--------------------+--------------------+--------------------+--------------------+
| | Total |
+-----------------------------------------+-----------------------------------------+
| Shares in Group undertakings | GBP'000 |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| Cost or valuation | |
+-----------------------------------------+-----------------------------------------+
| At 1 April 2007 and 1 April 2008 | 12,829 |
+-----------------------------------------+-----------------------------------------+
| Additions | - |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| 31 March 2009 | 12,829 |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| Amounts written off | |
+-----------------------------------------+-----------------------------------------+
| At 1 April 2007 and 1 April 2008 | 12,829 |
+-----------------------------------------+-----------------------------------------+
| Amounts written off during the year | - |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| 31 March 2009 | 12,829 |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| Net book value | |
+-----------------------------------------+-----------------------------------------+
| At 31 March 2009 | - |
+-----------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------+-----------------------------------------+
| At 31 March 2008 | - |
+--------------------+--------------------+--------------------+--------------------+
Details of the principal Subsidiaries are disclosed in Note 23 to the financial
statements.
15. TRADE AND OTHER RECEIVABLES
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
| | Group | Company |
+-----------------+---------------------------------------+---------------------------------------+
| | 2009 | 2008 | 2009 | 2008 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Trade | 2,628 | 3,420 | 2,628 | 3,420 |
| receivables | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Other | 8 | 9 | 8 | 9 |
| receivables | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Prepayments and | 582 | 875 | 582 | 875 |
| accrued income | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | 3,218 | 4,304 | 3,218 | 4,304 |
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
As at 31 March 2009, trade receivables of GBP560,629 (2008: GBP380,125) were
impaired and fully provided for. The ageing of the trade receivables which are
past due and not impaired are as follows:
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
| | Group | Company |
+-----------------+---------------------------------------+---------------------------------------+
| | 2009 | 2008 | 2009 | 2008 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| 31-60 days | 68 | 380 | 68 | 380 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| 61-90 days | 1 | 84 | 1 | 84 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Over 90 days | 34 | 171 | 34 | 171 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | 103 | 635 | 103 | 635 |
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
Movement of the Group provision for impairment of trade receivables are as
follows:
+-------------+-------------+-------------+-------------+-------------+-------------+
| | Group | Company |
+---------------------------+---------------------------+---------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| At 1 April 2007 | 412 | 412 |
+---------------------------+---------------------------+---------------------------+
| Receivables written off | (570) | (570) |
| during the year as | | |
| uncollectible | | |
+---------------------------+---------------------------+---------------------------+
| Unused amounts reversed | (5) | (5) |
+---------------------------+---------------------------+---------------------------+
| Provision for receivables | 543 | 543 |
| impairment for the year | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| At 1 April 2008 | 380 | 380 |
+---------------------------+---------------------------+---------------------------+
| Receivables written off | (472) | (472) |
| during the year as | | |
| uncollectible | | |
+---------------------------+---------------------------+---------------------------+
| Unused amounts reversed | (35) | (35) |
+---------------------------+---------------------------+---------------------------+
| Provision for receivables | 688 | 688 |
| impairment for the year | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| At 31 March 2009 | 561 | 561 |
+---------------------------+---------------------------+---------------------------+
| | | |
+-------------+-------------+-------------+-------------+-------------+-------------+
The creation and release of a provision for impaired receivables has been
included in administration expenses in the income statement. Amounts charged to
the allowance account are generally written off when there is no expectation of
recovering cash. Management regularly review the outstanding receivables and do
not consider that any further impairment is required. The other assets classes
within trade and other receivables do not contain impaired assets.
16. TRADE AND OTHER PAYABLES
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
| | Group | Company |
+-----------------+---------------------------------------+---------------------------------------+
| | 2009 | 2008 | 2009 | 2008 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Trade payables | 3,292 | 3,701 | 3,292 | 3,701 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Other taxes and | 411 | 503 | 411 | 503 |
| social security | | | | |
| costs | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Finance lease | 6 | 16 | 6 | 16 |
| obligations | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Other payables | 150 | 143 | 150 | 143 |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| Accruals and | 1,429 | 2,234 | 1,429 | 2,234 |
| deferred income | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | | | | |
+-----------------+-------------------+-------------------+-------------------+-------------------+
| | 5,288 | 6,597 | 5,288 | 6,597 |
+--------+--------+----------+--------+----------+--------+----------+--------+----------+--------+
The finance lease obligations are payable within one year and have a present
value of GBP6,152. Included within accruals is deferred consideration of GBPNil
(2008: GBP619,044) in respect of the customer bases and subsidiaries acquired in
the current and prior years.
