TIDMADT
RNS Number : 0051L
AdEPT Telecom plc
26 July 2011
AdEPT Telecom plc
("AdEPT" or the "Company")
Final results for the year ended 31 March 2011
AdEPT (AIM: ADT), a leading UK independent provider of
award-winning telecommunications services for fixed line, mobile
and data connectivity, announces its results for the year ended 31
March 2011.
Financial Highlights
-- Underlying EBITDA maintained at GBP3.6m (2010: GBP3.6m)
-- Underlying EBITDA margin % increasing by 1.3% to 15.3% (2010:
14.0%)
-- Strong cash generation with free cash flow, after interest
and before non-recurring costs, of GBP2.1m (2010: GBP1.9m)
-- 99% of reported EBITA (GBP3.3m) converted into cash generated
from operating activities (GBP3.3m) (2010: 86%)
-- Net debt reduction of GBP1.8m year-on-year (2010: GBP1.6m) to
GBP7.4m (2010: GBP9.2m)
-- GBP0.9m increase to profit before tax to GBP0.8m (2010: loss
of GBP0.1m)
-- 9.5% increase to adjusted Earnings Per Share to 10.15p (2010:
9.27p)
Operational Highlights
-- Substantially increased product range
-- 11% increase in ARPU as at March 2011 to GBP86.71 (2010:
GBP77.97)
-- Further progress in increasing revenue from fixed monthly
charges to 54% of revenue for the year ended March 2011 (2010:
48%)
-- Greater than 50% increase to mobile revenues year-on-year
-- Greater than 25% increase to data revenues year-on-year
-- 89% of revenue generated from customers taking more than one
product or service (2010: 86%)
-- 28% of revenue generated from customers taking 3 or more
products (2010: 23%)
-- Overhead costs (excluding one-off restructuring costs)
decreased to 21% of revenue (2010: 23%)
-- Credit collection processes and debt management improved with
year end debtor days of 29 (2010: 30 days)
Commenting upon these results Chairman Roger Wilson said:
"AdEPT has delivered on its strategy of paying down debt from
the continued strong operating cash generation of the business. The
business is in a much stronger position with its increasing ability
to provide complex multi-site, multi-product solutions to larger
customers."
For further information on AdEPT Telecom please visit
www.adept-telecom.co.uk or contact:
AdEPT Telecom Plc
Roger Wilson, Chairman 07786 111 535
Ian Fishwick, Chief Executive 01892 550 225
John Swaite, Finance Director 01892 550 243
Northland Capital Partners Limited
Shane Gallwey 020 7796 8800
CHAIRMAN'S STATEMENT
Review of Operations
Despite the revenue and gross margin pressure from the
challenging economic climate and price pressure over the last 12
months, underlying EBITDA has been maintained. The focus on larger
customers, generally businesses of 25 to 1,000 employees, has
continued to be beneficial and has enhanced our ability to benefit
from scale efficiencies and cross selling. The AdEPT Premier
Customer division, comprising the 200 largest customers, accounts
for approximately one-third of total revenue. Average contract
length has been enhanced through an increased focus on providing
multi-product solutions. At March 2011, customers taking 3 or more
AdEPT products now account for 28% of monthly revenue (23% in March
2010).
During the year AdEPT was named by Ja.net (the Joint Academic
Network) as one of only 20 companies approved to sell data products
to Universities, Colleges, higher education and research
establishments connected to the Ja.net network in the UK. This
accreditation has contributed to some important contract wins.
Call volume reductions during the year have resulted in revenue
becoming more stable as reliance on variable monthly call charges
is reduced. The proportion of revenue derived from fixed monthly
charges now represents 54% of total revenue (2010: 48%).
The strong cash flow generation continued during the year with
GBP2.1m of free cash flow after interest. This was used to fund
GBP0.3m of non-recurring costs and GBP1.8m reduction in net
borrowings, to GBP7.4m at 31 March 2011.
New products
AdEPT was originally established as a fixed-line telecom
provider but is increasingly expanding and diversifying its product
range and has become one of the UK's leading communication
integrators offering best of breed products from all major UK
networks.
AdEPT has broadened its product range further during the year,
particularly with regard to data connectivity, which has seen
greater than 25% year-on-year revenue growth. Data services, such
as Ethernet high speed access (up to 1Gigabit speeds) and MPLS
networks have been added to the product portfolio. We are currently
in the process of launching 40Mb fibre broadband utilising BT's
21st century network upgrade that offers fibre-to-the-cabinet in
the street.
AdEPT has launched what we believe to be the UK's most advanced
VoIP for BUSINESS product range, and has built a new National VoIP
Demonstration Centre at our headquarters in Tunbridge Wells. The
service, powered by BT Wholesale, includes 7 different ways of
deploying VoIP for businesses. SIP trunking and hosted voice
inter-work on a single BT network with dual resilience offered by 2
data centres in London. All VoIP services are managed via a single
web portal. The VoIP products offer comprehensive solutions for
every size of business: large and small sites as well as
homeworkers.
AdEPT has had continued success with new 'cloud' or
network-based inbound call handling solutions being provided to a
number of major customers, including a new contact centre for a
major UK airline.
Cross selling of products
A key strategy for the Company remains to sell more products to
new and existing customers. The product penetration has increased
during the year; at March 2011 28% of revenue was generated from
customers taking more than three or more products (2010: 23%).
In the larger customer base (those spending more than GBP1,000
per month) we have seen further improvement in product penetration.
At March 2011 customers taking more than one product accounted for
98% of revenue generated (2010: 97%). The proportion taking 3 or
more products increased to 64% at March 2011 (2010: 58%).
Employees
The improved profitability this year was made possible by the
continued hard work and focus of all employees at AdEPT Telecom. As
a Company we are immensely proud of the track record we have
created in a relatively short period of time and on behalf of the
Board I would like to take this opportunity to thank all of our
employees for their hard work.
Shareholder benefits scheme
The AdEPT shareholder benefits scheme has continued to attract
new members during the year. The scheme, which is available to all
shareholders owning a minimum of 1,000 shares, provides eligible
shareholders with free residential line rental worth approximately
GBP120 per annum for as long as they remain eligible
shareholders.
