TIDMDGB
RNS Number : 1112Y
Digital Barriers plc
27 November 2014
27 November 2014
Digital Barriers plc
("Digital Barriers" or the "Group")
Interim Results for the six months ended 30 September 2014
Digital Barriers (AIM: DGB), the specialist provider of advanced
surveillance technologies to the international homeland security
and defence markets, announces its unaudited results for the six
months ended 30 September 2014.
Key Highlights
-- Group revenues in the six-month period to 30 September 2014
were 13% higher than the same period last year at GBP10.1m (2013:
GBP9.0m)
-- Adjusted losses of GBP5.8m showinga year-on-year reduction
(2013: GBP6.8m), which is expected to further improve through the
remainder of the financial year. Loss before tax GBP13.2m (2013:
GBP7.2m).
-- International revenues increased 62% to GBP3.7m (2013: GBP2.3m)
-- The Group's sales pipeline is significantly stronger than in
prior periods, with core products (TVI Video Surveillance,
Integrated Surveillance Platform (ISP) - incorporating RDC Ground
Sensors and TVI, and ThruVision Passive People Screening) now
accounting for almost the entire sales pipeline
-- Additional core product, the Cloud Video Platform built on
the Group's class-leading TVI technology, now under development and
expected to launch this financial year
-- Net cash at the end of the period was GBP7.6m
Commenting on the results, Tom Black, Chairman of Digital
Barriers, said:
"The Group's international momentum is high and we have an
increasing number of flagship customers around the world who have
trialled and then selected our technology. Our challenge now is to
grow these relationships to become much larger-scale and to
overcome the procurement delays that inevitably come with large
government and commercial customers. Our qualified sales pipeline
continues to strengthen and our assessment of likely sales in the
second half provides confidence that we will achieve our
expectations for the full year.
For further information please contact:
Digital Barriers plc +44 (0)20 7940 4740
Zak Doffman, Chief Executive Officer
Sharon Cooper, Group Finance Director
Investec Investment Banking +44 (0)20 7597 5970
Andrew Pinder / Dominic Emery
FTI Consulting +44 (0)20 3727 1000
Edward Bridges / Matt Dixon
About Digital Barriers:
Digital Barriers provides advanced surveillance technologies to
the international homeland security and defence markets,
specialising in 'edge-intelligent' solutions that are designed for
remote, hostile or complex operating environments. We work with
governments, multinational corporations and system integrators in
the defence, law enforcement, critical infrastructure,
transportation and natural resources sectors. Our surveillance
technologies have been successfully proven on some of the most
demanding operational and environmental deployments around the
world.
www.digitalbarriers.com
Chairman's Statement
Introduction
Following a number of years of acquisitions and a period of
integration, the Group is now focused on a single coherent strategy
of delivering sales from our core product offerings and developing
new core products leveraging our intellectual property. We have
devoted significant resources over the past two years to developing
and launching a set of integrated product solutions built around
the core intellectual property that we have acquired. This has
included developing high-definition, IP-camera, platform-agnostic
software and mobile-device variants of our TVI video surveillance
solution, as well as integrating the technology with market leading
video management systems. We have developed the Integrated
Surveillance Platform, which combines TVI and our RDC unattended
ground sensor, into a fully integrated wide area surveillance
solution that provides a new level of capability to the market.
Furthermore we have launched an updated version of the ThruVision
passive screening solution that provides an enhanced level of
functionality and usability.
Although we acquired world-class intellectual property with the
businesses brought into the Group, material product development has
been required to ensure that the products we take to market have
the right level of functionality and capability to meet our wider
market opportunities. We have also worked on providing our
technologies as integrated solutions rather than standalone
products. The Board has confidence in the compelling nature of
these new products, which comprise the majority of our sales
pipeline. However this two-year period of product development,
along with lengthy procurement cycles, has delayed the Group's
ability to leverage value from the integrated businesses and
generate sales in the expected timeframes and as a consequence an
impairment charge of GBP6.25m has been recorded in the period.