17. LONG TERM BORROWINGS
+--------+--------+--------+--------+--------+--------+----------+--------+----------+--------+
| | Group | Company |
+-----------------+-----------------------------------+---------------------------------------+
| | 2009 | 2008 | 2009 | 2008 |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Between 1 and 2 | 1,474 | 1,712 | 1,474 | 1,712 |
| years | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Between 2 and 3 | 1,116 | 1,712 | 1,116 | 1,712 |
| years | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| More than 3 | 7,513 | 7,103 | 7,513 | 7,103 |
| years | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| | | | | |
+-----------------+-----------------+-----------------+-------------------+-------------------+
| Bank loans | 10,103 | 10,527 | 10,103 | 10,527 |
+--------+--------+--------+--------+--------+--------+----------+--------+----------+--------+
The bank loan is secured by a debenture incorporating a fixed and floating
charge over the undertaking and all property and assets present and future
including goodwill, book debts, uncalled capital, buildings, fixtures, fixed
plant and machinery. Details of the interest rates applicable to the loans are
included in Note 27.
Included within bank loans are arrangement fees amounting to GBP278,897 which
are being released over the term of the loan in accordance with IAS 39.
In addition an exit fee has also been included within this balance. Under the
terms of the loan agreement an amount of between GBP587,500 and GBP87,500 is due
to be paid on the settlement of the loan. The amount payable depends upon future
targets based upon the ratio of Net Debt to EBITDA. At the balance sheet date
the directors expect the maximum amount will become payable based upon the
Group's forecasts. The amount is being charged to finance charges over the life
of the loan.
18. SHARE CAPITAL
+----------------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------------+------------+------------+
| | | |
+----------------------------------------------------------+------------+------------+
| Authorised | | |
+----------------------------------------------------------+------------+------------+
| 65,000,000 Ordinary shares of 10p each | 6,500 | 6,500 |
+----------------------------------------------------------+------------+------------+
| | | |
+----------------------------------------------------------+------------+------------+
| Allotted, called up and fully paid | | |
+----------------------------------------------------------+------------+------------+
| 21,067,443 Ordinary shares of 10p each | 2,107 | 2,107 |
+----------------------------------------------------------+------------+------------+
Share Options
At 31 March 2009, the following options and warrants over the shares of AdEPT
were in issue:
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| | 2009 | 2009 | 2008 | 2008 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | Number of | Weighted | Number of | Weighted |
| | shares under | average | shares under | average |
| | option | exercise price | option | exercise price |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Outstanding at | 2,313,046 | 75p | 2,378,420 | 77p |
| 1 April | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Granted during | 1,858,813 | 23p | - | - |
| the year | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Forfeited | (20,600) | 140p | (65,374) | 145p |
| during the year | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Exercised | - | - | - | - |
| during the year | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| Outstanding at | 4,151,259 | 52p | 2,313,046 | 75p |
| 31 March | | | | |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
The weighted average fair values have been determined using the Black
Scholes-Merton Pricing Model with the following assumptions and inputs:
+------------------------------------------+-------------+-------------+-------------+
| | | 2009 | 2008 |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Risk free interest rate | | 2.71-4.13% | 4.13% |
+------------------------------------------+-------------+-------------+-------------+
| Expected volatility | | 20.0-83.0% | 20.0% |
+------------------------------------------+-------------+-------------+-------------+
| Expected option life (years) | | 1.25-5.7 | 1.25-5.7 |
| | | years | years |
+------------------------------------------+-------------+-------------+-------------+
| Expected dividend yield | | 0% | 0% |
+------------------------------------------+-------------+-------------+-------------+
| Weighted average share price | | 43p | 60p |
+------------------------------------------+-------------+-------------+-------------+
| Weighted average exercise price | | 44p | 60p |
+------------------------------------------+-------------+-------------+-------------+
| Weighted average fair value of options | | 5p | 6p |
| granted | | | |
+------------------------------------------+-------------+-------------+-------------+
The expected average volatility was determined by reviewing the last 100
historical fluctuations in the share price prior to the grant date of each share
instrument. An expected take up of 100% has been applied to each share
instrument. Expected dividend yield is estimated at 0%, this estimate of nil is
per the requirement of IFRS2 where a Company such as AdEPT has no current
dividend history, it does not bear any relation to the actual dividend policy of
AdEPT Telecom plc.
