TIDMNSV
RNS Number : 5994C
NetServices PLC
17 November 2009
NetServices plc
17 November 2009
For Immediate Release
Preliminary Results announcement
For the year ended 31 August 2009
NetServices plc, (AIM:NSV) the business-to-business unified network provider,
announces its audited preliminary results for the year ended 31 August 2009.
Highlights
+----------------------------------------------------------------------------------------+
| * NetServices achieved Master Managed Services Certification from |
| Cisco, one of a select few in the UK* |
| EBITDA before non-recurring items GBP0.1m loss (2008: profit |
| GBP0.5m) |
+----------------------------------------------------------------------------------------+
| * Loss before tax and non-recurring items GBP0.3m (2008: |
| profit GBP0.1m) |
+----------------------------------------------------------------------------------------+
| * Completed transformation to Cisco Powered house and managed |
| services provider |
+----------------------------------------------------------------------------------------+
| * Actions taken to manage the cost base* |
| Gross period end cash balances GBP0.6m (2008:GBP1.3m) |
+----------------------------------------------------------------------------------------+
Mark Vickers, Chief Executive Officer said:
'NetServices has re-positioned itself as a Cisco Powered managed services
provider focused around the delivery of MPLS networks. Recent active engagement
with our key technology partners has identified markets and sales opportunities
where our value proposition is attractive. We are focused on converting
technical capability into sales value and as ever we remain focused on tight
cost control and maximizing shareholder value'
For further information, please contact:
+--------------------------------------------+--------------------------------------------+
| NetServices | Tel No: 0870 753 0900 |
+--------------------------------------------+--------------------------------------------+
| Mark Vickers, Chief Executive | |
+--------------------------------------------+--------------------------------------------+
| Ian Winn, Finance Director | |
+--------------------------------------------+--------------------------------------------+
| | |
+--------------------------------------------+--------------------------------------------+
| MC2 (Manchester) Limited | Tel No: 01565 872 478 |
+--------------------------------------------+--------------------------------------------+
| Melanie Miotte | |
+--------------------------------------------+--------------------------------------------+
| | |
+--------------------------------------------+--------------------------------------------+
| Arbuthnot Securities | Tel No: 020 7012 2000 |
+--------------------------------------------+--------------------------------------------+
| Tom Griffiths/ Alasdair Younie | |
+--------------------------------------------+--------------------------------------------+
Chairman's statement
I am pleased to report the results for NetServices plc for the year ended 31
August 2009, my first set of results as chairman. I would like to thank my
predecessor Chris Townsend for his valuable contribution over the last four
years and wish him well in the challenge of delivering, what I am sure will be,
a fantastic Olympics for Britain in 2012.
Financial performance
The general economic background, against which these results have been
delivered, has been challenging and the group was certainly not alone in being
adversely affected by the economic conditions.
Revenue for the year was GBP5.9m (2008: GBP7.1m), which reflects the loss of a
hosting contract and attrition in our non-core revenues. Revenues were also
affected by the lower level of set up fees which resulted from a reduction in
the number of significant MPLS networks implemented during the financial year.
Gross profit at GBP2.4m (2008: GBP3.3m) ensured that the group's gross profit
margin was 40%, in spite of pressure both from customers and pricing under the
group's supply contract with Fibernet UK Limited. The group generated an EBITDA
loss of GBP0.1m (2008: GBP0.5m profit), which in turn produced an operating loss
before non-recurring costs of GBP0.3m (2008: GBP0.1m profit). The non-recurring
costs related to a staff redundancy programme, the write-off of legacy
networking equipment and professional fees relating to a strategic review of the
business. The impact of these items resulted in a loss before tax of GBP0.81m
(2008: GBP0.05m profit). In the year under review the board has taken measures
to reduce the group's operating cost base to ensure that it is commensurate with
both its current and future revenues and financial resources. At the year end,
the group had GBP0.6m gross cash balances.
Whilst we are disappointed with the financial performance of the group for the
last financial year, we are encouraged that our managed services technical
capability continues to build.
Business strategy
In the last two years, the group has changed from a small, independent
wholesaler of DSL to a dedicated, Cisco Powered, managed networking business.
The group is now firmly positioned as both a managed services provider and a
Cisco "house", meaning we will always use Cisco equipment in the solutions we
provide to current and future customers. We believe that this positions the
group in the right market space. During the year, we built on our technical
foundation in legacy MPLS networking skills, leveraged experience within the
business and assisted our staff in achieving Cisco accreditation. This allowed
us to achieve certification in the following areas:
+-------+--------------------------------------------------------------------------+
| * | Cisco Master Managed Services Channel Program ("MSCP") Partner in |
| | Connectivity and Security, one of only a handful of such partners in the |
| | UK; |
+-------+--------------------------------------------------------------------------+
| * | Cisco MSCP Host-Agent, which allows us to be used by out-of-country MSCP |
| | |
| | Partners to provide UK services to their UK clients; |
+-------+--------------------------------------------------------------------------+
| * | Cisco Premier Partner; and |
+-------+--------------------------------------------------------------------------+
| * | Investors in People - bronze level. |
+-------+--------------------------------------------------------------------------+
The Cisco accreditations act as a business enabler in a number of ways:
providing third?party validation of the group's skills, access to significant
discounts on hardware, access to Cisco marketing resources and access to Cisco
account management to provide sales opportunities. It is however worth pointing
out that Cisco does not sell our product set - that remains with us.
Board changes
There have been a number of changes in the composition of the board during the
period. With the departure of Paul Foley, sales director, in April 2009, Mark
Vickers, chief executive officer, has taken direct responsibility for the
delivery of new managed services contracts. Chris Townsend, as a result of his
commitments in his role as commercial director for the London organising
committee of the 2012 Olympic Games, stepped down from the board in May 2009 and
was replaced as chairman by myself. Paul Williams was appointed to the board in
June 2009 as operations director, and both prior to and since this date he has
been instrumental in building the technical capability of the business.
