RNS Number:5397W
Tadpole Technology PLC
15 May 2007
Tadpole Technology plc ("the Group")
Interim Results
The Group announces its Interim Results for the six months ended 31 March 2007.
A copy of this report is also available on the Company's website
www.tadpoletechnology.com.
15 May 2006
Tadpole Technology plc
Interim Report
31 March 2007
Corporate Summary
Tadpole Technology plc ("Tadpole") is an application software and solution
provider with two operating divisions; Streaming and Geospatial Solutions.
The Streaming Division offers packaged systems integration, licensing and OEM
solutions based on its patented applications streaming technologies. End
customers benefit from these technologies by reducing the cost of ownership of
their computer environments whilst improving their ability to manage, deploy,
control and monitor their users' requirements. Headquartered in Irvine,
California, the division supports customers in North America, Japan and Europe.
Customers include Parsons Engineering, Wyse Technologies, Softbank, Microsoft
and Citrix.
The Geospatial Solutions Division provides innovative solutions that focus on
the integration of geospatial information with data acquisition, dissemination
and management information tools. Through these solutions customers gain
improved reliability, access and confidence in their asset data and systems
which underpin critical operational activities. Headquartered in Edinburgh,
Scotland, the division services its international client base directly and
through partners, offering both packaged and consultancy-based solutions.
Customers include Ordnance Survey GB, United Utilities, ScottishPower, BP and
ESSO.
Business and Financial Review
Group Financial Highlights
Operating results
The Group reports an operating profit of #539,000 in the first half year,
compared with an operating loss of #404,000 in the same period last year.
Revenues declined by 9% to #4,658,000 due primarily to lower revenues from
Ordnance Survey. However, gross margins improved substantially due primarily to
a greater proportion of high margin streaming licenses in the revenue mix.
Operating expenses were reduced by 12% to #2,652,000.
Balance Sheet and Funding
Notwithstanding the operating profit, the cash received from licensing
agreements and signature of a new contract with Ordnance Survey GB, the
Directors continue to evaluate the possible need for additional funding to
finance the planned investments in product development, sales and marketing for
the Streaming Division.
Cash flow
Net cash generated from operating activities in the first half was #1,248,000
compared with #2,000 in the first half last year. After repaying the DivestCap
$1.5 million loan note (#763,000 repaid compared with #842,000 received due to a
favourable foreign exchange movement over the past year), the Group closed the
half year with cash resources of #2,188,000.
Streaming Division
Operating results
Revenues in the first half year grew by 75% to #1,993,000 compared with
#1,139,000 in the first half last year and operating expenses were reduced by
12% to #1,358,000, resulting in a significant improvement in operating
profitability from an operating loss of #408,000 to an operating profit of
#605,000.
Sales, marketing & product development
The Division signed and announced two major licensing agreements with Microsoft
and Citrix in March 2007. In compliance with International Financial Reporting
Standards ("IFRS"), certain revenues arising from the licensing agreements were
recognised in the first half and certain revenues were deferred and will be
recognised in the second half. Revenues from Softbank continue to be recognised
based on the agreement signed in 2004.
A distribution agreement with ActivAeon to integrate and market AppExpress
together with ActivAeon's resource and user management software was announced in
September 2006.
The Division has focussed its marketing efforts on the "Endeavors" brand and the
"StreamTheory" brand has been discontinued. As a consequence, new marketing
collateral and a new web site were created during the last quarter of calendar
2006. A new "try before you buy" download and evaluation centre is being created
and will be live before the end of June 2007. Ongoing revision to the main
website, new micro-sites, press and analyst relationship management and case
studies will be key activities for the remainder of the year.
The Division continues to reposition itself as a major licensor of technologies
and is embarking on a number of initiatives to increase awareness of application
streaming and specifically to increase significantly the number of AppExpress
clients and servers that are deployed in the market. Product and marketing
programmes supporting this strategy will be launched in the second half of the
year.
Previous activities in the games content and aggregation arena have been
terminated along with associated personnel. However, the Division sees
opportunities for supplying its technologies to others to integrate in their
on-demand games environments.