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
| | Exercise price |Expected option | 31 March 2009 | 31 March 2008 |
| | (pence) | life (years) | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 31 July 2003 | 29 | 5.7 | 152,160 | 152,160 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 28 December | 29 | 5.3 | 600,000 | 600,000 |
| 2003 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 29 August 2004 | 42 | 4.6 | 342,216 | 342,216 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 6 June 2005 | 42 | 3.6-4.8 | 342,216 | 342,216 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 13 December | 140 | 2.3-4.1 | 342,216 | 342,216 |
| 2005 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 14 February | 140 | 3.1-4.1 | 421,349 | 421,349 |
| 2006 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 15 February | 140 | 1.25-2.25 | 86,761 | 107,361 |
| 2006 | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 9 May 2006 | 199 | 1.25-2.25 | 5,528 | 5,528 |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 1 August 2008 | 42 | 3.0 | 750,000 | - |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| 21 January 2009 | 12 | 3.0 | 1,108,813 | - |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+-----------------+-----------------+-----------------+-----------------+
| | | | 4,151,259 | 2,313,046 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+
During the year a warrant was issued to Barclays Bank plc over 5% of the diluted
share capital of the Company. As at 31 March 2009 this entitled the holder to
1,108,813 shares. The weighted average fair value of this equity instrument of
GBP55,500 has been determined using the Black Scholes-Merton Pricing Model
applying the same assumptions as those applied to the other equity instruments
issued during the period due to Barclays Bank plc being unable to provide a
sufficiently reliable estimate of the value of services provided in relation to
these warrants.
The mid?market price of the ordinary shares on 31 March 2009 was 15.5p and the
range during the year was 10.0p to 44.5p.
There have been no transactions with equity holders or dividends during the
current or previous year.
19. RESERVES
+-----------------------------------------------------------+------------+-----------+
| | Share | |
+-----------------------------------------------------------+------------+-----------+
| | premium | Profit |
| | | and |
+-----------------------------------------------------------+------------+-----------+
| | account | loss |
| | | account |
+-----------------------------------------------------------+------------+-----------+
| Group | GBP'000 | GBP'000 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 1 April 2007 | 7,965 | 552 |
+-----------------------------------------------------------+------------+-----------+
| Loss for the year | - | (843) |
+-----------------------------------------------------------+------------+-----------+
| Share options issued during the year | - | 35 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 1 April 2008 | 7,965 | (256) |
+-----------------------------------------------------------+------------+-----------+
| Loss for the year | - | (1,241) |
+-----------------------------------------------------------+------------+-----------+
| Share options issued during the year | - | 27 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 31 March 2009 | 7,965 | (1,470) |
+-----------------------------------------------------------+------------+-----------+
+-----------------------------------------------------------+------------+-----------+
| | Share | |
+-----------------------------------------------------------+------------+-----------+
| | premium | Profit |
| | | and |
+-----------------------------------------------------------+------------+-----------+
| | account | loss |
| | | account |
+-----------------------------------------------------------+------------+-----------+
| Company | GBP'000 | GBP'000 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 1 April 2007 | 7,965 | 552 |
+-----------------------------------------------------------+------------+-----------+
| Loss for the year | - | (843) |
+-----------------------------------------------------------+------------+-----------+
| Share options issued during the year | - | 35 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 1 April 2008 | 7,965 | (256) |
+-----------------------------------------------------------+------------+-----------+
| Loss for the year | - | (1,241) |
+-----------------------------------------------------------+------------+-----------+
| Share options issued during the year | - | 27 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| At 31 March 2009 | 7,965 | (1,470) |
+-----------------------------------------------------------+------------+-----------+
20. PENSION COMMITMENTS
At 31 March 2009 there were no pension commitments (2008: GBPNil).