Outlook
The Company has been under top line pressure from the
challenging economic climate and market price pressure over the
last 12 months. Despite the top line and gross margin reduction,
EBITDA has been maintained and net debt reduction of GBP1.8m was
underpinned by focus on underlying profitability through improving
margins on customer contracts, operational efficiencies and tight
credit control. The further broadening of the product offering,
particularly with regard to data connectivity, will ensure that
AdEPT can continue to provide complete communication solutions for
customers.
The business focus for the coming year remains on continued
development of organic sales, maintaining profitability and cash
flow generation, which will be used to reduce net borrowings. 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 customers.
Roger Wilson
Non-executive Chairman
FINANCIAL AND BUSINESS REVIEW
SUMMARY of three year financial performance:
Year ending March
2011 Year-on-Year 2010 Year-on-Year 2009
GBP'000 % GBP'000 % GBP'000
-------------- --------- ------------- --------- ------------- ---------
Revenue 23,734 (8)% 25,725 (10)% 28,567
Gross margin 8,510 (11)% 9,561 (8)% 10,341
EBITDA* 3,624 0% 3,612 3% 3,517
Net debt 7,365 9,215 10,843
* before non-recurring costs
REVENUE
Revenue by product area
Group revenue decreased by 7.8% to GBP23.7m (2010: GBP25.7m)
-- Fixed line revenues were 11.0% lower at GBP21.3m (2010:
GBP24.0m), with this reduction driven largely by call volume
reductions which is primarily a reflection of lower economic
activity. The Company's previous reliance on call revenues has been
much reduced with call revenue providing only 43% of total revenue
in March 2011 (2010: 47%).
-- Data and broadband product revenues were up 27.4% to GBP1.8m
(2010: GBP1.4m), with increases to the number of data circuits in
place, and the March 2011 revenue run rate for data and broadband
was GBP2.0m. At March 2011 the contract revenue from data product
orders placed awaiting connection was GBP0.8m due to longer
connection timescales.
-- Mobile revenues were ahead 52.2% to GBP0.5m (2010: GBP0.3m).
We have only been selling mobile for three years and handset
volumes increased during the year by 476 to 1,845 (2010: 1,369).
The revenue per connection has increased to GBP263 (2010: GBP232)
driven by the increased take up of smartphones.
Total revenue generated from data, mobile and other services
represented 11.8% of total revenue in March 2011 (March 2010:
8.7%).
Fixed monthly revenue streams
The Company continues to focus on fixed monthly revenue streams
so as to reduce revenue volatility. The proportion of revenue,
which is fixed monthly values, increased to 53% of total revenue
for the year ended March 2011 (2010: 48%) following the continued
focus on multi-product sales (calls, line rental and data products)
and the introduction of a broad range of data connectivity products
in 2008.
Cross selling
The proportion of revenue generated from customers taking more
than one product or service has increased to 89.3% for the year
ended March 2011 (2010: 85.6%) which should provide a more stable
future revenue stream.
The proportion of higher spending customers (recurring revenues
of more than GBP1,000 per month) taking 3 or more products
increased to 63.7% at March 2011 (2010: 58.1%).
Average spend per customer
The Company is continuing to focus on larger customers and
AdEPT's largest 200 customers account for approximately one third
of March 2011 revenue.
Average customer monthly spend for business customers increased
year-on-year by 11.2% to GBP86.71 in March 2011 reflecting the
Group's success in gaining contracts with higher spending customers
and an increasing proportion of higher spending business
customers.
GROSS MARGIN
Gross margins have been under pressure during the year as the
product mix has moved towards the lower margin data and broadband
revenue streams. Particular gross margin pressure has been
experienced in fixed line calls following the significant month on
month changes to wholesale mobile termination rates passed through
by the mobile networks. The recent OFCOM price regulation is
expected to improve future wholesale price stability.
Future gross margin pressure is anticipated as our product mix
moves increasingly towards the lower margin line rental, data
connectivity and broadband revenue streams.
ADMINISTRATION COSTS
Operational efficiencies achieved
Cost savings have been delivered as planned from operational
efficiencies associated with managing larger customers, and savings
derived from in-sourcing of wholesale line rental management and a
further reduction to bad debt provisions.
As a result, the Company has seen a GBP1.0m reduction in
underlying operating costs during the year ended March 2011 to
GBP4.9m which is 20.7% of revenue (2010: 23.2%).
We believe that we remain one of the lowest cost operators in
the industry.
Non-recurring costs
The non-recurring costs identified are restructuring costs which
will not recur next year. These costs are represented by staff
costs associated with restructuring and the close out of leases
acquired with the Telecom Direct acquisition.
Impact of corporate failures
Whilst corporate failure has had a minimal impact on the overall
results it still remains higher than normal. In the year ended
March 2011 there was 143 such failures in our customer base (2010:
207). These were mostly smaller companies with average debt per
failed customer during the year ended March 2011 being GBP486
(2010: GBP435). We anticipate the relatively high corporate failure
rate may continue for some time, but that as a result of the
collection processes the Company's exposure and risk has been
reduced.
EBITDA
I am pleased to report underlying EBITDA has been maintained in
line with the previous year.
Excluding non-recurring costs EBITDA has increased marginally
during the year despite top line pressure. The Company has focussed
on the underlying profitability or customers and revenue streams;
as a result revenue reduction has been more than absorbed by gross
margin improvement and the operational efficiencies and costs
savings from managing larger customer and the earlier
restructuring.
PROFIT BEFORE TAX
This year the Company has recorded an GBP865,788 improvement
with a reported profit before tax of GBP752,399 (2010: loss of
GBP113,389). This arises from operational efficiency combined with
the reduction in finance costs following the renewal of the banking
facility on more favourable terms.
EARNINGS PER SHARE
Adjusted earnings per share, based on retained earnings adding
back amortisation and non-recurring costs (see Note 22), has
increased by 9.5% to 10.15p per share (2010: 9.27p).