The Division has commenced an integration project to deliver a combined product
and technology platform. This will be based primarily on the AppExpress code
base and will reduce support and engineering costs as well as offering improved
and extended functionality. The first release is scheduled for the first
calendar quarter of 2008.
In support of these initiatives, a new 'product based' marketing organisation
has been created and a new European sales and support team has been recruited.
The engineering team has been re-structured into a matrix model, capable of
supporting multiple engineering initiatives simultaneously. Customer support has
been improved and the Division expects to make a number of additional
appointments in the engineering, support and service functions.
During the first half year, the Division had 1 patent granted and filed 4
others, bringing its patent portfolio to 8 patents granted and 25 pending.
Potential litigation to protect the Division's intellectual property is still
pending with AppStream and Exent.
Outlook
The increasing number of new sales and collaboration opportunities being
generated by the new team is encouraging. However, it will take a significant
period of time for the sales pipeline to develop the depth and breadth to
generate a solid and predictable revenue stream. In the intervening period,
revenues will continue to be 'lumpy' and difficult to predict as regards amount
and timing. Second half revenues are likely to be lower than in the first half.
This likely drop in revenues, together with a planned expenditure increase on
additional resources, is expected to reduce the Division's operating result in
the second half compared with the first half.
The high profile acquisition of Softricity by Microsoft, the proposed
acquisition of Appstream by Symantec and the launch of Citrix's Tarpon
application streaming product has stimulated customer and vendor awareness and
increased the credibility of the sector. Publicity arising from the Microsoft
and Citrix licensing agreements and an unconnected article in Computer World
describing Parsons Engineering's positive experience of using AppExpress has
generated a significant increase in awareness of the Division with a
corresponding increase in potential customer and partner engagements.
Geospatial Solutions Division
Operating results
Revenues in the first half declined by 33% to #2,665,000 compared with
#3,995,000 in the first half last year, due primarily to a reduction in billing
to Ordnance Survey GB ("OS"). However, as a result of the prompt cost
realignment action taken, percentage margins improved from 37% to 45% and gross
profit reduced by only #270,000. Operating expenses decreased from #1,130,000 to
#1,008,000 and the resulting operating profit fell from #338,000 to #190,000,
after charging a one-off cost of #75,000 in respect of redundancies. The
operating profit in the first half of both years included an operating loss
incurred by Tadpole Cartesia, Inc. of #344,000 in 2006 and #219,000 in 2007.
Sales, marketing & product development
In November 2006 it was announced that OS had suspended, on one month notice,
two of the major work-streams in connection with the development of the Phoenix
programme, pending a strategic review. On 29 March 2007, the Division signed a
framework services contract with OS for the continuation of the Editor work-
stream. The review by OS of the options for the Phoenix programme is still
on-going.
Revenue has also been generated from a number of other existing clients. In
addition to the renewal of maintenance and support agreements, the Division won
new contracts for additional software development or licences from HM Land
Registry, Veolia (Three Valleys Water) and ScottishPower. Further opportunities
are anticipated that leverage the Division's Go!Sync technology and expertise in
the latest ESRI Inc. technologies gained through the OS Phoenix programme.
The growth of the Division's business profile in the process industry sector
(oil, gas and petrochemical) is encouraging. New contracts for the iPlan product
suite have been signed with BP for site maintenance systems, and another for an
interactive map-based site record system. The contract to host the ESSO pipeline
manager has been extended and additional functionality delivered. The Division
exhibited at the Industrial Fireworld conference in Texas, and future events in
Europe, North America and the Middle East are planned. The sector currently has
a very high media profile, particularly with regard to asset integrity and
maintenance, and emergency pre-planning and response. The scope of the market
opportunity is being evaluated and may result in the Division seeking additional
investment in sales, marketing and the iPlan product portfolio to capitalise on
these opportunities.
Sale of Tadpole Cartesia, Inc.
During the first half, the decision was taken to sell Tadpole Cartesia, Inc.