Outlook
The board is mindful that the company has had a number of years now where it has
failed to deliver meaningful progress in financial terms. The work that has been
undertaken to obtain Cisco accreditation, whilst managing the company's cost
base, will hopefully lead to an improved performance during the current
financial year. However we also continue to review strategic opportunities to
improve shareholder value.
In what has been a challenging period for the business, I would like to thank
all the staff at NetServices for their efforts and diligence and I look forward
to their hard work and skills being recognised by a positive outcome in the
current financial year.
Graham Norfolk
Chairman
17 November 2009
Business review
Introduction
NetServices plc is a Cisco Powered managed services provider, qualified to
supply integrated managed services focused around our core MPLS network. We have
built on our heritage and experience in managed networking to deliver a
cost-effective managed service which meets our customers' demanding needs and
provides them with the peace of mind that they require 24/7 for 365 days a year.
Our business model, target market and routes to that market
Traditionally in this report, we have commented on the changes in the technical
landscape that have shaped and impacted our business during the period under
review. The last year has seen: a continuation of the trend for increasing
bandwidth at reduced prices; BT's continued investment in its 21st Century
network (and delays in its roll out); the green agenda increasing the
attractiveness of video conferencing; and virtualisation changing the data
centre model from one based on charging for space to one centred on power
utilisation. Over the last twelve months, there has also been an increased focus
on managed services both from customers, who welcome the lower cost of ownership
and outsourced management by experts, and investors, who appreciate the
contractual, predictable, annuity aspect of revenue streams.
In the last three years since listing on AIM, NetServices has changed
substantially - from a wholesale DSL provider with some MPLS capability to a
Cisco Powered managed services provider, focused around the delivery of MPLS
networks. I believe that the progress we have made over the last year in
augmenting our technical capability now positions the group in the most
appropriate market space.
Our business model - "commitment to service excellence"
We are proud to describe ourselves as a Cisco "house". We provide experienced
and knowledgeable engineering and pre-sales consultancy resource - all highly
qualified and Cisco certified - alongside project management and service
delivery teams who possess the latest ITIL and PRINCE2 skills. We deliver
managed MPLS networks, utilising our own core network within defined, industry
leading, service level agreements. Due to our size, customer engagement with us
is at management level or above and we are flexible and responsive to our
customers business needs.
The Master MSCP accreditation awarded to us provides recognition that the
services we are delivering are first class. Furthermore in achieving Master
status we are one of only a handful of providers at this level in the UK, as
recognised by Cisco.
During October 2009 Cisco successfully audited our White Label Network
Operations Centre ("NOC") capability - the first organisation anywhere in the
world to receive this accreditation.
Target market
We need to focus on those markets where our value proposition is recognised.
Whilst we can provide additional services which run across a network we operate,
through our relationships with third-party suppliers, it is our networking
capability that we believe will secure us business and revenues. Through active
engagement with our partners during the course of the last three months,
listening to what their issues are and where they see opportunities, we have
identified a number of target markets where we believe that our value
proposition is attractive:
+-------+--------------------------------------------------------------------------------+
| * | local government network connectivity through established local government |
| | partners; |
+-------+--------------------------------------------------------------------------------+
| * | White Label NOC services to businesses who wish to retain the benefits of |
| | Cisco Powered status but do not have the requisite NOC capabilities; and |
+-------+--------------------------------------------------------------------------------+
| * | video conferencing managed end points. |
+-------+--------------------------------------------------------------------------------+
Route to market
As we have restructured the business over the last two years into a managed
services provider, we have found it difficult to map out an effective route to
market. The perception of our business has been that it has good technical
capability without the means to sell it. The turnover in sales directors has
been the most evident testament to this. However, over recent months we believe
that we have made real progress in establishing a credible and viable
distribution model for our services. The key routes and engagements are listed
below:
+-------+------------------------------------------------------------------------------+
| * | we are in active discussions with two businesses that provide services into |
| | the local government market, which have a requirement for a carrier neutral, |
| | network provider; |
+-------+------------------------------------------------------------------------------+
| * | we are engaged with a business that provides connectivity through an |
| | innovative delivery mechanism which has lacked the managed networking |
| | component to deliver this to corporate customers, particularly local |
| | government. Our service proposition is complementary to their model and |
| | there exist a number of identified sales opportunities on which we are |
| | currently working with them; and |
+-------+------------------------------------------------------------------------------+
| * | we are looking to leverage the resources and contacts made with Cisco to |
| | generate leads into the business. |
+-------+------------------------------------------------------------------------------+
As a consequence of this, sales cycles are likely to extend. However the
contracts that are secured are more likely to be of a significant scale and
duration.
Results for the year
The last year has been a difficult one for the business as a consequence of both
the economic environment and our efforts to develop our capability and
engagement model.
Revenue for the year was GBP5.9m (2008: GBP7.1m) which reflected the loss of a
hosting contract and attrition in our non-core, non-converged revenues. Revenues
were also affected by lower set-up fees resulting from a reduction in the number
of significant MPLS networks implemented during the financial year. However the
group was successful in securing, through a partnership with Datapoint and
because of the Cisco accreditation, a three year managed wide area and local
network contract which is initially worth in excess of GBP0.4m.
Gross profit for the year was GBP2.4m (2008: GBP3.3m), representing a gross
margin of 40%. The board is pleased to have maintained margins at 40% despite
pricing pressure from existing customer renewals, changes in business mix and
the obligations under its supply contract with Fibernet UK Limited (part of
Global Crossing).
The current management team of the group has continued to demonstrate its
ability to manage the cost and operating base in light of available financial
resources. The normalised current overhead base is GBP0.18m per month
which compares to GBP0.23m at August 2008, clear demonstration of action taken
during the year. During the financial year an exercise was undertaken to reduce
headcount, whilst ensuring that capability was maintained. This was completed in
January 2009.
The group generated an EBITDA loss of GBP0.1m (2008: GBP0.5m profit), which in
turn produced an operating loss before non-recurring costs of GBP0.3m (2008:
GBP0.1m profit).
As a consequence of incurring non-recurring costs on the write-down of certain
legacy networking equipment, staff re-organisation costs, and one-off
professional fees relating to a strategic review of the business, a loss before
tax was incurred of GBP0.81m (2008: GBP0.05m profit).