In addition to encouraging revenue growth, losses for the period
show a year-on-year reduction. The Board sees this as a genuine
inflection point for the Group, as it moves closer towards
break-even driven by a continued acceleration in revenue growth
alongside a successful reduction in the cost base.
International revenue growth of 62% over the same period last
year was particularly strong, reinforcing the Board's view of the
opportunity open to Digital Barriers in international markets. This
strong international revenue growth came despite delays in our
ability to progress opportunities in West Africa due to the Ebola
crisis, as announced by the Group on 11 August 2014, a proportion
of which the Board had expected to be delivered during the period.
The Group maintains a strong sales pipeline into the region, which
we are looking to progress as the Ebola crisis is brought under
control. UK revenues contracted slightly due to a major MoD
programme in the previous year having no counterpart in this
period, although we remain highly confident of further revenues
from this customer going forward. Balancing this, the UK Services
division had a strong half due to work in support of the 2014
Summer Games.
The focus of the Group remains on its core product areas.
Integrated Surveillance Platform (incorporating TVI and RDC
technologies)
This solution provides real-time video surveillance and
intrusion alerts for remote and inaccessible locations, combining
with existing infrastructure and surveillance assets to deliver
maximum value for money and use of legacy systems. This provides a
Common Operating Picture enabling live video streaming and
intrusion data to be shared at local, regional and national levels
across multiple agencies, supporting a coordinated, timely response
to identified threats. Applications include force and border
protection, critical infrastructure, oil & gas installations,
maritime security and law enforcement. Highlights during the period
include:
-- An initial sale and successful delivery into West Africa for
the protection of a secure government facility. This was the first
of a set of government projects that were then delayed by the Ebola
crisis but which are still expected to progress over this financial
year and into FY16.
-- A successful trial with a government customer in Asia
Pacific. The trial included participation from central government
and all branches of the military and is expected to lead to
material sales over the coming months and has significant potential
to extend into future years.
-- Numerous smaller sales into law enforcement agencies in the
US, Asia Pacific, Mainland Europe and the Middle East, as well as
the first ISP sale for commercial facility protection in the UK
which came after the period-end.
TVI Video Surveillance Platform
The TVI technology combines an enterprise-grade server
architecture with the world's most efficient video compression and
transmission system. It offers an unparalleled real-time
'surveillance from anywhere to anywhere' capability, overcoming the
challenges of video transmission over low or variable bandwidth
networks, such as cellular, and providing multiple ways to access,
share and manipulate critical video information. TVI enables
'edge-based' storage and analysis, for the optimal combination of
flexibility and affordability. Highlights from the period
include:
-- The largest TVI hardware sale, valued at around $1.5m, to a
US federal agency for our new HDS600 high-definition product, which
is expected to lead to much wider TVI adoption within the
agency.
-- Initial TVI sales into three new US federal agencies, where
the objective again is to achieve agency-wide adoption.
-- Modest TVI sales into multiple markets in the Middle East for
law enforcement agencies for both static and vehicle-based
solutions.
-- The development and subsequent first sale of an Integrated
TVI vehicle solution, based on our IP450 and including multiple
devices and cameras all integrated into a turn-key customer
solution.
-- The formal launch of a TVI powered service, based on our
Minicam, by the UK's largest telecoms company.
ThruVision Passive People Screening
ThruVision uses a unique passive sensing method that relies only
on millimeter-wave energy produced by and reflected from the body -
thereby making it 100% safe, non-invasive and, if necessary, covert
in operation. The technology can screen for both metallic and
non-metallic objects concealed under clothing, including
explosives, weapons, drugs, currency and other contraband. It is
the world's leading passive people scanning technology. This was
the best ever period for ThruVision sales, and highlights
included:
-- A sale into the security agencies protecting the recent ASEAN
summit in Myanmar, where the technology was used to secure those
areas where key dignitaries were in attendance.
-- An initial sale into a major Asia Pacific customs agency for
airport screening, this sale followed a user trial and has now been
operationally deployed with significant success.
-- The first sale into the counter-terrorism division of a major
US metropolitan police department, the technology will be used for
the protection of high-profile facilities and is expected to be
part of a wider adoption.