21. OPERATING LEASE COMMITMENTS
At 31 March 2009 the Group and Company had lease commitments as follows:
+--------+--------+------------------+--------+------------------+--------+------------------+--------+------------------+--------+
| | Land and buildings | Other |
+-----------------+-------------------------------------------------------+-------------------------------------------------------+
| | 2009 | 2008 | 2009 | 2008 |
+-----------------+---------------------------+---------------------------+---------------------------+---------------------------+
| Group and | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| Company | | | | |
+-----------------+---------------------------+---------------------------+---------------------------+---------------------------+
| | | | | |
+-----------------+---------------------------+---------------------------+---------------------------+---------------------------+
| Within 1 year | 147 | 331 | 37 | 87 |
+-----------------+---------------------------+---------------------------+---------------------------+---------------------------+
| Between 2 and 5 | 484 | 612 | 7 | 29 |
| years | | | | |
+-----------------+---------------------------+---------------------------+---------------------------+---------------------------+
| More than 5 | - | 25 | - | - |
| years | | | | |
+--------+--------+------------------+--------+------------------+--------+------------------+--------+------------------+--------+
Land and Buildings:
The Group leases its offices under non cancellable operating lease agreements.
There is no material contingent rent payable. The lease agreements do not offer
security of tenure. The lease terms are for approximately 5 years.
Other:
The Group leases various office equipment and motor vehicles under non
cancellable operating lease agreements. The lease terms are either 2 or 3 years.
The lease expenditure charged to the income statement during the year is
disclosed in Note 5.
22. RELATED PARTY TRANSACTIONS
During the year CKR Holdings Ltd, a Company controlled by Mr C Fishwick, a
director, provided consultancy services to the Group in the normal course of
business and at an arm's length basis with a total value of GBP14,215 (2008:
GBP10,000). There was no balance owing to CKR Holdings at the end of the year
(2008: GBPNil).
23. PRINCIPAL SUBSIDIARIES
+----------+----------+----------+----------+----------+----------+----------+----------+
| Company name | Country | Percentage | Description |
| | | shareholding of | |
| | | ordinary shares | |
+---------------------+---------------------+---------------------+---------------------+
| | | | |
+---------------------+---------------------+---------------------+---------------------+
| Transglobal | England & | 100 | Non-trading |
| Telecommunications | Wales | | |
| Limited | | | |
+---------------------+---------------------+---------------------+---------------------+
| Connaught | England & | 100 | Non-trading |
| Telecommunications | Wales | | |
| Limited | | | |
+---------------------+---------------------+---------------------+---------------------+
| Call Options UK | England & | 100 | Non-trading |
| Limited | Wales | | |
+---------------------+---------------------+---------------------+---------------------+
| Adept Managed | England & | 100 | Non-trading |
| Networks Limited | Wales | | |
+---------------------+---------------------+---------------------+---------------------+
| Connectacom Network | England & | 100 | Non-trading |
| Solutions Limited | Wales | | |
+---------------------+---------------------+---------------------+---------------------+
| Oxtalk Limited | England & | 100 | Non-trading |
| | Wales | | |
+---------------------+---------------------+---------------------+---------------------+
| Telecom Direct | England & | 100 | Non-trading |
| Limited | Wales | | |
+----------+----------+----------+----------+----------+----------+----------+----------+
The business and assets of Subsidiaries are hived up to AdEPT immediately or
within one month following acquisition. After the hive up, the Subsidiaries
become inactive. With effect from April 2009 all of the above Subsidiaries, with
the exception of Oxtalk Limited and Telecom Direct Limited (both non-trading),
are in the process of being taken through a member's voluntary liquidation.
24. CAPITAL COMMITMENTS
At 31 March 2009 there were capital commitments of GBP65,000 (2008: GBP23,188).