CASH FLOW
Cash conversion
The Group benefits from a strong operating cash model, with
EBITA turning into cash. Reported EBITA turned into net cash from
operating activities is 98.6% (2010: 86.3%). There was a net
working capital outflow of GBP0.1m during the year arising from the
reduction in trade payables following the reduction in direct costs
due to top line reductions.
Strong management of credit risk
The Group has continued to manage its credit risk in the current
economic climate and the collections of trade receivables have been
maintained during the year with customer collection periods of 29
days (2010: 30 days).
Increase in cash balances
After servicing its debt the Group achieved an increase in cash
and cash equivalents of GBP0.5m 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 (2010: 0.2%).
Intangible asset additions were negligible during the year (2010:
GBP0.1m).
NET DEBT
A key strength of AdEPT is its consistent, proven ability to
generate strong free cash flow. As a result of the Company's focus
on underlying profitability and cash conversion free cash flow
after bank interest of GBP2.1m was generated during the year ended
March 2011; GBP0.3m of this was used to fund non-recurring costs
with GBP1.8m being applied to net reduction. Net debt, which
comprises cash balances and bank borrowings, has therefore improved
to GBP7.4m (2010: GBP9.2m).
The Company's banking facilities were renewed during the year
and the available banking facilities are described in Note 23 to
the financial statements. The Company continues to manage its
exposure to interest rate risks arising from financing
activities.
KEY PERFORMANCE INDICATORS (KPIs)
The KPIs outlined below are intended to provide useful
information when interpreting the accounts.
Year ended 31 March Year ended 31 March
2011 2010
Data, Data,
Fixed mobile Fixed mobile
line and other line and other
services services Total services services Total
-------------- --------- ---------- ------- --------- ---------- -------
Revenue 21,311 2,423 23,734 23,953 1,772 25,725
Gross profit 7,533 977 8,510 8,862 699 9,561
Gross margin
% 35.3% 40.3% 35.9% 37.0% 39.4% 37.2%
The Company has non-financial KPIs that it monitors on a regular
basis at board level and where relevant management meetings, which
include:
Year
Year ended ended
31 March 31 March
2011 2010
Customer credit collection 29 days 30 days
Product penetration 89.3% 85.6%
Direct debit penetration 67.0% 64.0%
POST BALANCE SHEET EVENTS
After the year end a resolution was passed and the Company
received court approval for a reduction in its share capital. The
share capital reduction has had no effect on the number of ordinary
shares or the rights attaching to the ordinary shares and the
market price of the shares has not been adjusted as a result of the
capital reduction. The share capital reduction has been approved in
order to maximise the share capital structure of the Company by
creating distributable reserves with a view to facilitating a
potential future dividend policy.
RESILIENT BUSINESS MODEL
The Board believes that AdEPT operates a resilient business
model and has 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 15.5% of revenues;
-- trade suppliers and partners are all top tier suppliers,
providing confidence in the continuity and reliability of service
to customers;
-- 67.0% of the Company's customers pay by monthly direct debit,
reducing the Company's credit risk;
-- the Company has agreed banking facilities through to
September 2013; and
-- with the level of cash generation forecast, the Board expects
the Company's net borrowing position to further improve over the
next twelve months.
John Swaite
Finance Director
STATEMENT OF COMPREHENSIVE INCOME
2011 2010
Note GBP'000 GBP'000
------------------------------------------------- ----- --------- ---------
Revenue 4 23,734 25,725
Cost of sales (15,224) (16,164)
------------------------------------------------- ----- --------- ---------
Gross profit 8,510 9,561
Administrative expenses (6,838) (8,382)
------------------------------------------------- ----- --------- ---------
Operating profit 1,672 1,179
------------------------------------------------- ----- --------- ---------
Total operating profit - analysed:
Operating profit before non-recurring costs,
depreciation and amortisation 3,624 3,612
Non-recurring costs (256) (326)
Share-based payments (23) (24)
Depreciation of tangible fixed assets (53) (102)
Impairment of intangible assets (137) (222)
Amortisation of intangible fixed assets (1,483) (1,759)
------------------------------------------------- ----- --------- ---------
Total operating profit 1,672 1,179
------------------------------------------------- ----- --------- ---------
Finance costs 7 (920) (1,293)
Profit/(loss) before income tax 752 (114)
Income tax expense 10 (489) (241)
------------------------------------------------- ----- --------- ---------
Profit/(loss) for the year 263 (355)
Other comprehensive income - -
------------------------------------------------- ----- --------- ---------
Total comprehensive income for the year 263 (355)
------------------------------------------------- ----- --------- ---------
Total comprehensive income attributable to:
Equity holders 263 (355)
Earnings per share:
Basic earnings 22 1.25p (1.68)p
Diluted earnings 22 1.09p N/a
------------------------------------------------- ----- --------- ---------
All amounts relate to continuing operations. Notes 1 to 23 form
part of these financial statements.
STATEMENT OF FINANCIAL POSITION
31 March 31 March
2011 2010
Note GBP'000 GBP'000
---------------------------------------- ----- --------- ---------
Assets
Non-current assets
Intangible assets 11 17,054 18,663
Property, plant and equipment 12 50 72
Deferred income tax 13 354 612
---------------------------------------- ----- --------- ---------
17,458 19,347
Current assets
Trade and other receivables 14 2,758 2,901
Cash and cash equivalents 1,361 885
---------------------------------------- ----- --------- ---------
4,119 3,786
---------------------------------------- ----- --------- ---------
Total assets 21,577 23,133
---------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 15 3,957 4,702
Income tax 225 60
Short-term borrowings 1,456 1,478
---------------------------------------- ----- --------- ---------
5,638 6,240
Non-current liabilities
Long-term borrowings 16 7,270 8,622
Provisions for liabilities and charges 106 -
---------------------------------------- ----- --------- ---------
Total liabilities 13,014 14,862
---------------------------------------- ----- --------- ---------
Net assets 8,563 8,271
---------------------------------------- ----- --------- ---------
Equity attributable to equity holders
Share capital 17 2,107 2,107
Share premium 7,965 7,965
Retained earnings (1,509) (1,801)
---------------------------------------- ----- --------- ---------
Total equity 8,563 8,271
---------------------------------------- ----- --------- ---------
The financial statements were approved and authorised for issue
by the Board on 25 July 2011 and signed on its behalf.