Cloud Video Platform (CVP)
Development commenced during the period on the Group's fourth
and new core product area: its enterprise-grade Cloud Video
Platform. This is expected to significantly widen the market for
TVI video surveillance technology and will capitalise on the major
investment the Group has made in the technology. TVI is a unique
video technology that has been proven to be more efficient at the
compression of live video than competing technologies on the market
today. As a consequence, TVI is now being adopted by flagship
customers around the world, including US federal agencies and major
telecom operators. The Group intends to use this same technical
advantage to power a cloud-based architecture that can meet the
demands of enterprises and the wider market for surveillance and
other video based applications in the future. TVI can stream live
video in and out of a cloud-based service more efficiently than any
other technology on the market, delivering major cost and
operational efficiencies, as well as significantly improved
usability.
The Group expects to launch CVP towards the end of the financial
year.
Changes to Management Arrangements
Zak Doffman was appointed to the position of Chief Executive
Officer of the Group on 14 October 2014. Tom Black continues to
serve as Chairman of the Board in a Non-Executive capacity,
providing Zak with strong support and guidance in his new role.
A founding Executive Director of the Group and member of the
Board, Zak has been responsible for developing the strategy and
acquiring the businesses brought into the Group, as well as
establishing and managing commercial and sales operations around
the world. Zak leads an executive team which includes Colin Evans,
who became Chief Operating Officer on the same date, and Sharon
Cooper, who continues in her role as Group Finance Director.
Financials
Revenue and Gross Margin
Revenue in the period grew 13% to GBP10.1m in the six-months
ended 30 September 2014 compared to GBP9.0m in the same period last
year. Underlying Product revenues contracted 25% to GBP5.5m (2013:
GBP7.3m), driven by a reduction in UK Product revenues.
International Product revenues grew 62% over the same period last
year, reflecting the continued sales focus in this area where the
Board sees the greatest opportunity for growth. Services revenue
grew significantly in the period up from GBP1.7m in 2013 to GBP4.6m
in 2014.
The Group generated a gross profit of GBP3.1m (2013: GBP3.8m),
which equates to a gross margin of 31% (2013: 42%). The lower gross
margin is predominantly due to the strong performance within the
Services division in the period, with revenues within the Services
division attracting a lower gross margin than the Product division.
Gross margin for the Group is forecast to increase through the
second half with Product revenues contributing a greater proportion
of total revenue.
Adjusted Loss
The adjusted loss before tax was GBP5.8m (2013: GBP6.8m) and on
an unadjusted basis was GBP13.2m (2013: GBP7.2m). The reduction in
the adjusted loss is driven by a reduction in underlying overheads
which have declined from GBP10.6m in 2013 to GBP9.0m in 2014. The
unadjusted loss includes a GBP6.25m non-cash impairment charge
against the carrying value of goodwill within the Products
division. This impairment reflects a period of product development,
which has delayed the Group's ability to leverage value from the
integrated businesses in the expected timeframes, along with delays
in sales cycles reported to the market by the Group on 11 August
and the corresponding impact on short-term performance.
Cash
The Group ended the period with a GBP7.6m cash balance (31 March
2014: GBP14.2m). Net cash outflow from operating activities was
GBP6.4m including a GBP0.7m working capital outflow together with
GBP5.7m of other operating outflows, primarily cash loss before
tax. Capital expenditure in the period of GBP0.2m accounts for the
balance of the cash spend.
Outlook
The momentum in the Group, underpinned by significant
international growth and a strengthening sales pipeline, gives the
Board confidence for the second half of the financial year. While
customer procurement processing delays can adversely impact Group
results in any particular period, the Board's assessment of likely
sales in the second half provides confidence that the Group will
achieve its expectations for the full year.
Independent review report to Digital Barriers plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
6 months ended 30 September 2014 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated statement of cash flows, and
related notes 1 to 7. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
International Accounting Standards 34, "Interim Financial
Reporting," as adopted by the European Union and the AIM Rules
issued by the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standards 34, "Interim
Financial Reporting, " as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 6 months ended 30
September 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the AIM Rules issued by the London Stock
Exchange.