("TCI") to its President, Jason Linley. The transaction was concluded on 18
March 2007 and was classified under the FSA's class tests as a class 2
transaction, and as such did not require shareholder approval. The entire fully
paid-up share capital of TCI was sold for a nominal consideration of $1. Under
the terms of the transaction, Tadpole retains the intellectual property in the
Go!Sync product suite, and receives from TCI (now trading as TCTechnology,
"TCT") a royalty of 50% of the reseller list price for all Go!Sync licences sold
by TCT. The agreement grants TCT exclusivity within the North American market
provided that certain annual licence sales targets are maintained. This will
allow Tadpole to continue to operate in the US market, albeit through a new and
independent distribution channel.
TCI has incurred losses since its formation and to develop the business in line
with the Group's 3 year plan would have required further investment. This
transaction has allowed the Division to reduce costs and uncertainties around
cash flows by eliminating its exposure to TCI's funding requirements whilst
still enabling it to participate in any long term value created by the Go!Sync
product range. With the limited funding available to the Group, this will allow
additional investment in other opportunities including the Streaming business
and the iPlan product suite.
Outlook
In the second half, a further substantial reduction in revenues is anticipated
as the impact of the suspended OS work streams takes full effect. However, due
to a combination of improved margins, cost reduction actions already taken and
the sale of the loss making US subsidiary, the Division is expected to maintain
profitability and cash flows.
David Lee
Chairman
15 May 2007
Consolidated Income Statement
for the six months ended 31 March 2007
Unaudited Unaudited Audited
Six months Six months Year ended 30
ended 31 March ended 31 March September
2007 2006 2006
#'000 #'000 #'000
Revenue 4,658 5,094 9,988
Cost of sales (1,467) (2,487) (4,920)
--------- --------- --------
Gross profit 3,191 2,607 5,068
Selling and
marketing
costs (950) (973) (2,066)
Research and
development
costs (805) (880) (1,785)
Administrative
costs (897) (1,158) (7,335)
Other
operating
income - - 67
--------- --------- --------
Total
operating
expenses (2,652) (3,011) (11,119)
--------- --------- --------
--------- --------- --------
Operating
profit /(loss) 539 (404) (6,051)
--------- --------- --------
Finance revenue 24 20 44
Finance
expenses (101) (17) (160)
--------- --------- --------
Profit /
(loss) before
taxation 462 (401) (6,167)
--------- --------- --------
Taxation (note
7) 27 85 466
--------- --------- --------
Profit /
(loss) for the
period
attributable
to equity
holders of the
parent 489 (316) (5,701)
========= ========= =======
Profit / (loss) per ordinary share
(pence): (see note 3)
Basic 0.12p (0.0p) (1.44p)
Diluted 0.12p (0.0p) (1.44p)
All activities relate to
continuing activities.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 31 March 2007
Unaudited Unaudited Unaudited
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2007 2006 2006
#'000 #'000 #'000
Exchange differences arising on
translation of foreign operations 19 (18) (285)
--------- -------- --------
Net income / (expense) recognised
directly in equity 19 (18) (285)
Profit / (loss) for the period 489 (316) (5,701)
--------- -------- --------
Total recognised income and expense
relating to the period attributable to
equity holders 508 (334) (5,986)
========= ======== ========
Consolidated Balance Sheet
at 31 March 2007
Unaudited Unaudited Audited
and restated
31 March 31 March 30 September
2007 2006 2006
#'000 #'000 #'000
Non-current assets
Goodwill 952 4,896 1,003
Intangible assets 299 1,751 408
Property, plant and equipment 118 218 151
---------- -------- ---------
1,369 6,865 1,562
---------- -------- ---------
Current assets
Trade and other receivables (note 5) 871 2,252 1,350
Cash and cash equivalents 2,188 1,794 1,709
---------- -------- ---------
3,059 4,046 3,059
---------- -------- ---------
---------- -------- ---------
Total assets 4,428 10,911 4,621
========== ======== =========
Equity
Equity share capital 20,893 20,851 20,851
Share premium account 40,109 40,108 40,109
Retained loss (71,476) (66,612) (72,012)
Merger reserve 11,191 11,191 11,190
Foreign currency translation reserve 29 427 10
Equity instruments reserve 380 380 380
---------- -------- ---------
Total equity 1,126 6,345 528
---------- -------- ---------
Non-current liabilities 90 503 122
Deferred tax liabilities