Ian Fishwick
Director
Notes 1 to 23 form part of these financial statements.
Registered number 4682431
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders
---------------------------------------------------
Share
capital
Share Share to Retained Total
capital premium be issued earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- ---------- --------- --------
Equity at 1 April 2009 2,107 7,965 87 (1,557) 8,602
Loss for the year - - - (355) (355)
Share-based payments - - 24 - 24
Share options lapsed
during the year - - (10) 10 -
------------------------- -------- -------- ---------- --------- --------
Net income/(expense)
recognised directly in
equity 2,107 7,965 101 (1,902) 8,271
Equity at 1 April 2010 2,107 7,965 101 (1,902) 8,271
Profit for the year - - - 263 263
Deferred tax asset
adjustment - - - 6 6
Share-based payments - - 23 - 23
Net income/(expense)
recognised directly in
equity 2,107 7,965 124 (1,633) 8,563
------------------------- -------- -------- ---------- --------- --------
Equity at 31 March 2011 2,107 7,965 124 (1,633) 8,563
------------------------- -------- -------- ---------- --------- --------
Notes 1 to 23 form part of these financial statements.
STATEMENT OF CASH FLOWS
2011 2010
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Cash flows from operating activities
Profit/(loss) before income tax 752 (114)
Depreciation and amortisation 1,673 2,082
Share-based payments 23 24
Net finance costs 920 1,293
---------------------------------------------------------- -------- --------
Operating cash flows before movements in working capital 3,368 3,285
(Decrease)/increase in trade and other receivables 29 (81)
Decrease in trade and other payables (153) (478)
---------------------------------------------------------- -------- --------
Cash generated from operations 3,244 2,726
Income taxes received/(paid) (61) 57
---------------------------------------------------------- -------- --------
Net cash from operating activities 3,183 2,783
---------------------------------------------------------- -------- --------
Cash flows from investing activities
Interest paid (1,093) (895)
Purchase of intangible assets (11) (112)
Purchase of property, plant and equipment (31) (39)
---------------------------------------------------------- -------- --------
Net cash used in investing activities (1,135) (1,046)
Cash flows from financing activities
Repayment of finance leases - (6)
Repayment of borrowings (1,886) (1,579)
Increase of bank loan 314 -
---------------------------------------------------------- -------- --------
Net cash from financing activities (1,572) (1,585)
---------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 476 152
Cash and cash equivalents at beginning of year 885 733
---------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 1,361 885
---------------------------------------------------------- -------- --------
Cash and cash equivalents:
Cash at bank and in hand 1,361 885
Bank overdrafts - -
---------------------------------------------------------- -------- --------
Cash and cash equivalents 1,361 885
---------------------------------------------------------- -------- --------
Notes 1 to 23 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 Company 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 incorporated under the Companies Act,
domiciled in the UK and the registered office is located at One
London Wall, London, EC2Y 5AB. The Company's shares are listed on
AIM of the London Stock Exchange.
2. Accounting policies
Basis of preparation of financial statements
The financial statements have been prepared in accordance with
applicable IFRS as adopted by the EU, as issued by the
International Accounting Standards Board.
Accounting standards require the directors to consider the
appropriateness of the going concern basis when preparing the
financial statements. The directors confirm that they consider that
the going concern basis remains appropriate. The directors have
taken notice of the Financial Reporting Council guidance 'Going
Concern and Liquidity Risk: Guidance for Directors of UK Companies
2010' which requires the reasons for this decision to be explained.
The directors regard the going concern basis as remaining
appropriate as the Company has adequate resources to continue in
operational existence for the foreseeable future based upon the
Company's forecasts. The Company has adequate financing
arrangements which can be utilised by the Company as required. Thus
they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
Certain new standards, amendments and interpretations of
existing standards that have been published and which are effective
for the Company's accounting periods beginning on or after 1 April
2010 and which are applicable to the Company, but which have not
been adopted early are:
-- IFRS 1 First Time Adoption of International Financial
Reporting Standards
o Jan 2010 revision effective for accounts commencing after 1
July 2010
o May 2010 revision effective accounts commencing after 1
January 2011
o Dec 2010 revision effective accounts commencing after 1 July
2011
-- IFRS 3 Business Combinations May 2010 revision effective July
2010
-- IFRS 7 Financial instruments
o May 2010 revision effective January 2011
o October 2010 revision effective July 2011
-- IFRS 9 Financial Instruments Classification & Measurement
Effective January 2013
-- IAS 1 Presentation of Financial Statements May 2010
amendments Effective January 2011
-- IAS 12 Income Taxes Limited scope amendment Effective January
2012
-- IAS 24 Related Party Disclosures revised definition Effective
January 2011
-- IAS 27 Consolidated and Separate Financial Statements May
2010 amendments Effective July 2010
-- IAS 32 Financial instruments amendments regarding rights
issues Effective February 2010
-- IAS 34 Interim Financial reporting May 2010 amendments
Effective January 2011
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 may result
in some changes in presentation of information within the Company's
financial statements.
The financial statements are presented in sterling which is the
Company's functional and presentation currency. The figures shown
in the financial statements are rounded to the nearest thousand
pounds.
Segmental reporting
The directors have considered the requirements of IFRS 8
"Operating segments" and have concluded that the Company has two
segments. For further information see Note 4 of the financial
statements.
Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and can be reliably
measured.
Revenue from calls, which excludes value added tax and trade
discounts, is recognised in the income statement at the time the
call is made. Calls made in the year, but not billed by year end,
are accrued within receivables as accrued income.
Revenue from line rental is recognised in the month that the
charge relates to, commencing with a full month's charge in the
month of connection. Revenue and related costs from the sales of
mobile handsets are recognised at the date of supply or
connection.
Revenue arising from the provision of internet and other
services is recognised evenly over the periods in which the service
is provided to the customer.