Ernst & Young LLP
London
26 November 2014
DIGITAL BARRIERS PLC
Consolidated income statement
for the six months ended 30 September 2014
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------------- ------------- -----------
Revenue 2 10,137 9,009 19,042
Cost of sales (6,993) (5,223) (10,319)
-------------------------------- ----- ------------- ------------- -----------
Gross profit 3,144 3,786 8,723
Administration costs (16,326) (11,490) (24,341)
Other income - 489 706
Other costs - - (160)
-------------------------------- ----- ------------- ------------- -----------
Operating loss (13,182) (7,215) (15,072)
Finance revenue 8 1 32
Finance costs - (20) (27)
-------------------------------- ----- ------------- ------------- -----------
Loss before tax (13,174) (7,234) (15,067)
Income tax 57 334 458
-------------------------------- ----- ------------- ------------- -----------
Loss for the period /
year (13,117) (6,900) (14,609)
-------------------------------- ----- ------------- ------------- -----------
Adjusted loss: 3
Loss before tax (13,174) (7,234) (15,067)
Amortisation of intangibles
initially recognised
on acquisition 996 867 1,733
Impairment of goodwill
& intangibles 6,250 - 160
Loss on disposal of businesses 83 - -
Adjustments to deferred
consideration - (472) (679)
Reorganisation costs - - 1,860
Adjusted loss before
tax for the period (5,845) (6,839) (11,993)
-------------------------------- ----- ------------- ------------- -----------
(Loss) per share - basic 4 (20.30p) (13.54p) (25.87p)
(Loss) per share - diluted 4 (20.30p) (13.54p) (25.87p)
(Loss) per share - adjusted 4 (9.03p) (12.87p) (21.49p)
(Loss) per share - adjusted
diluted 4 (9.03p) (12.87p) (21.49p)
-------------------------------- ----- ------------- ------------- -----------
The results for the period and the prior period are derived from
continuing activities.
DIGITAL BARRIERS PLC
Consolidated statement of comprehensive income
for the six months ended 30 September 2014
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------ ------ ------------- ------------- -----------
Loss for the period /
year (13,117) (6,900) (14,609)
Other comprehensive income
to be reclassified to
profit or loss in
subsequent periods
------------------------------ ------ ------------- ------------- -----------
Exchange differences
on retranslation of foreign
operations (327) (27) 9
-------------------------------------- ------------- ------------- -----------
Net other comprehensive
income to be reclassified
to profit or
loss in subsequent periods (327) (27) 9
-------------------------------------- ------------- ------------- -----------
Total comprehensive loss
attributable to owners
of the parent (13,444) (6,927) (14,600)
-------------------------------------- ------------- ------------- -----------
DIGITAL BARRIERS PLC
Consolidated balance sheet
at 30 September 2014
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------ ----- ------------- ------------- ---------
Assets
Non current assets
Property, plant and
equipment 783 1,245 1,108
Goodwill 18,298 24,647 24,802
Other intangible assets 2,791 4,931 3,857
------------------------------ ----- ------------- ------------- ---------
21,872 30,823 29,767
Current assets
Inventories 4,117 3,743 3,895
Trade and other receivables 7,634 7,261 7,706
Current tax recoverable 845 1,102 826
Cash and cash equivalents 7,582 1,145 14,246
------------------------------ ----- ------------- ------------- ---------
20,178 13,251 26,673
------------------------------ ----- ------------- ------------- ---------
Total assets 42,050 44,074 56,440
------------------------------ ----- ------------- ------------- ---------
Equity and liabilities
Attributable to owners
of the parent
Equity share capital 6 646 510 646
Share premium 75,879 57,989 75,879
Capital redemption
reserve 4,786 4,735 4,786
Merger reserve 454 454 454
Translation reserve (539) (248) (212)
Other reserves (307) (307) (307)
Retained earnings (44,266) (23,904) (31,352)
------------------------------ ----- ------------- ------------- ---------
Total equity 36,653 39,229 49,894
Non current liabilities
Deferred tax liabilities 163 305 194
Financial liabilities - 207 -
Provisions 147 - 161
------------------------------ ----- ------------- ------------- ---------
310 512 355
Current liabilities
Trade and other payables 4,865 4,115 5,608
Financial liabilities 163 218 163
Provisions 59 - 420
------------------------------ ----- ------------- ------------- ---------
5,087 4,333 6,191
Total liabilities 5,397 4,845 6,546
------------------------------ ----- ------------- ------------- ---------
Total equity and liabilities 42,050 44,074 56,440
------------------------------ ----- ------------- ------------- ---------
DIGITAL BARRIERS PLC