---------- -------- ---------
90 503 122
---------- -------- ---------
Current liabilities
Trade and other payables (note 6) 3,199 3,576 3,223
Interest-bearing loans and overdrafts - 487 739
Tax liabilities 13 - 9
---------- -------- ---------
3,212 4,063 3,971
---------- -------- ---------
---------- -------- ---------
Total liabilities 3,302 4,566 4,093
---------- -------- ---------
---------- -------- ---------
Total equity and liabilities 4,428 10,911 4,621
========== ======== =========
The financial statements were approved by the Board of Directors and authorised
for issue on 15 May 2007. They were signed on its behalf by:
David Lee - Chairman
14 May 2007
Consolidated Cash Flow Statement
for the six months ended 31 March 2007
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2007 2006 2006
#'000 #'000 #'000
Cash flows from operating activities
Profit / (loss) before tax 462 (401) (6,167)
Depreciation, amortisation and
impairments 177 432 5,300
Movements in holiday pay provision - - (20)
Share-based remuneration 48 130 115
Warrants costs - - 214
Finance revenue (24) (20) (44)
Finance costs 101 17 160
Decrease in receivables 588 449 1,516
Decrease in payables (104) (605) (872)
--------- -------- ---------
Cash generated from operating activities
before tax 1,248 2 202
Income taxes paid - - (10)
--------- -------- ---------
Net cash generated from operating
activities 1,248 2 192
Cash flows from investing activities
Purchase of property, plant and equipment (48) (110) (161)
Disposal of subsidiary (14) - -
Interest received 24 20 44
--------- -------- ---------
Net cash used in investing activities (38) (90) (117)
Cash flows from financing activities
Gross proceeds from issue of share
capital 42 - 1
Share issue costs - (3) (4)
Interest paid (38) (17) (57)
Proceeds from issue of loan note to
DivestCap - 842 842
Repayment of DivestCap loan note (763) - -
--------- -------- ---------
Net cash (used in) /generated from
financing activities (759) 822 782
Net increase in cash and cash equivalents 451 734 857
Net foreign exchange difference 28 (18) (226)
Opening cash and cash equivalents 1,709 1,078 1,078
--------- -------- ---------
Closing cash and cash equivalents 2,188 1,794 1,709
========= ======== =========
Notes to the Inrerim Financial Statements
Material non-cash transactions in the six months to 31 March 2007 and the
comparatives comprise the impairment of goodwill and other intangible assets,
share based payment charges and the accounting for the convertible loan.
1. Basis of preparation
(a) Financial information
The financial information set out within this report does not constitute the
Group's consolidated statutory financial statements as defined in section 240 of
the Companies Act 1985. The results for the year ended 30 September 2006 have
been extracted from the statutory consolidated financial statements of Tadpole
Technology Plc for the year ended 30 September 2006 which are prepared in
accordance with IFRS, on which the auditors gave an unqualified report (which
made no statement under sections 237 (2) or (3) of the Companies Act 1985) and
have been filed with the Registrar of Companies.
The unaudited interim financial statements for the six months ended 31 March
2007 have been prepared on the basis of the accounting policies set out in the
most recently published financial statements of the Group for the year ended 30
September 2006.
(b) Going concern
The financial statements have been prepared on the going concern basis which
assumes that the Group will continue its operational existence, and will be able
to meet its liabilities as they fall due, for the foreseeable future.
In concluding that it is appropriate to adopt the going concern basis in
preparing the financial statements the Directors have prepared forecast income
statements, balance sheets and cash flows to the end of the current fiscal year
and beyond and have also taken into consideration the following improvements in
the Group's trading performance and financial condition:
* The Group has reported an operating profit in the first half
* Cash received from the licensing agreements with Microsoft and Citrix
has resolved the Group's short-term financing needs
* A new contract has been signed with Ordnance Survey GB for the
continued delivery of the Editor work stream within the Phoenix programme
Notwithstanding the foregoing, the Directors continue to evaluate the possible
need for additional funding to finance the planned investments in product
development, sales and marketing for the Streaming Division.