Connection commissions received from mobile network operators
are recognised when the customer is connected to the mobile network
after providing for expected future clawbacks.
The whole of the revenue is attributable to the provision of
voice and data communication services to both residential and
business customers. All revenue arose within the United
Kingdom.
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 Company 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 Company.
After initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated impairment
losses. Impairment reviews are conducted annually from the first
anniversary following acquisition.
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 17 years (2010: 15 years).
Other intangible assets
Also included within intangible fixed assets are the development
costs of the Company's billing and customer management system plus
an individual licence. 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:
Customer management system - Three years straight line
Other licences - Contract 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 leasehold improvements - Five years straight line
Fixtures and fittings - Three years straight line
Office equipment - Three years straight line
Computer software - Three 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 Company 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.
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 Company's
balance sheet when the Company becomes a party to the contractual
provisions of the instrument.
The Company 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 Company
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 Company 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 Company consists of debt, which
includes the borrowings disclosed in Notes 17 and 23, cash and cash
equivalents, and equity attributable to equity holders, comprising
issued capital, reserves and retained earnings.
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 Company determines whether intangible assets are impaired on
at least 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. Segmental information
IFRS 8 operating segments require identification on the basis of
internal reporting about components of the Company that are
regularly reviewed by the chief operating decision maker to
allocate resources to the segments and to assess their
performance.
The chief operating decision maker has been identified as the
Board. The Board review the Company's internal reporting in order
to assess performance and allocate resources. The operating
segments are fixed line services and data, mobile and other
services which are reported in a manner consistent with the
internal reporting to the Board. The Board assesses the performance
of the operating segments based on revenue, gross profit and
EBITDA.
Year ended 31 March 2011 Year ended 31 March 2010
Data, Data,
Fixed mobile Fixed mobile
and and
line other Central line other Central
services services costs Total services services costs Total
--------------- --------- --------- -------- -------- --------- --------- -------- --------
Revenue 21,311 2,423 - 23,734 23,953 1,772 - 25,725
Gross profit 7,533 977 - 8,510 8,862 699 - 9,561
Gross margin % 35.3% 40.3% - 35.9% 37.0% 39.4% - 37.2%
--------------- --------- --------- -------- -------- --------- --------- -------- --------
EBITDA 3,231 393 - 3,624 3,460 152 - 3,612
EBITDA % 15.2% 16.2% - 15.3% 14.4% 8.6% - 14.0%
--------------- --------- --------- -------- -------- --------- --------- -------- --------
Amortisation (1,620) - - (1,620) (1,981) - - (1,981)
Depreciation - - (53) (53) - - (102) (102)
Exceptional
operating
costs - - (256) (256) - - (326) (326)
Share based
payments - - (23) (23) - - (24) (24)
--------------- --------- --------- -------- -------- --------- --------- -------- --------
Operating
profit/(loss) 1,611 393 (332) 1,672 1,479 152 (452) 1,179
--------------- --------- --------- -------- -------- --------- --------- -------- --------
Finance costs - - (920) (920) - - (1,293) (1,293)
Income tax - - (489) (489) - - (241) (241)
--------------- --------- --------- -------- -------- --------- --------- -------- --------
Profit/(loss)
before tax 263 (355)
--------------- --------- --------- -------- -------- --------- --------- -------- --------
The assets and liabilities relating to the above segments have
not been disclosed as they are not separately identifiable and are
not used by the chief operating decision maker to allocate
resources.
Transactions with the largest customer of the Company are less
than 10% of total turnover and do not require disclosure for either
2010 or 2011.
5. Operating loss
The operating profit is stated after charging:
2011 2010
GBP'000 GBP'000
---------------------- ----------------------------------- ----------- --------
Amortisation of customer base, billing system and
license 1,620 1,981
Depreciation of tangible fixed assets:
- owned by the Company 53 102
Share option expense 23 24
Minimum operating lease payments:
- land and buildings 171 175
- motor vehicles and other equipment 36 27
------------------------------------------------------- ----------- --------
The operating profit includes non-recurring costs of GBP256,244
(2010: GBP326,292), 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 the share option expense for the year is
GBP20,109 relating to the warrant instrument issued to Barclays
Bank plc: see Note 17.
6. Auditors' remuneration
2011 2010
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Fees payable to the Company's auditor for the audit of
the Company's annual financial statements 30 30
Fees payable to the Company's auditor and its associates
in respect of:
Other services relating to taxation 5 5
---------------------------------------------------------- -------- --------
7. Finance costs
2011 2010
GBP'000 GBP'000
------------------------------ -------- --------
On bank loans and overdrafts 814 895
Bank fees - 398
Other interest payable 106 -
------------------------------ -------- --------
920 1,293
------------------------------ -------- --------
Included within interest is a charge of GBP106,384 which relates
to the fair value of the interest rate swap liability as calculated
in accordance with IAS 39.
8. Employee costs
Staff costs, including directors' remuneration, were as
follows:
2011 2010
GBP'000 GBP'000
----------------------- -------- --------
Wages and salaries 1,923 2,340
Social security costs 200 230
Share option expense 3 4
Other pension costs 14 14
----------------------- -------- --------
2,140 2,588
----------------------- -------- --------
Employee costs include GBP249,230 non-recurring costs (Note 5)
(2010: GBP287,749).
The average monthly number of employees, including the
directors, during the year was as follows:
2011 2010
Number Number
------------------------- ------- -------
Non-executive directors 3 3
Administrative staff 52 65
------------------------- ------- -------
55 68
------------------------- ------- -------
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 Company.
9. Directors' emoluments
Short-term Post-employment
employee benefits benefits
------------------------------------- ----------------
Salary and
fees paid Bonus paid
or or Other Pension Total Total
receivable receivable benefits contributions 2011 2010
GBP GBP GBP GBP GBP GBP
R Wilson 45,000 - 1,459 - 46,459 46,368
C Fishwick 100,000 - - - 100,000 100,000
D Lukic 15,000 - - - 15,000 15,000
I Fishwick 207,050 - 2,942 13,968 223,960 239,870
A Woodruffe 135,020 17,530 1,106 - 153,656 151,826
J Murphy 97,500 - 9,538 - 107,038 92,597
J Swaite 70,000 10,458 6,879 - 87,337 81,337
C Riggs - - - - - 137,353
----------------- ----------- ----------- ----------- ---------------- -------- --------
Totals 669,570 27,988 21,924 13,968 733,450 864,543
----------------- ----------- ----------- ----------- ---------------- -------- --------
During the year retirement benefits were accruing to one
director (2010: one) in respect of money purchase pension schemes.