Consolidated statement of changes in equity
for the 6 months ended 30 September 2014
Profit
Share Capital and
Share Premium Redemption Merger Translation Other loss Total
capital account reserve reserve reserve reserves reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
At 31 March
2013 510 57,989 4,735 454 (221) (307) (17,267) 45,893
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Loss for the
period - - - - - - (6,900) (6,900)
Other comprehensive
loss - - - - (27) - - (27)
Share-based
payment credit - - - - - - 263 263
At 30 September
2013 510 57,989 4,735 454 (248) (307) (23,904) 39,229
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Loss for the
period - - - - - - (7,709) (7,709)
Other comprehensive
loss - - - - 36 - - 36
Share-based
payment credit - - - - - - 261 261
Share issue
cost - (677) - - - - - (677)
Share placement 133 18,567 - - - - - 18,700
Incentive share
conversion 3 - 51 - - - - 54
At 31 March
2014 646 75,879 4,786 454 (212) (307) (31,352) 49,894
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
Loss for the
period - - - - - - (13,117) (13,117)
Other comprehensive
loss - - - - (327) - - (327)
Share-based
payment credit - - - - - - 203 203
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
At 30 September
2014 646 75,879 4,786 454 (539) (307) (44,266) 36,653
--------------------- --------- --------- ------------ --------- ------------ ---------- --------- ---------
DIGITAL BARRIERS PLC
Consolidated statement of cash flows
for the 6 months ended 30 September 2014
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------- ------------- -----------
Operating activities
Loss before tax (13,174) (7,234) (15,067)
Non-cash adjustment to reconcile
loss before tax to net cash flows
Depreciation of property, plant
and equipment 341 394 739
Amortisation of intangible assets 1,067 929 1,819
Impairment of intangible assets 6,250 - 160
Share-based payment transaction
expense 203 263 524
Release of deferred consideration - (260) (494)
Reassessment of deferred consideration - (229) (212)
Disposal of fixed assets 162 (2) 178
Finance income (8) (1) (32)
Finance costs - 20 27
Working capital adjustments:
(Increase) / decrease in trade
and other receivables (11) 5,966 5,353
Increase in inventories (137) (1,964) (2,116)
Decrease in trade and other payables (562) (1,937) (919)
(Decrease) / increase in deferred
revenue (182) - 704
(Decrease) / increase in provisions (375) - 581
------------------------------------------ ------------- ------------- -----------
Cash utilised in operations (6,426) (4,055) (8,755)
Tax received 7 146 220
------------------------------------------ ------------- ------------- -----------
Net cash flow from operating activities (6,419) (3,909) (8,535)
------------------------------------------ ------------- ------------- -----------
Investing activities
Sale of property, plant & equipment - 2 -
Purchase of property, plant & equipment (188) (269) (624)
Expenditure on intangible assets (44) (32) (8)
Payment of deferred consideration - (188) (188)
Interest received 8 1 32
------------------------------------------ ------------- ------------- -----------
Net cash flow from investing activities (224) (486) (788)
------------------------------------------ ------------- ------------- -----------
Financing activities
Proceeds from issue of shares - - 18,700
Share issue costs - - (677)
Interest paid - (3) -
------------------------------------------ ------------- ------------- -----------
Net cash flow from financing activities - (3) 18,023
------------------------------------------ ------------- ------------- -----------
Net (decrease) / increase in cash
and cash equivalents (6,643) (4,398) 8,700
Cash and cash equivalents at beginning
of period / year 14,246 5,544 5,544
Effect of foreign exchange rate
changes on cash and cash equivalents (21) (1) 2
------------------------------------------ ------------- ------------- -----------
Cash and cash equivalents at end
of period / year 7,582 1,145 14,246
------------------------------------------ ------------- ------------- -----------
DIGITAL BARRIERS PLC
Notes to the financial statements
for the 6 months ended 30 September 2014
1. Accounting policies
Basis of preparation
The consolidated interim financial statements include those of
Digital Barriers plc and all of its subsidiary undertakings
(together "the Group") drawn up at 30 September 2014, and have been
prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting" ("IAS 34") as adopted for use in the
European Union ("EU"). The consolidated interim financial
statements have been prepared using accounting policies and methods
of computation consistent with those applied in the consolidated
financial statements for the period ended 31 March 2014.