Balance sheet and working capital
During the year we developed our Cisco capability which has resulted in us
capitalising GBP0.1m of expenditure. However given our investment in our core
network in 2008, there was no further need for investment in this capability
during the last financial year.
In spite of the economic environment, we maintained strong credit control and as
a consequence incurred no bad debts during the year.
There was a small increase in the provision for onerous supply contracts at the
year end, reflecting the group's lower activity levels. As we reported in our
pre-close statement, released on 14 September 2009, we remain in negotiations
with Fibernet UK Limited (part of Global Crossing) to try to achieve an outcome
which is mutually beneficial to both companies.
Gross cash balances at the year end were GBP0.6m (2008: GBP1.3m). The reduction
in cash balances resulted from the small operating loss, the cash cost of
restructuring the business and undertaking a strategic review, a final reversal
in the timing difference on 186k Limited re-charged infrastructure costs,
investment in technical capability referred to above and the net repayment of
borrowings.
Outlook
The board is focused on delivering growth in the markets identified and further
building upon the relationships which have been established over the last six
months. The board is acutely aware that having now completed the process
of reshaping and refining the business model, with the consequential investment
costs and reduced profitability that have resulted from those actions, it now
must deliver shareholder value.
The directors in aggregate hold approximately 30% of the company's issued shares
and therefore consider that their interests are closely aligned with those of
all shareholders.
The board remains confident that the business model will ultimately prove
successful. However it acknowledges the short term risks to both revenue growth
and profitability growth from what are most likely to be longer sales cycles. In
the meantime, the board will continue to review all available opportunities to
maximise shareholder value.
We look forward to updating the markets and shareholders during the course of
the year as the group succeeds in delivering its strategic objectives.
Mark Vickers
Chief executive officer
17 November 2009
Consolidated income statement
For the year ended 31 August 2009
+-------------------------------------------+-----+-----+-------------+--------------+
| Year ended | Year ended |
+---------------------------------------------------------------------+--------------+
| 31 August | 31 August |
+---------------------------------------------------------------------+--------------+
| 2009 | 2008 |
+---------------------------------------------------------------------+--------------+
| Notes | GBP | GBP |
+-------------------------------------------------------+-------------+--------------+
| REVENUE | 2 | 5,908,997 | 7,145,442 |
+-------------------------------------------+-----------+-------------+--------------+
| Cost of sales | 3,556,906 | 3,835,791 |
+-------------------------------------------------------+-------------+--------------+
| GROSS PROFIT | 2,352,091 | 3,309,651 |
+-------------------------------------------------------+-------------+--------------+
| Other operating expenses | 2,443,054 | 2,810,467 |
+-------------------------------------------------------+-------------+--------------+
| (LOSS)/PROFIT FROM OPERATIONS BEFORE |
+------------------------------------------------------------------------------------+
| AMORTISATION, DEPRECIATION AND SHARE- |
+------------------------------------------------------------------------------------+
| BASED PAYMENT COSTS | (90,963) | 499,184 |
+-------------------------------------------------------+-------------+--------------+
| Amortisation of intangibles | 58,689 | 64,062 |
+-------------------------------------------------------+-------------+--------------+
| Depreciation | 142,335 | 369,242 |
+-------------------------------------------------------+-------------+--------------+
| Share-based payment costs | 6,048 | - |
+-------------------------------------------------------+-------------+--------------+
| (LOSS)/PROFIT FROM OPERATIONS BEFORE NON- |
+------------------------------------------------------------------------------------+
| RECURRING ITEMS | (298,035) | 65,880 |
+-------------------------------------------------+-------------------+--------------+
| Non-recurring items - restructuring costs | 3 | 172,462 | - |
+-------------------------------------------+-----------+-------------+--------------+
| Non-recurring items - loss on disposal of property, plant |
+------------------------------------------------------------------------------------+
| and equipment | 3 | 293,826 | - |
+-------------------------------------------+-----------+-------------+--------------+
| (LOSS)/PROFIT FROM OPERATIONS | 3 | (764,323) | 65,880 |
+-------------------------------------------+-----------+-------------+--------------+
| Finance income | 5,584 | 36,359 |
+-------------------------------------------------------+-------------+--------------+
| Finance costs | | (55,851) | (52,923) |
+-------------------------------------------+-----------+-------------+--------------+
| (LOSS)/PROFIT BEFORE TAX | (814,590) | 49,316 |
+-------------------------------------------------------+-------------+--------------+
| Income tax expense | 4 | - | - |
+-------------------------------------------+-----------+-------------+--------------+
| (LOSS)/PROFIT FOR THE YEAR | (814,590) | 49,316 |
+-------------------------------------------------------+-------------+--------------+
| (LOSS)/EARNINGS PER SHARE |
+------------------------------------------------------------------------------------+
| - basic (p) | 5 | (2.75) | 0.17 |
+-------------------------------------------+-----------+-------------+--------------+
| - diluted (p) | 5 | (2.75) | 0.16 |
+-------------------------------------------+-----+-----+-------------+--------------+
The retained loss for the year arises from the group's continuing operations.
No separate statement of total recognised income and expense is presented as all
such income and expenses have been dealt with in the consolidated income
statement.