25. ANALYSIS OF ACQUISITIONS
During the year ended 31 March 2008 the Group made two acquisitions. Following
acquisition the customers were fully integrated into a single billing and
customer service platform. Whilst revenue can be separately identified by
acquisition, cost of sales cannot. Calls are routed across various network
suppliers and the overhead base services all of our customers. The analysis of
revenue by existing and acquired businesses is, therefore, as follows:
+-----------------------------------------------------------+------------+-----------+
| | 31 March | 31 March |
+-----------------------------------------------------------+------------+-----------+
| | 2009 | 2008 |
+-----------------------------------------------------------+------------+-----------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| Sales revenue | | |
+-----------------------------------------------------------+------------+-----------+
| Existing businesses as at 31 March | 28,567 | 16,437 |
+-----------------------------------------------------------+------------+-----------+
| Businesses acquired in the year | - | 7,181 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
| Total sales revenue | 28,567 | 23,618 |
+-----------------------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------------------+------------+-----------+
26. EARNINGS PER SHARE
Earnings per share is calculated on the basis of a loss of GBP1,240,975 (2008:
loss GBP842,743) divided by the weighted average number of shares in issue for
the year of 21,067,443 (2008: 21,067,443). The diluted earnings per share is
calculated on the assumption that the unapproved and EMI share options as
disclosed in note 18 to the financial statements are exercised. This would give
rise to a total weighted average number of ordinary shares in issue for the
period of 25,218,702 (2008: 22,959,140).
An adjusted earnings per share is calculated by adding back amortisation of
intangible assets and non-recurring costs to retained earnings, giving
GBP2,027,701 (2008: GBP2,407,683). This is divided by the same weighted average
number of shares as above.
+------------------------------------------------------+----+------------+------------+
| | | 2009 | 2008 |
+------------------------------------------------------+----+------------+------------+
| | | GBP'000 | GBP'000 |
+------------------------------------------------------+----+------------+------------+
| | | | |
+------------------------------------------------------+----+------------+------------+
| Earnings for the purposes of basic and diluted | | | |
| earnings per share | | | |
+------------------------------------------------------+----+------------+------------+
| Loss for the period attributable to equity holders | | (1,241) | (843) |
| of the parent | | | |
+------------------------------------------------------+----+------------+------------+
| Amortisation | | 2,126 | 1,869 |
+------------------------------------------------------+----+------------+------------+
| Non-recurring costs | | 1,314 | 1,381 |
+------------------------------------------------------+----+------------+------------+
| Adjusted profit attributable to equity holders of | | 2,199 | 2,407 |
| the parent, adding back amortisation and | | | |
| non-recurring costs | | | |
+------------------------------------------------------+----+------------+------------+
| | | | |
+------------------------------------------------------+----+------------+------------+
| Number of shares | | | |
+------------------------------------------------------+----+------------+------------+
| Weighted average number of shares used for earnings | | 21,067,443 | 21,067,443 |
| per share | | | |
+------------------------------------------------------+----+------------+------------+
| Dilutive effect of share plans | | 4,151,259 | 1,891,697 |
+------------------------------------------------------+----+------------+------------+
| Diluted weighted average number of shares used to | | 25,218,702 | 22,959,140 |
| calculate fully diluted earnings per share | | | |
+------------------------------------------------------+----+------------+------------+
| | | | |
+------------------------------------------------------+----+------------+------------+
| Earnings per share | | | |
+------------------------------------------------------+----+------------+------------+
| Basic earnings per share | | (5.89)p | (4.00)p |
+------------------------------------------------------+----+------------+------------+
| Fully diluted earnings per share | | n/a | n/a |
+------------------------------------------------------+----+------------+------------+
| | | | |
+------------------------------------------------------+----+------------+------------+
| Adjusted earnings per share, after adding back | | | |
| amortisation and non-recurring costs | | | |
+------------------------------------------------------+----+------------+------------+
| Adjusted basic earnings per share | | 10.44p | 11.43p |
+------------------------------------------------------+----+------------+------------+
| Adjusted fully diluted earnings per share | | 8.72p | 10.49p |
+------------------------------------------------------+----+------------+------------+
| | | | |
+------------------------------------------------------+----+------------+------------+
Earnings per share is calculated by dividing the retained earnings attributable
to equity holders of the parent by the weighted average number of ordinary
shares in issue.
Adjusted earnings per share is calculated by dividing the retained earnings
attributable to equity holders of the parent (after adding back amortisation and
non-recurring costs) by the weighted average number of ordinary shares in issue.
The adjustment for the dilutive effect of share options has not been reflected
in the calculation of the diluted loss per share as the effect would be
anti-dilutive, therefore diluted and basic earnings per share are equal.