The value of the Company's contributions paid to a money purchase
pension scheme in respect of the highest paid director amounted to
GBP13,968 (2010: GBP14,471).
The share option expense recognised during the year in respect
of the directors was GBP2,881 (2010: GBP3,980).
Directors share options
Options Options
at 1 at 31
Option April Awarded Options Options March Option Exercise
scheme 2010 in year exercised lapsed 2011 Price dates
------------------------ -------- -------- ---------- ---------- -------- ------- ---------
28 Dec
I Fishwick EMI 600,000 - - (600,000) - 30p 10
6 Dec
I Fishwick EMI - 510,638 - - 510,638 30p 13
6 Dec
I Fishwick Unapproved - 89,362 - - 89,362 30p 13
31 Jul
I Fishwick Unapproved 152,160 - - - 152,160 30p 13
A 29 Aug
Woodruffe EMI 171,108 - - - 171,108 42p 11
A 6 June
Woodruffe EMI 171,108 - - - 171,108 42p 12
A 1 Aug
Woodruffe EMI 187,952 - - - 187,952 42p 15
A 1 Aug
Woodruffe Unapproved 62,048 - - - 62,048 42p 15
----------- ------------ -------- -------- ---------- ---------- -------- ------- ---------
Directors interest in the ordinary shares of AdEPT Telecom
plc:
2011 2010
No. of shares No. of shares
------------- -------------- --------------
C Fishwick 6,434,400 6,434,400
I Fishwick 1,134,000 1,134,000
R Wilson 788,300 788,300
D Lukic 92,500 42,500
J Swaite 11,256 3,656
A Woodruffe 3,400 3,400
------------- -------------- --------------
10. Income tax expense
2011 2010
GBP'000 GBP'000
------------------------------------------------ -------- --------
Current tax
UK corporation tax on profit for the year 225 60
Adjustments in respect of prior periods - (6)
------------------------------------------------ -------- --------
Total current tax 225 54
------------------------------------------------ -------- --------
Deferred tax
Origination and reversal of timing differences 264 174
Adjustments in respect of prior periods - 13
------------------------------------------------ -------- --------
Total deferred tax (see Note 13) 264 187
------------------------------------------------ -------- --------
Total income tax expense 489 241
------------------------------------------------ -------- --------
Factors affecting tax charge for year
The relationship between expected tax expense based on the
effective tax rate of AdEPT at 28% (2010: 28%) and the tax expense
actually recognised in the income statement can be reconciled as
follows:
2011 2010
GBP'000 GBP'000
----------------------------------------------- -------- --------
Profit/(loss) before income tax 752 (114)
Tax rate 28% 28%
Expected tax charge/(credit) 211 (32)
Expenses not deductible for tax purposes 8 13
Amortisation not deductible for tax purposes 258 274
Change in deferred tax rate 23 -
Adjustments to tax charge in respect of prior
periods - 6
Marginal relief (11) (20)
----------------------------------------------- -------- --------
Actual tax expense net 489 241
----------------------------------------------- -------- --------
There were no material factors that may affect future tax
charges.
11. Intangible fixed assets
Computer Customer
License software base Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- --------- --------- --------
Cost
At 1 April 2009 26 751 26,651 27,428
Additions - 95 17 112
At 1 April 2010 26 846 26,668 27,540
Additions - 11 - 11
At 31 March 2011 26 857 26,668 27,551
--------------------- -------- --------- --------- --------
Amortisation
At 1 April 2009 9 546 6,341 6,896
Charge for the year 1 150 1,608 1,759
Impairment charge - - 222 222
At 1 April 2010 10 696 8,171 8,877
Charge for the year 3 105 1,375 1,483
Impairment charge - - 137 137
At 31 March 2011 13 801 9,683 10,497
--------------------- -------- --------- --------- --------
Net book value
At 31 March 2011 13 56 16,985 17,054
--------------------- -------- --------- --------- --------
At 31 March 2010 16 150 18,497 18,663
--------------------- -------- --------- --------- --------
Intangible assets are reviewed annually or more frequently if
events or changes in circumstances indicate that the carrying value
may be impaired. The net present value of cash flows for each
cash-generating unit is reviewed against the carrying value at the
balance sheet date. At the interim reporting date of 30 September
2010 the net present value of future cash flows of certain
cash-generating units indicated that they were below the carrying
value and the directors considered it appropriate to record an
impairment charge of GBP137,737 and adjust the economic lives of
the respective cash-generating units appropriately. The impairment
review conducted at 31 March 2011 indicated no further impairment
of any of the cash-generating units.
The Company has no internally generated intangible assets.
12. Property, plant and equipment
Short term
leasehold Fixtures Office
improvements and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- ------------- ---------- --------
Cost
At 1 April 2009 7 122 470 599
Additions - - 39 39
At 1 April 2010 7 122 509 638
Additions - 2 34 36
Disposals - - (244) (244)
--------------------- ------------- ------------- ---------- --------
At 31 March 2011 7 124 299 430
--------------------- ------------- ------------- ---------- --------
Depreciation
At 1 April 2009 7 84 373 464
Charge for the year - 25 77 102
At 1 April 2010 7 109 450 566
Charge for the year - 14 39 53
Disposals - - (239) (239)
--------------------- ------------- ------------- ---------- --------
At 31 March 2010 7 123 250 380
--------------------- ------------- ------------- ---------- --------
Net book value
At 31 March 2011 - 1 49 50
--------------------- ------------- ------------- ---------- --------
At 31 March 2010 - 13 59 72
--------------------- ------------- ------------- ---------- --------
13. Deferred taxation
2011 2010
GBP'000 GBP'000
----------------------------------------- -------- --------
At 1 April 2010 612 799
Income statement charge (264) (174)
Adjustments in respect of prior periods 6 (13)
----------------------------------------- -------- --------
At 31 March 2011 354 612
----------------------------------------- -------- --------
The deferred tax asset is made up as follows:
2011 2010
GBP'000 GBP'000
------------------------------- -------- --------
Capital allowances 104 118
Derived financial liabilities 29 -
Share options 6 -
Tax losses 215 494
------------------------------- -------- --------
354 612
------------------------------- -------- --------
The deferred tax asset has been recognised as the Company
continues to generate taxable profits against which the asset
continues to reverse.