Consolidated balance sheet
As at 31 August 2009
+--------------------------------------------+---------++------------+---------------+
| As at | As at |
+--------------------------------------------------------------------+---------------+
| 31 August | 31 August |
+--------------------------------------------------------------------+---------------+
| 2009 | 2008 |
+--------------------------------------------------------------------+---------------+
| | GBP | GBP |
+------------------------------------------------------+-------------+---------------+
| ASSETS |
+------------------------------------------------------------------------------------+
| Non-current assets |
+------------------------------------------------------------------------------------+
| Property, plant and equipment | | 1,158,561 | 1,548,193 |
+--------------------------------------------+---------+-------------+---------------+
| Goodwill | | 333,983 | 333,983 |
+--------------------------------------------+---------+-------------+---------------+
| Intangibles | | 179,135 | 182,798 |
+--------------------------------------------+---------+-------------+---------------+
| Other investments | | 58,667 | 58,667 |
+--------------------------------------------+---------+-------------+---------------+
| | 1,730,346 | 2,123,641 |
+-------------------------------------------------------+------------+---------------+
| Current assets |
+------------------------------------------------------------------------------------+
| Trade and other receivables | | 834,567 | 844,234 |
+--------------------------------------------+---------+-------------+---------------+
| Cash and cash equivalents | | 648,867 | 1,253,737 |
+--------------------------------------------+---------+-------------+---------------+
| | 1,483,434 | 2,097,971 |
+-------------------------------------------------------+------------+---------------+
| TOTAL ASSETS | 3,213,780 | 4,221,612 |
+------------------------------------------------------+-------------+---------------+
| EQUITY AND LIABILITIES |
+------------------------------------------------------------------------------------+
| Equity attributable to the equity holders of the parent |
+------------------------------------------------------------------------------------+
| Share capital | | 74,042 | 73,992 |
+--------------------------------------------+---------+-------------+---------------+
| Share premium reserve | 4,293,446 | 4,293,246 |
+------------------------------------------------------+-------------+---------------+
| Share-based payment reserve | 14,332 | 8,284 |
+------------------------------------------------------+-------------+---------------+
| Purchase of own shares | (11,500) | - |
+------------------------------------------------------+-------------+---------------+
| Revaluation reserve | 151,650 | 151,650 |
+------------------------------------------------------+-------------+---------------+
| Retained losses | (4,469,195) | (3,654,605) |
+------------------------------------------------------+-------------+---------------+
| | 52,775 | 872,567 |
+-------------------------------------------------------+------------+---------------+
| Non-current liabilities |
+------------------------------------------------------------------------------------+
| Trade and other payables | | - | 1,343 |
+--------------------------------------------+---------+-------------+---------------+
| Financial liabilities | | 390,571 | 508,107 |
+--------------------------------------------+---------+-------------+---------------+
| Provisions | | 1,456,967 | 1,519,844 |
+--------------------------------------------+---------+-------------+---------------+
| Deferred tax | | 66,827 | 66,827 |
+--------------------------------------------+---------+-------------+---------------+
| | 1,914,365 | 2,096,121 |
+-------------------------------------------------------+------------+---------------+
| Current liabilities |
+------------------------------------------------------------------------------------+
| Financial liabilities | | 156,695 | 150,187 |
+--------------------------------------------+---------+-------------+---------------+
| Trade and other payables | | 1,089,945 | 1,102,737 |
+--------------------------------------------+---------+-------------+---------------+
| | 1,246,640 | 1,252,924 |
+------------------------------------------------------+-------------+---------------+
| TOTAL EQUITY AND LIABILITIES | 3,213,780 | 4,221,612 |
+--------------------------------------------+---------++------------+---------------+
Consolidated statement of changes in equity
For the year ended 31 August 2009
+----------------+--------+--------+-----------+-------------+----------+--------+-------------+-------------+-----------+
| Share | Share-based | Purchase |
+----------------------------------------------+-------------+----------+
| Share | premium | payment | of own | Revaluation | Retained |
+----------------------------------+-----------+-------------+-------------------+-------------+-------------+
| capital | reserve | reserve | shares | reserve | losses | Total |
+----------------------------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| GBP | GBP | GBP | GBP | GBP | GBP | GBP |
+----------------------------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| BALANCE AT 1 |
+------------------------------------------------------------------------------------------------------------------------+
| SEPTEMBER 2007 | 73,962 | 4,293,126 | 8,284 | - | 151,650 | (3,703,921) | 823,101 |
+-------------------------+--------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Total recognised |
+------------------------------------------------------------------------------------------------------------------------+
| income and expense |
+------------------------------------------------------------------------------------------------------------------------+
| for the year | - | - | - | - | - | 49,316 | 49,316 |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Exercise of |
+------------------------------------------------------------------------------------------------------------------------+
| options | 30 | 120 | - | - | - | - | 150 |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| BALANCE AT 31 |
+------------------------------------------------------------------------------------------------------------------------+
| AUGUST 2008 | 73,992 | 4,293,246 | 8,284 | - | 151,650 | (3,654,605) | 872,567 |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Total recognised |
+------------------------------------------------------------------------------------------------------------------------+
| income and expense |
+------------------------------------------------------------------------------------------------------------------------+
| for the year | - | - | - | - | - | (814,590) | (814,590) |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Exercise of |
+------------------------------------------------------------------------------------------------------------------------+
| options | 50 | 200 | - | - | - | - | 250 |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Purchase of own |
+------------------------------------------------------------------------------------------------------------------------+
| shares | - | - | - | (11,500) | - | - | (11,500) |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| Share-based |
+------------------------------------------------------------------------------------------------------------------------+
| payment | - | - | 6,048 | - | - | - | 6,048 |
+----------------+-----------------+-----------+-------------+-------------------+-------------+-------------+-----------+
| BALANCE AT 31 |
+------------------------------------------------------------------------------------------------------------------------+
| AUGUST 2009 | 74,042 | 4,293,446 | 14,332 | (11,500) | 151,650 | (4,469,195) | 52,775 |
+----------------+--------+--------+-----------+-------------+----------+--------+-------------+-------------+-----------+
The revaluation reserve relates to the revaluation of the group's properties on
transition to IFRS, net of the associated deferred tax liability.
During the period, the EBT acquired 342,209 shares on behalf of employees of
NetServices plc, the cost of which is held within the purchase of own shares
reserve.