27. FINANCIAL INSTRUMENTS
Set out below are the Group's financial instruments. The directors consider
there to be no difference between the carrying value and fair value of the
Group's financial instruments.
+------------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Financial assets | | |
+------------------------------------------------------------+-----------+-----------+
| Cash | 733 | 155 |
+------------------------------------------------------------+-----------+-----------+
| Trade and other receivables | 2,636 | 3,429 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Financial liabilities | | |
+------------------------------------------------------------+-----------+-----------+
| Interest bearing loans and borrowings: | | |
+------------------------------------------------------------+-----------+-----------+
| Obligations under finance lease contracts | 6 | 16 |
+------------------------------------------------------------+-----------+-----------+
| Floating rate borrowings | 4,455 | 2,863 |
+------------------------------------------------------------+-----------+-----------+
| Fixed rate borrowings | 7,400 | 8,588 |
+------------------------------------------------------------+-----------+-----------+
| Other financial liabilities | - | 619 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| | 11,861 | 12,086 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Amounts due for settlement: | | |
+------------------------------------------------------------+-----------+-----------+
| Within 12 months | 1,579 | 1,952 |
+------------------------------------------------------------+-----------+-----------+
| After 12 months | 10,282 | 10,134 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| | 11,861 | 12,086 |
+------------------------------------------------------------+-----------+-----------+
The Facility A term loan bears interest at 3.5% over LIBOR and is repayable by
quarterly instalments of GBP394,650. The final repayment is due on 31 December
2011. At the year end the amount outstanding in respect of this facility was
GBP9.355m.
The Alternative Structured Facility bears cash interest at a rate at 5.5% over
LIBOR. Payment In Kind interest is accruing on the Alternative Structured
Facility at a rate of 2.0% per annum which is payable on the final repayment
date of 31 December 2011. At the year end the amount outstanding in respect of
the Alternative Structured Facility was GBP2.5m.
At 31 March 2009 the Group had no outstanding earnout liabilities (2008:
GBP619,044). No interest is charged on these liabilities. The weighted average
period of financial liabilities on which no interest is paid is 12 months (2008:
12 months).
The fixed interest rate liabilities relate to amounts payable on finance lease
liabilities. The weighted average interest rate of these liabilities was 8.0%
and the weighted average period for which the interest rates are fixed was 60
months.
The financial assets of the Group are surplus funds, which are offset against
borrowings under the facility, and there is no separate interest rate exposure.
Barclays Bank plc has a cross guarantee and debenture incorporating a fixed and
floating charge over the undertaking and all property and assets present and
future including goodwill, book debts, uncalled capital, buildings, fixtures,
fixed plant and machinery.
The bank also holds a charge over the life assurance policies of Ian Fishwick
and Amanda Woodruffe, directors of the Company, for GBP250,000 and GBP1,500,000
respectively.
Obligations under finance leases
+------------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Finance lease liabilities - minimum lease payments: | | |
+------------------------------------------------------------+-----------+-----------+
| No later than 1 year | 6 | 17 |
+------------------------------------------------------------+-----------+-----------+
| Later than 1 years and no later than 5 years | - | - |
+------------------------------------------------------------+-----------+-----------+
| Later than 5 years | - | - |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Future finance charges on finance leases | - | (1) |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| Present value of finance lease liabilities | 6 | 16 |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| The present value of finance lease liabilities is as | | |
| follows: | | |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| No later than one year | 6 | 16 |
+------------------------------------------------------------+-----------+-----------+
| Later than 1 years and no later than 5 years | - | - |
+------------------------------------------------------------+-----------+-----------+
| Later than 5 years | - | - |
+------------------------------------------------------------+-----------+-----------+
| | | |
+------------------------------------------------------------+-----------+-----------+
| | 6 | 16 |
+------------------------------------------------------------+-----------+-----------+
The Group has a certain amount of its property, plant and equipment under
finance lease. For the year ended 31 March 2009 the average effective borrowing
rate was 8.0%. Interest rates are fixed at the contract dates. All leases are on
a fixed repayment basis and no arrangements have been entered into for
contingent rental payments. All lease obligations are denominated in sterling.