14. Trade and other receivables
2011 2010
GBP'000 GBP'000
-------------------------------- -------- --------
Trade receivables 2,290 2,446
Other receivables 7 8
Prepayments and accrued income 461 447
-------------------------------- -------- --------
2,758 2,901
-------------------------------- -------- --------
As at 31 March 2011, trade receivables of GBP237,560 (2010:
GBP283,280) were impaired and fully provided for. The ageing of the
trade receivables which are past due and not impaired are as
follows:
2011 2010
GBP'000 GBP'000
-------------- -------- --------
31-60 days 49 54
61-90 days 3 9
Over 90 days 68 83
-------------- -------- --------
120 146
-------------- -------- --------
Movement of the Company provision for impairment of trade
receivables are as follows:
GBP'000
------------------------------------------ --------
At 1 April 2009 561
Receivables written off during the year
as uncollectable (521)
Provision for receivables impairment for
the year 243
------------------------------------------ --------
At 1 April 2010 283
Receivables written off during the year
as uncollectable (227)
Provision for receivables impairment for
the year 181
------------------------------------------ --------
At 31 March 2011 237
------------------------------------------ --------
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.
15. Trade and other payables
2011 2010
GBP'000 GBP'000
--------------------------------------- -------- --------
Trade payables 2,601 2,685
Other taxes and social security costs 460 411
Other payables 96 121
Accruals and deferred income 800 1,485
--------------------------------------- -------- --------
3,957 4,702
--------------------------------------- -------- --------
16. Long term borrowings
2011 2010
GBP'000 GBP'000
---------------------------- -------- --------
Between one and two years 1,206 8,622
Between two and five years 5,126 -
More than five years 938 -
---------------------------- -------- --------
Bank loans 7,270 8,622
---------------------------- -------- --------
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
23.
Included within bank loans are arrangement fees amounting to
GBP148,875 (2010: GBP177,480) which are being released over the
term of the loan in accordance with IAS 39.
17. Share capital
2011 2010
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 2011, the following options and warrants over the
shares of AdEPT were in issue:
2011 2010
2011 Weighted 2010 Weighted
Number of average Number of average
shares under exercise shares under exercise
option price option price
-------------------------- ------------- --------- ------------- ---------
Outstanding at 1 April 3,037,433 42p 4,151,259 52p
Granted during the year 600,000 30p 96,431 11p
Forfeited during the year (607,651) 36p (1,210,257) 44p
Exercised during the year - - - -
-------------------------- ------------- --------- ------------- ---------
Outstanding at 31 March 3,029,782 42p 3,037,433 42p
-------------------------- ------------- --------- ------------- ---------
The weighted average fair values have been determined using the
Black Scholes-Merton Pricing Model with the following assumptions
and inputs:
2011 2010
------------------------------------------------ ----------- -----------
Risk free interest rate 1.95-4.13% 1.95-4.13%
Expected volatility 30-65% 41-66%
Expected option life (years) 1.0-5.7 1.25-5.7
Expected dividend yield 0% 0%
Weighted average share price 43p 27p
Weighted average exercise price 42p 42p
Weighted average fair value of options granted 5p 6p
------------------------------------------------ ----------- -----------
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
IFRS 2 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 Expected
price option 31 March 31 March
(p) life (years) 2011 2010
------------------ --------- ------------- ---------- ----------
31 July 2003 29 5.7 152,160 152,160
28 December 2003 29 5.3 - 600,000
29 August 2004 42 4.6 171,108 171,108
6 June 2005 42 3.6-4.8 171,108 171,108
14 February 2006 140 3.1-4.1 421,349 421,349
15 February 2006 140 1.25-2.25 59,196 66,464
1 August 2008 42 3.0 250,000 250,000
21 January 2009 12 3.0 1,204,861 1,205,244
6 December 2010 30 1.0 600,000 -
------------------ --------- ------------- ---------- ----------
3,029,782 3,037,433
------------------ --------- ------------- ---------- ----------
Share options continued
During the year ended 31 March 2009 a warrant was issued to
Barclays Bank plc over 5% of the diluted share capital of the
Company. As at 31 March 2011 this entitled the holder to 1,204,861
shares. The weighted average fair value of this equity instrument
of GBP60,327 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 2011 was
33.5p and the range during the year was 24.0p.
There have been no transactions with equity holders or dividends
during the current or previous year.
18. Pension commitments
At 31 March 2011 there were no pension commitments (2010:
GBPNil).
19. Operating lease commitments
At 31 March 2011 the Company had lease commitments as
follows:
Land and buildings Other
------------------
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- --------- -------- --------
Within one year 153 153 38 12
Between two and five years 178 331 50 11
More than five years - - - -
---------------------------- ---------- --------- -------- --------
Land and buildings
The Company 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 five years.
Other
The Company leases various office equipment and motor vehicles
under non-cancellable operating lease agreements. The lease terms
are either two or three years.
The lease expenditure charged to the income statement during the
year is disclosed in Note 5.
20. Related party transactions
During the year CKR Holdings Limited and Rykesh Limited,
companies controlled by Chris Fishwick, a director, provided
consultancy services to the Company in the normal course of
business and at an arm's length basis with a total value of
GBP100,000 (2010: GBP100,000). There was no balance owing to CKR
Holdings Limited or Rykesh Limited at the end of the year (2010:
GBPNil).