Consolidated cash flow statement
For the year ended 31 August 2009
+--------------------------------------------------+------+------------+-----------+
| Year ended | Year |
| | ended |
+----------------------------------------------------------------------+-----------+
| 31 August | 31 August |
+----------------------------------------------------------------------+-----------+
| 2009 | 2008 |
+----------------------------------------------------------------------+-----------+
| Notes | GBP | GBP |
+---------------------------------------------------------+------------+-----------+
| CASH FLOW FROM OPERATING ACTIVITIES |
+----------------------------------------------------------------------------------+
| Cash used in operations | 6 | (278,420) | (317,525) |
+--------------------------------------------------+------+------------+-----------+
| Finance cost | (55,851) | (52,923) |
+---------------------------------------------------------+------------+-----------+
| NET CASH USED IN OPERATING ACTIVITIES | (334,271) | (370,448) |
+---------------------------------------------------------+------------+-----------+
| CASH FLOW FROM INVESTING ACTIVITIES |
+----------------------------------------------------------------------------------+
| Purchase of property, plant and equipment | (5,305) | (79,198) |
+---------------------------------------------------------+------------+-----------+
| Purchase of intangible assets | (96,250) | (116,942) |
+---------------------------------------------------------+------------+-----------+
| Proceeds from sale of equipment | - | 47,293 |
+---------------------------------------------------------+------------+-----------+
| Finance income | 5,584 | 36,359 |
+---------------------------------------------------------+------------+-----------+
| NET CASH USED IN INVESTING ACTIVITIES | (95,971) | (112,488) |
+---------------------------------------------------------+------------+-----------+
| CASH FLOW FROM FINANCING ACTIVITIES |
+----------------------------------------------------------------------------------+
| Proceeds from the exercise of share options | 250 | 150 |
+---------------------------------------------------------+------------+-----------+
| Purchase of own shares for EBT | (11,500) | - |
+---------------------------------------------------------+------------+-----------+
| Repayment of long term borrowings | (58,256) | (46,596) |
+---------------------------------------------------------+------------+-----------+
| Payment of finance lease liabilities | (105,122) | (100,001) |
+---------------------------------------------------------+------------+-----------+
| CASH USED IN FINANCING ACTIVITIES | (174,628) | (146,447) |
+---------------------------------------------------------+------------+-----------+
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (604,870) | (629,383) |
+---------------------------------------------------------+------------+-----------+
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,253,737 | 1,883,120 |
+---------------------------------------------------------+------------+-----------+
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 648,867 | 1,253,737 |
+--------------------------------------------------+------+------------+-----------+
1.Consolidated accounting policies for the year ended 31 August 2009
Basis of accounting
NetServices plc ("the company") is a company incorporated and domiciled in the
UK.
For the year ended 31 August 2009 the consolidated financial statements have
been prepared in accordance with IFRS and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations as endorsed by the EU and
the Companies Act 2006.
IFRS issued at 8 September 2009
+----------+------------------------------------------------+---------+------------+-------------+
| Standard | | Issued | Effective | EU |
| | | | date: | endorsement |
| | | | periods | status |
| | | | commencing | |
| | | | on or | |
| | | | after | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS1 | "Presentation of Financial Statements - | 6 Sept | 1 Jan 09 | Endorsed |
| | Comprehensive Revision Including Requiring a | 07 | | 17 Dec 08 |
| | Statement of Comprehensive Income" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS1(1) | "Presentation of Financial Statements - | 14 Feb | 1 Jan 09 | Endorsed |
| | Amendment: Puttable Financial Instruments and | 08 | | 21 Jan 09 |
| | Obligations Arising on Liquidation" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS27 | "Consolidated and Separate Financial | 10 Jan | 1 Jul 09 | Endorsed 3 |
| | Statements - Amendments Arising from IFRS3" | 08 | | Jun 09 |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS27 | "Consolidated and Separate Financial | 22 May | 1 Jan 09 | Endorsed |
| | Statements - Amendment: Cost of an Investment | 08 | | 23 Jan 09 |
| | in a Subsidiary, Jointly-controlled Entity or | | | |
| | Associate" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS31 | "Investments in Joint Ventures - Consequential | 10 Jan | 1 Jul 09 | Endorsed 3 |
| | Amendments Arising from IFRS3" | 08 | | Jun 09 |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS32 | "Financial Instruments: | 14 Feb | 1 Jan 09 | Endorsed |
| | Presentation-Amendment: Puttable Financial | 08 | | 21 Jan 09 |
| | Instruments and Obligations Arising on | | | |
| | Liquidation" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IFRS1 | "Revised IFRS1 First-time Adoption of IFRS" | 27 Nov | 1 July | Q4 2009 |
| | | 08 | 09(2) | |
+----------+------------------------------------------------+---------+------------+-------------+
| IFRS1 | "First-time Adoption of IFRS - Amendment: | 23 Jul | 1 Jan 2010 | To be |
| | Additional Exemptions for First-time Adopters" | 09 | | confirmed |
+----------+------------------------------------------------+---------+------------+-------------+
| IFRS2(3) | "Share-based Payments-Amendment: Cash-settled | 18 Jun | 1 Jan 2010 | Q1 2010 |
| | Share-based Payment Transactions" | 09 | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IFRS7 | "Financial Instruments: Disclosures-Amendment: | 5 Mar | 1 Jan 09 | Q4 2009 |
| | Improving Disclosures About Financial | 09 | | |
| | Instruments" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IFRS7 | "Financial Instruments: Disclosures-Amendment: | 27 Nov | Effective | Q3 2009 |
| | Reclassification of Financial Assets - | 08 | date 1 Jul | |
| | Effective Date and Transition" | | 08 | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS39 | "Financial Instruments: Recognition and | 27 Nov | Effective | Q3 2009 |
| | Measurement-Amendment: Reclassification of | 08 | date 1 Jul | |
| | Financial Assets-Effective Date and | | 08 | |
| | Transition" | | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS39 | "Financial Instruments: Recognition and | 31 Jul | 1 Jul 09 | Q3 2009 |
| | Measurement-Amendment: Eligible Hedged Items" | 08 | | |
+----------+------------------------------------------------+---------+------------+-------------+
| IAS39 | "Financial Instruments: Recognition and | 12 Mar | Periods | Q4 2009 |
| | Measurement-Amendment: Embedded Derivatives" | 09 | ending 30 | |
| | | | Jun 09 | |
+----------+------------------------------------------------+---------+------------+-------------+
+------+----------------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------------+
| (1) | Consequential amendments to IFRS 7, IAS 39 and IFRIC 2. |
+------+----------------------------------------------------------------------------+
| (2) | Also: (a) revision to improve structure but no technical changes, issued |
| | 27 November 2008 and effective for periods commencing on/after 1 July |
| | 2009; and (b) change of effective date from 1 January 2009 to 1 July 2009, |
| | issued 17 December 2008. |
+------+----------------------------------------------------------------------------+
| (3) | Amendment incorporates guidance in IFRIC 8 "Scope of IFRS 2" and IFRIC 11 |
| | "IFRS 2 - Group and Treasury". |
+------+----------------------------------------------------------------------------+
Going concern
The directors have considered the nature of the loss for the period just ended,
and the opportunities available to the group in the future, as a consequence of
the technical capability and services that have been developed over the last
twelve months. The group's financial projections show that it can operate within
the level of the current facilities available to it. Therefore the directors
consider it appropriate to prepare financial statements on a going concern
basis.