The Group's original forecasts and projections for the year
ended 31 March 2015 have been revised downwards during the period,
as announced on 11 August 2014. As a result of modifying
expectations the Directors have undertaken a detailed review of
revised forecasts and projections for the Group. These revised
forecasts and projections assume accelerated revenue growth in the
six-month period to 31 March 2015, with a material reduction in the
losses incurred by the Group. Revenue growth is forecast to
continue into the financial year ended 31 March 2016 with further
improvements in the profitability of the Group. Based on these
projections, and taking account of reasonably possible changes in
trading performance, the Group should be able to operate within its
current level of cash reserves of GBP7.6m, as at 30 September 2014.
The Directors therefore have a reasonable expectation that the
Group has adequate resources to continue operating for the
foreseeable future, and for this reason they have adopted the going
concern basis in these consolidated interim financial
statements.
The annual consolidated financial statements of the Group are
prepared on the basis of International Financial Reporting
Standards ("IFRS"). The consolidated interim financial statements
are presented on a condensed basis as permitted by IAS 34 and
therefore do not include all the disclosures that would otherwise
be required in a full set of financial statements and should be
read in conjunction with the most recent Annual Report and Accounts
which were approved by the Board of Directors on 27 May 2014 and
have been filed with Companies House. The condensed interim
financial statements do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006 and are unaudited
for all periods presented. The financial information for the 12
month period ended 31 March 2014 is extracted from the financial
statements for that period. The auditors' report on those financial
statements was unqualified and did not contain an emphasis of
matter reference and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The Company is a limited liability company incorporated and
domiciled in England & Wales and whose shares are quoted on
AIM, a market operated by The London Stock Exchange.
The following new and revised international financial reporting
standards are effective for this interim period:
IFRS 10 Consolidated Financial Statements and IAS 27 Separate
Financial Statements. Effective for annual periods beginning on or
after 1 January 2014. IFRS 10 replaces the portion of IAS 27 that
addresses the accounting for consolidated financial statements. It
also addresses the issues raised in SIC-12 Consolidation - Special
Purpose Entities, which resulted in SIC-12 being withdrawn. IAS 27,
as revised, is limited to the accounting for investments in
subsidiaries, joint ventures, and associates in separate financial
statements. The standard is not expected to significantly affect
the Group's results or financial position.
IFRS 12 Disclosure of Interests in Other Entities.Effective for
annual periods beginning on or after 1 January 2014. IFRS 12
applies to an entity that has an interest in subsidiaries, joint
arrangements, associates and/or structured entities. Many of the
disclosure requirements of IFRS 12 were previously included in IAS
27, IAS 31, and IAS 28, while others are new.
IAS 32 Offsetting Financial Assets and Financial Liabilities -
Amendments to IAS 32. Effective for annual periods beginning on or
after 1 January 2014. These amendments to IAS 32 clarify the
meaning of 'currently has a legally enforceable right to set-off'.
The amendments also clarify the application of the IAS 32
offsetting criteria to settlement systems (such as central clearing
house systems), which apply gross settlement mechanisms that are
not simultaneous. The standard is not expected to significantly
affect the Group's results or financial position.
2. Segmental information
The Group is organised into the Services and Products divisions
for internal management, reporting and decision-making, based on
the nature of the products and services of the Group's businesses.