(c) Assets and liabilities held for sale and discontinued operations
In the Interim Report to 31 March 2006, issued in June 2006, the assets and
liabilities of the Streaming Division were categorised under IFRS as "assets
held for sale" as it was considered probable that the proposed transaction with
DivestCap Management Corporation would be consummated. This would have resulted
in the divestment of 80% of the Streaming Division.
Following a strategic review, the Board decided to retain the Streaming
Division. To aid a proper understanding of the financial statements, the balance
sheet has been restated to show the current period and comparatives on a
consistent basis with all activities considered as continuing.
2. Segment information
The primary reporting segment format is determined to be business segments as
this is the basis on which operations are managed. Secondary information is
presented geographically.
For management purposes, the Group is organised into two trading operations;
Geospatial Solutions and Streaming, and a Headquarters cost centre. The
Geospatial business provides enterprise infrastructure software solutions to
support the management, replication and distribution of geographic data within
and between organizations, and is conducted from Edinburgh, UK. The Geospatial
business also operated from Carlsbad, California until mid-March 2007, when the
Company sold its US subsidiary Tadpole Cartesia, Inc. The Streaming business, t
hrough its AppExpress and StreamFlow platforms, provides applications
software-streaming technologies for both consumer and enterprise delivery and
management of applications worldwide. The Streaming business, comprising
Endeavors Technologies, Inc. and StreamTheory, Inc. operates from Irvine,
California, USA.
Divisional segments
Unaudited six months ended 31 March 2007
Streaming Geospatial HQ Total
#'000 #'000 #'000 #'000
Revenue
Licencing and support 1,857 160 - 2,017
Royalties 123 - - 123
Consultancy and 13 2,505 - 2,518
services -------- -------- ------- -------
Segment revenue 1,993 2,665 - 4,658
Cost of sales - (1,467) - (1,467)
-------- -------- ------- -------
Gross profit 1,993 1,198 - 3,191
Selling and marketing (429) (521) - (950)
costs
Research and (474) (331) - (805)
development costs
Administrative costs (455) (156) (286) (897)
-------- -------- ------- -------
Total operating (1,358) (1,008) (286) (2,652)
expenses -------- -------- ------- -------
-------- -------- ------- -------
Segment result 635 190 (286) 539
-------- -------- ------- -------
Finance revenue 24
Finance expenses (101)
-------
Profit before taxation 462
-------
Taxation 27
------
Profit for the period 489
======
Depreciation 4 77 - 81
Amortisation 89 - - 89
======== ======== ======= =======
Earnings before 728 267 (286) 709
Interest, Tax
Depreciation and
Amortisation (EBITDA)
======== ======== ======== ========
Unaudited six months ended 31 March 2006
Streaming Geospatial HQ Total
#'000 #'000 #'000 #'000
Revenue
Licencing and support 989 182 - 1,171
Royalties 137 - - 137
Consultancy and services 13 3,773 - 3,786
-------- -------- ------- -------
Segment revenue 1,139 3,955 - 5,094
Cost of sales - (2,487) - (2,487)
-------- -------- ------- -------
Gross profit 1,139 1,468 - 2,607
Selling and marketing (449) (524) - (973)
costs
Research and development (461) (419) - (880)
costs
Administrative costs (637) (187) (334) (1,158)
-------- -------- ------- -------
Total operating expenses (1,547) (1,130) (334) (3,011)
-------- -------- ------- -------
-------- -------- ------- -------
Segment result (408) 338 (334) (404)
-------- -------- ------- -------
Finance revenue 20
Finance expenses (17)
-------
Loss before taxation (401)
-------
Taxation 85
------
Loss for the period (316)
======
Depreciation 12 102 - 114
Amortisation 318 - - 318
======== ======== =======
Earnings before (78) 440 (334) 28
Interest, Tax
Depreciation and
Amortisation (EBITDA)
======== ======== ======== =======
Audited for year ended 30 September 2006
Streaming Geospatial HQ Total
#'000 #'000 #'000 #'000
Revenue
Licencing and Support 1,815 773 - 2,588
Royalties 267 - - 267
Consultancy and services 16 7,117 - 7,133
-------- -------- ------- -------
Segment revenue 2,098 7,890 - 9,988
Cost of sales - (4,920) - (4,920)