Basis of consolidation
The consolidated accounts incorporate the accounts of the company and all group
undertakings.
These are adjusted, where appropriate, to conform to group accounting policies.
Acquisitions are accounted for under the purchase method and goodwill is
reviewed annually for impairment. The results of companies acquired or disposed
of are included in the income statement after or up to the date that control
passes, respectively.
All intra-group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
Property, plant and equipment ("PPE")
Plant and equipment are stated at historic cost less accumulated depreciation
and any recognised impairment losses. At the date of transition to IFRS, the
group elected to revalue its property to fair value and to consider this value
as the deemed cost at the date of transition. The valuation was based on market
value provided by an independent surveyor.
Depreciation is charged so as to write off the cost of assets, other than land,
to their estimated residual values over their estimated useful lives using the
straight-line method on the following bases:
+----------------------+--------------------------------------+
| Long leasehold | - 2% |
| property | |
+----------------------+--------------------------------------+
| Fixtures and | - 20% |
| fittings | |
+----------------------+--------------------------------------+
| Plant and machinery | - 20% |
+----------------------+--------------------------------------+
| Motor vehicles | - 20% |
+----------------------+--------------------------------------+
| Computer equipment | - 20% |
+----------------------+--------------------------------------+
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, the term of the
relevant lease.
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset and
is recognised in income.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group's interest in the fair value of the identifiable
assets, liabilities and contingent liabilities of a subsidiary, associate or
jointly-controlled entity at the date of acquisition.
Upon the acquisition of subsidiaries, goodwill is separately disclosed. Goodwill
on acquisition of associates and jointly-controlled entities is included in
investment in associates and jointly-controlled entities.
Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in the income statement and
is not subsequently reversed. Determining whether goodwill is impaired requires
an estimation of the value in use of the cash generating unit to which goodwill
has been allocated. The value in use calculation requires management to estimate
the future cash flows expected to arise from the cash generating unit and a
suitable discount rate in order to calculate present value.
On disposal of a subsidiary, associate or jointly-controlled entity, the
attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the amount previously calculated under UK GAAP subject to being
tested for impairment at that date.
Other intangible assets
Research and development is capitalised as an intangible asset at the point a
commercial value is quantifiable as the result of developing a new product or
service.
Software is capitalised upon purchase at cost.
Internally generated goodwill is not capitalised as an intangible asset.
Amortisation is calculated to write off the cost of an asset, less its estimated
residual value, over the useful economic life of that asset as follows:
+--------------------+---------------------------------------------------------------------+
| Development costs | - over the life of the associated product or service |
+--------------------+---------------------------------------------------------------------+
| Software | - over five years |
+--------------------+---------------------------------------------------------------------+
Impairment of PPE and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of PPE and
intangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). An intangible asset with an indefinite useful life is
tested for impairment annually and also whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its recoverable
amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income immediately,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Investments
Investments are stated at cost less any provision for diminution in value.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits repayable on demand
and short term deposits.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the
rates of exchange ruling at the balance sheet dates. Transactions in foreign
currencies are translated into sterling at the rate of exchange prevailing at
the date of the transaction. Exchange differences are taken into account when
arriving at operating profit. The functional and presentational currency used is
sterling.
Financial instruments
Financial assets and financial liabilities are recognised on the group's balance
sheet when the group has become a party to the contractual provisions of the
instrument.
Trade receivables
Trade receivables do not carry any interest and are initially stated at fair
value and are subsequently reassessed when there is objective evidence of
impairment.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the group
after deducting all of its liabilities. Interest associated with financial
liabilities is recognised in the income statement on an accruals basis over the
term of the instrument using the effective interest method.
Trade payables
Trade payables are classified as "other liabilities" in accordance with IAS 39.
They are initially recognised at fair value net of transaction costs and
subsequently measured at amortised cost.
Equity instruments
Equity instruments issued by the company are recorded at the fair value, net of
direct issue costs.
Provisions
Provisions are recognised when the group has a present obligation as a result of
a past event which it is probable will result in an outflow of economic benefits
that can be reliably estimated.
Provision is held against an onerous contract entered into by a subsidiary
company. The provision is based upon the expected expenditure under the contract
against the contractual commitment across the remaining life of the onerous
contract. The provision held is reviewed on a regular basis and adjusted
to reflect current expected expenditure.
Leasing
Assets held under finance leases, which are leases where substantially all the
risks and rewards of ownership of the asset have passed to the group, and hire
purchase contracts, are capitalised in the balance sheet and are depreciated
over their useful lives. The capital element of future obligations under the
leases and hire purchase contracts are included as liabilities in the balance
sheet.
Assets held under finance leases are recognised as assets of the group at their
fair value or, if lower, at the present value of the minimum lease payments,
each determined at the inception of the lease. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease. Benefits received and receivable as
an incentive to enter into an operating lease are also spread on a straight-line
basis over the lease term.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided
in the normal course of business, net of discounts, Value Added Tax and other
sales related taxes. Sales of goods are recognised when goods are delivered to
the customer, and installation revenue is recognised when the customer is
connected to the network.