These are the reportable operating segments in accordance with IFRS
8 "Operating Segments". As the Group continues to develop and
change, the Directors closely monitor these reporting operating
segments to ensure they remain relevant to the management of the
Group.
6 months ended 30 September 6 months ended 30 September
2014 2013
---------------------------------- ----------------------------------
Services Products Total Services Products Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total segment revenue 4,614 5,664 10,278 1,672 7,414 9,086
Inter-segment revenue - (141) (141) - (77) (77)
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Revenue 4,614 5,523 10,137 1,672 7,337 9,009
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Segment operating
(loss) / profit 200 (1,368) (1,168) (290) (1,904) (2,194)
Corporate overheads (4,685) (4,626)
Net adjusted loss
items (see note 3) (7,329) (395)
Operating loss (13,182) (7,215)
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Finance income 8 1
Finance costs - (20)
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Loss before tax (13,174) (7,234)
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Income tax 57 334
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Loss for the period (13,117) (6,900)
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Year ended 31 March 2014
-------------------------------
Services Products Total
Audited Audited Audited
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- ---------
Total segment revenue 4,527 14,696 19,223
Inter-segment revenue - (181) (181)
----------------------- --------- --------- ---------
Revenue 4,527 14,515 19,042
----------------------- --------- --------- ---------
Segment operating
profit / (loss) (97) (1,854) (1,951)
Corporate overheads (10,074)
Net adjusted loss
items (see note 3) (3,047)
Operating loss (15,072)
----------------------- --------- --------- ---------
Finance income 32
Finance costs (27)
----------------------- --------- --------- ---------
Loss before tax (15,067)
----------------------- --------- --------- ---------
Income tax 458
----------------------- --------- --------- ---------
Loss for the year (14,609)
----------------------- --------- --------- ---------
3. Adjusted loss before tax
An adjusted loss before tax measure has been presented as the
Directors believe that this is a more relevant measure of the
Group's underlying performance. Adjusted loss is not defined under
IFRS and has been shown as the Directors consider this to be
helpful for a better understanding of the performance of the
Group's underlying business. It may not be comparable with
similarly titled measurements reported by other companies and is
not intended to be a substitute for, or superior to, IFRS measures
of profit. The net adjustments to loss before tax are summarised
below:
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- ------------- -----------
Amortisation of intangibles initially
recognised on acquisition 996 867 1,733
Adjustments to deferred consideration - (472) (679)
Impairment of goodwill and intangible
assets (note 5) 6,250 - 160
Loss on disposal of businesses
(i) 83 - -
Reorganisation costs (ii) - - 1,860
Total adjustments 7,329 395 3,074
--------------------------------------- ------------- ------------- -----------
(i) During the 6 months ended 30 September 2014 Margaux Matrix
Limited and Visimetrics (UK) Limited, two wholly owned
subsidiaries, were disposed of for GBPnil consideration.
(ii) Reorganisation costs of GBP1.9m in the year ended 31 March
2014 relate to a restructuring programme undertaken to rationalise
the cost base of the Group. A provision for GBP0.6m remained on the
balance sheet as at 31 March 2014 representing amounts still to be
settled. Of this, GBP0.4m has been settled in cash in the
period.
4. Loss per share
The basic loss per share is calculated on the loss after tax and
the weighted average number of shares in issue during the
period.
The basic adjusted loss per share is calculated on the adjusted
loss after tax and the weighted average number of shares in issue
during the period.
Diluted earnings per share measures are calculated using the
same number of shares as the basic loss per share measures, as the
inclusion of potential Ordinary Shares arising from share options
and Incentive Shares in issue would be anti-dilutive.