Finance lease liabilities are secured upon the underlying assets. Outstanding
finance lease obligations at 31 March 2009 are due to be settled within 12
months. The fair value of the Group's lease obligations approximates to their
carrying amount.
Sensitivity analysis
At 31 March 2009 it is estimated that a movement of one percentage point in
interest rates would impact the Group's profit before tax by approximately
GBP129,000. Given the interest rate hedge in place, this impact on profit would
be reduced should interest rates rise above 3.77%.
Interest rate risk
The Group's policy is to manage its interest cost using a mix of fixed and
variable rate debts. The Group's policy is to keep at least 75% of its
borrowings at fixed rates of interest. At 31 March 2009, after taking into
account the effect of interest rate management, 62.4% of the Group's borrowings
are at a fixed rate of interest (2008: 75%).
Credit risk
Credit risk associated with cash balances and derivative financial instruments
is managed by transacting with financial institutions with high quality credit
ratings. Accordingly the Group's associated credit risk is deemed to be limited.
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at 31 March 2009 was GBP3,369,207 (2008:
GBP3,583,988).
Loans and receivables
+-------------+-------------+-------------+-------------+-------------+-------------+
| | 31 March | 31 March |
+---------------------------+---------------------------+---------------------------+
| | 2009 | 2008 |
+---------------------------+---------------------------+---------------------------+
| | GBP'000 | GBP'000 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Trade receivables | 2,628 | 3,420 |
+---------------------------+---------------------------+---------------------------+
| Other receivables | 8 | 9 |
+---------------------------+---------------------------+---------------------------+
| Cash and cash equivalents | 733 | 155 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| | 3,369 | 3,584 |
+---------------------------+---------------------------+---------------------------+
| | | |
+-------------+-------------+-------------+-------------+-------------+-------------+
Credit risk refers to the risk that the counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group has
adopted a policy of only dealing with creditworthy counterparties and this
policy has been implemented by requiring staff to carry out appropriate credit
checks on customers before sales commence.
Trade receivables consist of a large number of customers, spread across diverse
industries across the United Kingdom. Ongoing credit evaluation is performed on
the financial condition of accounts receivable. The Group does not have any
significant credit risk exposure to any single counterparty or any Group of
counterparties having similar characteristics. The Group defines counterparties
as having similar characteristics if they are connected parties.
Liquidity risk
The Group has an appropriate liquidity risk management framework for the
management of the Group's short, medium and long-term funding and liquidity risk
management requirements. The Group manages liquidity risk by maintaining
adequate banking facilities and reserve borrowing facilities through cash flow
forecasting, acquisition planning and monitoring working capital and capital
expenditure requirements on an ongoing basis.
The table below analyses the Group's financial liabilities into relevant
maturity Groupings based on the remaining period at the balance sheet dated to
the contractual maturity date. The amounts disclosed in the table are the
contracted undiscounted cash flows. Discounting is not required as this has no
material effect on the financial statements.
Amortised cost
+--------+--------+-----------------------+--------+--------+--------+--------+--------+--------+--------+
| | Within | | | More than |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | 1 year | 1-2 years | 2-5 years | 5 years |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Year ended 31 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| March 2009 | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Borrowings | 1,474 | 1,474 | 8,629 | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Finance leases | 6 | - | - | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Trade and other | 3,442 | - | - | - |
| payables | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | 4,922 | 1,474 | 8,629 | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | Within | | | More than |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | 1 year | 1-2 years | 2-5 years | 5 years |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Year ended 31 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| March 2008 | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Borrowings | 923 | 1,712 | 8,815 | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Finance leases | 10 | 6 | - | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| Trade and other | 3,845 | - | - | - |
| payables | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | 4,778 | 1,718 | 8,815 | - |
+-----------------+--------------------------------+-----------------+-----------------+-----------------+
| | | | | |
+--------+--------+-----------------------+--------+--------+--------+--------+--------+--------+--------+
Currency risk
The Group's operations are handled entirely in sterling.
28. EVENTS AFTER THE BALANCE SHEET DATE
The Group continues to manage its exposure to interest rate risks arising from
financing activities. After the year end the Group entered an agreement to
manage the interest rate risk on 100% of the Group's fixed term debts through to
December 2011 at a more favourable rate than that which it replaced.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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