Other contracted income, including customer rental, is recognised over the
contract period in proportion to the value of the service provided.
Deferred income represents that portion of rental fees paid by customers
relating to a future period.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Share-based payments
The group has applied the requirements of IFRS 2 "Share-based Payment".
The group issues equity-settled share-based awards to its employees.
Equity-settled share-based awards are measured at fair value at the date of
grant. The fair value determined at the grant date of equity-settled share-based
awards is expensed on a straight-line basis over the vesting period, based on
the group's estimate of shares that will eventually vest. Fair value is measured
by use of the Black-Scholes model. The expected life used in the model is based
upon exercise restrictions and expected volatility is based upon historical
volatility over the expected life of the scheme.
Taxation
The tax expense represents the sum of the current tax and the deferred tax
elements.
The current tax is based on taxable profit for the year. Taxable profit differs
from net profit as reported in the income statement because it excludes items
of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The group's
liability for current tax is calculated by using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Temporary
differences are differences between the group's taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax assessments in periods different from those in which they are
recognised in the financial statements.
Deferred tax is calculated at the tax rates (and tax laws) that have been
enacted or substantively enacted by the balance sheet date. Deferred tax is
charged or credited in the income statement, except when it relates to items
credited or charged directly to equity, in which case the deferred tax is also
dealt with in equity.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The group makes estimates and assumptions concerning the future. The resulting
accounting judgements will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below:
+-----+---------------------------------------------------------------------------------+
| * | goodwill has been tested for impairment by comparing the amount of goodwill |
| | attributable to a cash generating unit against the expected forecast cash flows |
| | to be generated in the future by that unit discounted at an appropriate rate of |
| | interest; |
+-----+---------------------------------------------------------------------------------+
| * | the fair value of share-based awards is measured using the Black-Scholes model |
| | which inherently makes use of significant estimates and assumptions concerning |
| | the future applied by the directors; and |
+-----+---------------------------------------------------------------------------------+
| * | provisions are held to the extent that directors feel contractual commitments |
| | against onerous contracts will not be met and have been discounted back to |
| | present value at an appropriate discount rate. |
+-----+---------------------------------------------------------------------------------+
Employee benefit trust
The company operates an employee benefit trust, NetServices plc Employee Benefit
Trust, and has de facto control of the shares held by the trust and bears their
benefits and risks. The company records certain assets and liabilities of the
trust as its own.
2. Revenue
The group's revenue and profit before taxation were all derived from its
principal activity which is the provision of converged networking solutions. 90%
of the revenue (2008: 92%) was attributable to the UK, the remaining revenue was
attributable to Europe. An analysis of the income, result and net assets by
geographical area has not been disclosed, as the directors consider that the
group has only one business segment.
3. (Loss)/profit from operations
(Loss)/profit from operations is stated after charging:
+-------------------------------------------------------+--------+----------+----------+
| 2009 | 2008 |
+---------------------------------------------------------------------------+----------+
| GBP | GBP |
+---------------------------------------------------------------------------+----------+
| Depreciation of owned PPE | 95,451 | 332,452 |
+----------------------------------------------------------------+----------+----------+
| Depreciation of assets held under lease agreements | 46,884 | 36,790 |
+----------------------------------------------------------------+----------+----------+
| Loss on disposal of PPE | - | 35,663 |
+----------------------------------------------------------------+----------+----------+
| Auditors' remuneration: |
+--------------------------------------------------------------------------------------+
| - as auditors of the parent company and group consolidated financial |
+--------------------------------------------------------------------------------------+
| statements | 24,950 | 24,950 |
+----------------------------------------------------------------+----------+----------+
| - audit of subsidiary company financial statements | 9,000 | 8,900 |
+----------------------------------------------------------------+----------+----------+
| - interim review | 9,200 | 8,900 |
+----------------------------------------------------------------+----------+----------+
| - corporation tax compliance | 8,140 | 8,140 |
+----------------------------------------------------------------+----------+----------+
| - other | 2,150 | 2,500 |
+----------------------------------------------------------------+----------+----------+
| Operating lease costs: |
+--------------------------------------------------------------------------------------+
| - land and buildings | 58,298 | 58,298 |
+----------------------------------------------------------------+----------+----------+
| Amortisation of internally generated assets | 45,319 | 44,683 |
+----------------------------------------------------------------+----------+----------+
| Amortisation of purchased software | 13,370 | 19,379 |
+----------------------------------------------------------------+----------+----------+
| Share-based payment costs | 6,048 | - |
+----------------------------------------------------------------+----------+----------+
| Onerous contracts: |
+--------------------------------------------------------------------------------------+
| - adjustment at period end | 36,178 | (80,000) |
+----------------------------------------------------------------+----------+----------+
| - utilised during the year | (99,055) | - |
+----------------------------------------------------------------+----------+----------+
| | (62,877) | (80,000) |
+-------------------------------------------------------+-------------------+----------+
| Penal rate cost of onerous contracts included in | 101,641 | - |
| administration costs | | |
+----------------------------------------------------------------+----------+----------+
| Non-recurring restructuring costs: |
+--------------------------------------------------------------------------------------+
| - redundancy costs and staff re-organisation | 94,792 | - |
+----------------------------------------------------------------+----------+----------+
| - strategic business review | 77,670 | - |
+----------------------------------------------------------------+----------+----------+
| - non-recurring loss on disposal of PPE | 252,602 | - |
+----------------------------------------------------------------+----------+----------+
| - non-recurring loss on disposal of intangible fixed assets | 41,224 | - |
+-------------------------------------------------------+--------+----------+----------+
Non-recurring restructuring costs represent costs incurred as a result of
corporate activity and staff redundancies.