21. Capital commitments
At 31 March 2011 there were capital commitments of GBP34,000
(2010: GBPNil).
22. Earnings per share
Earnings per share is calculated on the basis of a profit of
GBP263,500 (2010: loss of GBP354,749) divided by the weighted
average number of shares in issue for the year of 21,067,443 (2010:
21,067,443). The diluted earnings per share is calculated on the
assumption that the unapproved and EMI share options as disclosed
in Note 17 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 24,097,225 (2010: 24,104,876).
An adjusted earnings per share is calculated by adding back
amortisation of intangible assets and non-recurring costs to
retained earnings, giving GBP2,139,307 (2010: GBP1,952,114). This
is divided by the same weighted average number of shares as
above.
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Earnings for the purposes of basic and diluted
earnings per share
Loss for the period attributable to equity holders 263 (355)
Amortisation 1,620 1,981
Non-recurring costs 256 326
---------------------------------------------------- ----------- -----------
Adjusted profit attributable to equity holders,
adding back amortisation and non-recurring costs 2,139 1,952
---------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of shares used for earnings
per share 21,067,443 21,067,443
Dilutive effect of share plans 3,029,782 3,037,433
---------------------------------------------------- ----------- -----------
Diluted weighted average number of shares used to
calculate fully diluted earnings per share 24,097,225 24,104,876
---------------------------------------------------- ----------- -----------
Earnings per share
Basic earnings per share 1.25p (1.68)p
Fully diluted earnings per share 1.09p n/a
Adjusted earnings per share, after adding back
amortisation and non-recurring costs
Adjusted basic earnings per share 10.15p 9.27p
Adjusted fully diluted earnings per share 8.88p 8.10p
---------------------------------------------------- ----------- -----------
Earnings per share is calculated by dividing the retained
earnings attributable to the equity holders by the weighted average
number of ordinary shares in issue.
Adjusted earnings per share is calculated by dividing the
retained earnings attributable to the equity holders (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 31 March 2010 diluted
earnings per share as the effect would be anti-dilutive; therefore
diluted and basic earnings per share are equal.
23. Financial instruments
Set out below are the Company's financial instruments. The
directors consider there to be no difference between the carrying
value and fair value of the Company's financial instruments.
2011 2010
GBP'000 GBP'000
---------------------------------------- -------- --------
Financial assets
Cash 1,361 885
Trade and other receivables 2,297 2,454
Financial liabilities
Interest bearing loans and borrowings:
Floating rate borrowings - -
Fixed rate borrowings 8,726 10,100
---------------------------------------- -------- --------
8,726 10,100
---------------------------------------- -------- --------
Amounts due for settlement:
Within twelve months 1,456 1,478
After twelve months 7,270 8,622
---------------------------------------- -------- --------
8,726 10,100
---------------------------------------- -------- --------
The Facility A term loan bears interest at 3.5-2.25% over LIBOR,
dependent upon the EBITA ratchet, and is repayable by quarterly
instalments of GBP375,000 to 31 March 2012 and reducing to
quarterly instalments of GBP312,500 thereafter, with the final
repayment due on 30 September 2015. At the year end the amount
outstanding in respect of this facility was GBP5.875m.
The Facility B loan bears interest at 3.5% over LIBOR, and is
repayable in full on the final repayment date of 30 September 2013.
At the year end the amount outstanding in respect of Facility B was
GBP3.0m.
The financial assets of the Company 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
GBP1,500,000 and GBP250,000 respectively.
Obligations under finance leases
As at 31 March 2011 the Company had no finance lease
obligations.
Sensitivity analysis
At 31 March 2011 it is estimated that a movement of 1% in
interest rates would impact the Company's profit before tax by
approximately GBP102,000. Given the interest rate swap instrument
in place, this impact on profit would be reduced should interest
rates rise above 2.96%.
Interest rate risk
The Company's policy is to manage its interest cost using a mix
of fixed and variable rate debts. The Company's policy is to keep
at least 75% of its borrowings at fixed rates of interest. At 31
March 2011, after taking into account the effect of interest rate
management, 100% of the Company's borrowings are at a fixed rate of
interest (2010: 100%).
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
Company'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
2011 was GBP3,658,001 (2010: GBP3,339,297).
Loans and receivables
2011 2010
GBP'000 GBP'000
--------------------------- -------- --------
Trade receivables 2,290 2,446
Other receivables 7 8
Cash and cash equivalents 1,361 885
--------------------------- -------- --------
3,658 3,339
--------------------------- -------- --------
Credit risk refers to the risk that the counterparty will
default on its contractual obligations resulting in financial loss
to the Company. The Company 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 Company does not have any significant credit risk
exposure to any single counterparty or any Company of
counterparties having similar characteristics. The Company defines
counterparties as having similar characteristics if they are
connected parties.
Liquidity risk
The Company has an appropriate liquidity risk management
framework for the management of the Company's short, medium and
long term funding and liquidity risk management requirements. The
Company 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 Company'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 March 2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- ---------- ----------
Borrowings 1,456 1,206 5,126 938
Finance leases - - - -
Trade and other payables 2,601 - - -
-------------------------- -------- ---------- ---------- ----------
4,057 1,206 5,126 938
-------------------------- -------- ---------- ---------- ----------
Within More than
1 year 1-2 years 2-5 years 5 years
Year ended 31 March 2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- ---------- ----------
Borrowings 1,478 8,622 - -
Finance leases - - - -
Trade and other payables 2,807 - - -
-------------------------- -------- ---------- ---------- ----------
4,285 8,622 - -
-------------------------- -------- ---------- ---------- ----------
Currency risk
The Company's operations are handled entirely in sterling.
Capital risk management
The Company is subject to the risk that its capital structure
will not be sufficient to support the growth of the business. The
Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. There were no changes to the Company's
approach to capital management during the year.
As part of the new banking arrangements, which were completed
during the year, the Company is required to comply with certain
covenants including net debt to adjusted EBITA, interest cover and
cash flow cover.
In order to maintain or adjust the capital structure, the
Company may return capital to shareholders, issue new shares or
sell assets to reduce debt.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RAMJTMBATBFB
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