-------- -------- ------- -------
Gross profit 2,098 2,970 - 5,068
Selling and marketing (965) (1,101) - (2,066)
costs
Research and development (925) (860) - (1,785)
costs
Administrative costs (5,956) (340) (1,039) (7,335)
Other operating income - - 67 67
-------- -------- ------- -------
Total operating expenses (7,846) (2,301) (972) (11,119)
-------- -------- ------- -------
-------- -------- ------- -------
Segment result (5,748) 669 (972) (6,051)
-------- -------- ------- -------
Finance revenue 44
Finance expenses (160)
-------
Loss before taxation (6,167)
-------
Taxation 466
-------
Loss for the year (5,701)
=======
Depreciation 13 218 - 231
Amortisation 667 - - 667
Impairment losses 4,403 - - 4,403
======== ======== ====== ========
Earnings before Interest, (664) 886 (972) (750)
Tax
Depreciation and
Amortisation (EBITDA)
======== ======== ======= ========
3. Earnings per ordinary share
The calculation of the basic earnings per ordinary share is based on a Group
profit of #489,000 (six months ended 31 March 2006: loss of #316,000; year ended
30 September 2006: loss of #5,701,000), and on 397,972,823 (31 March 2006:
395,828,476; 30 September 2006: 396,807,911) ordinary shares, the weighted
average number in issue and ranking for dividend during the period.
The diluted earnings per share for the six months to 31 March 2007 is based on
Group Profit of #489,000 and on 414,221,442 ordinary shares. This includes the
outstanding 12.75 million share warrants. These warrants were excluded from the
calculation for the periods ending 30 September 2006 and 31 March 2006 as they
were considered anti-dilutive. Therefore the calculation remains as for the
basic earnings per ordinary share for each of the comparative periods.
In accordance with IAS 33 the outstanding share options at the balance sheet
date totalling 12,885,000 (31 March 2006: 18,537,500; 30 September 2006:
14,165,000) have not been included within the calculation of diluted earnings
per share, as their exercise price is greater than the current market price of
the shares.
4. Sale of Tadpole Cartesia, Inc.
The sale resulted in the write back of $3,000 of net liabilities and the
forgiving of the inter-company loan of $3,465,000 due from TCI to the Company.
Given the relatively small size of TCI, the continuing nature of the larger
European Geospatial business and the continuing activity of the Company in the
US market through the new TCT distribution channel, it was concluded that, under
current accounting standards, the results for TCI should not be disclosed as a
discontinued operation in the consolidated income statement and the divisional
segment information. For clarity, the separate results of TCI included in the
consolidated income statement and divisional segment information were as
follows: -
Unaudited Unaudited Audited
Six months Six months Year ended 30
ended 31 March ended 31 March September
2007 2006 2006
#'000 #'000 #'000
Revenue 244 469 856
Gross profit 83 191 263
Total
operating
expenses (302) (535) (697)
Operating loss (219) (344) (434)
5. Trade and other receivables
Unaudited Unaudited Audited
31 31 30 September
March March
2007 2006 2006
#'000 #'000 #'000
Trade receivables 635 1,821 1,114
Other receivables 5 7 5
Prepayments and accrued income 231 424 231
--------- --------- --------
871 2,252 1,350
========= ========= ========
6. Trade and other payables
Unaudited Unaudited Audited
31 31 30 September
March March
2007 2006 2006
#'000 #'000 #'000
Trade payables 563 1,026 920
Social security, PAYE and VAT 248 261 199
Other payables 505 639 640
Accruals 711 524 783
Deferred revenues 1,172 1,126 681
--------- --------- --------
3,199 3,576 3,223
========= ========= ========
7. Taxation
The tax charges / (credits) comprise:
Unaudited Unaudited Audited
Six months Six months Year ended 30
ended 31 March ended 31 March September
2007 2006 2006
#'000 #'000 #'000
UK Corporation
Tax 5 - 9
Adjustments in
respect of
previous
period - 10 1
--------- --------- --------
5 10 10
Foreign tax - - -
--------- --------- --------
Total current
tax 5 10 10
Deferred tax
release (32) (95) (476)
--------- --------- --------
(27) (85) (466)
========= ========= ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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