4. Taxation on ordinary activities
(A) Taxation
+---------------------------------------------------------+----------+----------+
| 2009 | 2008 |
+--------------------------------------------------------------------+----------+
| GBP | GBP |
+--------------------------------------------------------------------+----------+
| Current tax |
+-------------------------------------------------------------------------------+
| UK corporation tax based on the results for the year at | - | - |
| 28% (2008: 29%) | | |
+---------------------------------------------------------+----------+----------+
| Deferred tax |
+-------------------------------------------------------------------------------+
| Origination and reversal of timing differences | - | - |
+---------------------------------------------------------+----------+----------+
| Over provision for corporation tax in earlier years | - | - |
+---------------------------------------------------------+----------+----------+
| Tax on loss on ordinary activities | - | - |
+---------------------------------------------------------+----------+----------+
(B) Factors affecting current tax charge
The tax assessed on the (loss)/profit on ordinary activities for the period is
lower than the standard rate of corporation tax in the UK of 28% (2008: 29%).
+---------------------------------------------------------+-----------+-----------+
| 2009 | 2008 |
+---------------------------------------------------------------------+-----------+
| GBP | GBP |
+---------------------------------------------------------------------+-----------+
| (Loss)/profit on ordinary activities before tax | (814,590) | 49,316 |
+---------------------------------------------------------+-----------+-----------+
| (Loss)/profit on ordinary activities by rate of tax | (228,085) | 14,382 |
+---------------------------------------------------------+-----------+-----------+
| Differences between capital allowances and depreciation | - | (240,450) |
+---------------------------------------------------------+-----------+-----------+
| Other short term timing differences | - | (9,470) |
+---------------------------------------------------------+-----------+-----------+
| Expenses disallowed | 29,717 | 9,097 |
+---------------------------------------------------------+-----------+-----------+
| Unrelieved tax losses | 198,368 | 226,441 |
+---------------------------------------------------------+-----------+-----------+
| Total current tax (note 4(A)) | - | - |
+---------------------------------------------------------+-----------+-----------+
The group has not recognised a deferred tax asset relating to cumulative
corporation tax losses of GBP23,689,709 (2008: losses of GBP22,875,119).
5. (Loss)/earnings per share
+---------------------------------------------------+----------------+-----------+
| 2009 | 2008 |
+--------------------------------------------------------------------+-----------+
| (Loss)/earnings per share |
+--------------------------------------------------------------------------------+
| - basic (p) | (2.75) | 0.17 |
+---------------------------------------------------+----------------+-----------+
| - diluted (p) | (2.75) | 0.16 |
+---------------------------------------------------+----------------+-----------+
The calculation of diluted loss per ordinary share is identical to that used for
the basic loss per ordinary share for the year ended 31 August 2009. This is
because the exercise of the options would have the effect of reducing the loss
per ordinary share and is, therefore, not dilutive under the terms of IAS 33.
Earnings and the number of shares used in the calculations of earnings per share
are set out below:
+--------------------------------------------------------+-----------+-----------+
| 2009 | 2008 |
+--------------------------------------------------------------------+-----------+
| GBP | GBP |
+--------------------------------------------------------------------+-----------+
| (Loss)/earnings for the year | (814,590) | 49,316 |
+--------------------------------------------------------+-----------+-----------+
Weighted average number of shares used in the calculations of earnings per share
are set out below:
+--------------------------------------------------------+------------+------------+
| 2009 | 2008 |
+---------------------------------------------------------------------+------------+
| No. | No. |
+---------------------------------------------------------------------+------------+
| For basic earnings per share | 29,608,898 | 29,595,703 |
+--------------------------------------------------------+------------+------------+
| Effect of dilutive potential ordinary shares: |
+----------------------------------------------------------------------------------+
| - share options | - | 459,420 |
+--------------------------------------------------------+------------+------------+
| For diluted earnings per share | - | 30,055,123 |
+--------------------------------------------------------+------------+------------+
6. Reconciliation of (loss)/profit to net cash inflow/(outflow) from operating
activities
+--------------------------------------------------------+-----------+-----------+
| 2009 | 2008 |
+--------------------------------------------------------------------+-----------+
| GBP | GBP |
+--------------------------------------------------------------------+-----------+
| (Loss)/profit before tax | (814,590) | 49,316 |
+--------------------------------------------------------+-----------+-----------+
| Adjustments for: |
+--------------------------------------------------------------------------------+
| Depreciation and amortisation | 201,024 | 433,304 |
+--------------------------------------------------------+-----------+-----------+
| Share-based payment costs | 6,048 | - |
+--------------------------------------------------------+-----------+-----------+
| Loss on disposal following impairment of PPE | 293,826 | - |
+--------------------------------------------------------+-----------+-----------+
| Loss on disposal of equipment | - | 35,663 |
+--------------------------------------------------------+-----------+-----------+
| Finance income | (5,584) | (36,359) |
+--------------------------------------------------------+-----------+-----------+
| Finance costs | 55,851 | 52,923 |
+--------------------------------------------------------+-----------+-----------+
| Operating (loss)/profit before changes in working | (263,425) | 534,847 |
| capital and provisions | | |
+--------------------------------------------------------+-----------+-----------+
| Adjustments for: |
+--------------------------------------------------------------------------------+
| Decrease in provisions | (62,877) | (80,000) |
+--------------------------------------------------------+-----------+-----------+
| Increase/(decrease) in receivables | 62,017 | (1,168) |
+--------------------------------------------------------+-----------+-----------+
| Increase in payables | (14,135) | (771,204) |
+--------------------------------------------------------+-----------+-----------+
| Net cash outflow used in operating activities | (278,420) | (317,525) |
+--------------------------------------------------------+-----------+-----------+
7. Basis of Preparation
The board of directors of NetServices plc approved the Preliminary Results on 17
November 2008. Copies of this announcement are available from the Company's
registered office at Waters Edge Business Park, 31 Modwen Road, Salford,
Manchester M5 3EZ and from the Company's website at www.netservicesplc.com
Statutory accounts for the year ended 31 August 2008, which were prepared under
accounting practices generally accepted in the UK, have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under Section 237 (2) or (3) of the Companies
Act 1985.
The annual report is expected to be sent to shareholders before the end of
November 2009. Additional copies will be available to the public free of charge,
from the Company's registered office at Waters Edge Business Park, 31 Modwen
Road, Salford, Manchester M5 3EZ and from the Company's website at
www.netservicesplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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