The following reflects the loss and share data used in the basic
and diluted loss per share calculations:
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Loss after tax (13,117) (6,900) (14,609)
Amortisation of acquired intangible
assets, net of tax 951 815 1,559
Adjustments to deferred consideration - (472) (679)
Impairment of goodwill and intangibles,
net of tax 6,250 - 160
Reorganisation costs - - 1,432
Loss on disposal of assets 83 - -
----------------------------------------- --------------- --------------- -----------
Adjusted loss after tax (5,833) (6,557) (12,137)
----------------------------------------- --------------- --------------- -----------
Weighted average number of shares 64,624,616 50,963,166 56,472,084
----------------------------------------- --------------- --------------- -----------
Basic and diluted loss per share (20.30p) (13.54p) (25.87p)
----------------------------------------- --------------- --------------- -----------
Basic and diluted adjusted loss
per share (9.03p) (12.87p) (21.49p)
----------------------------------------- --------------- --------------- -----------
5. Impairment of goodwill
Goodwill acquired through business combinations has been
allocated for impairment testing purposes to two groups of
cash-generating Units ('CGUs'). These groups of CGUs are its two
operating segments 'services' and 'products' as the goodwill
relates to synergies at this level. The Group conducts annual
impairment tests on the carrying value of the CGUs in the balance
sheet as at 28 February each year. Impairment testing is only
re-performed if an impairment triggering event occurs in the
intervening period. As announced on 11 August 2014, the Group's
original forecasts for the year ended 31 March 2015 were revised
downwards during the period. As a result the Group conducted an
impairment test on the carrying value of the Product division as at
30 September 2014.
Value in use calculations are used to determine the recoverable
amount of the Product cash-generating unit. The key assumptions for
the value in use calculations are the forecast revenue growth of
the CGU, cost allocations, the discount rate applied and the
long-term growth rate of the net operating cash flows. In
determining the key assumptions, management have taken into
consideration the nature of the markets in which it operates, the
ability of the CGU to exploit those opportunities and the current
economic climate, the resulting impact on expected growth, cost
base and pre-tax discount rates, and the pressure this places on
impairment calculations.
The Group prepares cash flow forecasts for the cash-generating
unit based on the most recent three-year detailed financial
forecasts. These forecasts have been revisited in light of the
announcement on 11 August 2014 and progression of the business
through its phases of development. The cash flow forecasts are
based on an internal assessment of the strength of the CGU in the
markets in which it operates, the costs attributable to the CGU and
the expected growth in revenue and margins, reflecting the size and
opportunities in its core strategic markets. Revenue growth in
years two and three is forecast at 40% and 20% per annum
respectively based on lowered forecast, with revenue growth of 2.5%
assumed from year four onwards, being an external estimate of the
UK's long-term growth rate. A discount rate of 11.6% has been
applied. Based on these assumptions, an impairment charge of
GBP6.25m arises.
The value of the Product division is sensitive to changes in the
discount rate and profits generated by the division. An increase in
the discount rate above 11.6%, with all other assumptions
unchanged, would result in an incremental impairment in the
six-month period to 31 March 2015. Similarly a reduction in the
profits generated by the division, either through reduced revenues
or increased costs, which is not recovered sufficiently in future
periods, would also result in an incremental impairment in the
six-month period to 31 March 2015.
6. Issued share capital
As at 30 September 2014, there were 64,624,616 Ordinary Shares
in issue (30 September 2013: 50,984,761, 31 March 2014:
64,624,616).
7. Related party transactions
On 12 June 2014 the Remuneration Committee of the Group made a
conditional grant to Colin Evans, Zak Doffman and Sharon Cooper,
under the rules of The Digital Barriers Long Term Incentive Plan
(the "Plan"). The award comprised three elements as detailed
below:
-- An award of HMRC approved Options at an exercise price of GBP1.195
-- An award of nil cost parallel options; and
-- A top-up award of nil cost options
Value of
HMRC approved Parallel
options options Top-up award
(no of shares) GBP (no of shares)
--------------- ---------------- ------------- ----------------
Colin Evans 25,104 GBP29,999.28 100,419
--------------- ---------------- ------------- ----------------
Zak Doffman 25,104 GBP29,999.28 100,419
--------------- ---------------- ------------- ----------------
Sharon Cooper 25,104 GBP29,999.28 79,498
--------------- ---------------- ------------- ----------------
Full details of the plan can be found in the 2014 Annual Report
on page 34.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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