TIDMBROC
RNS Number : 0479N
Broca Plc
10 February 2009
10 February 2009
Broca plc
Final Results for the year ended 31 August 2008
Broca Plc (the "Company"). the provider of secure advanced messaging technology,
today announces results for the year ended 31 August 2008.
Extracts of the financial statements appear below and the full version is
available on the Company's website - www.brocaplc.com
For further information contact:
+-------------------------+----------------------------+
| Ian Price, | Andrew Dunn/Lulu Bridges |
| Managing Director | |
+-------------------------+----------------------------+
| Broca Plc | Tavistock Communications |
+-------------------------+----------------------------+
| Tel: 0845 0066661 | Tel: 020 7920 3150 |
+-------------------------+----------------------------+
| | |
+-------------------------+----------------------------+
| Fiona Owen | Rupert Krefting |
+-------------------------+----------------------------+
| Grant Thornton UK LLP | Numis Securities Limited |
+-------------------------+----------------------------+
| Nominated Adviser | Broker |
+-------------------------+----------------------------+
| Tel: 020 7383 5100 | Tel: 020 7260 1000 |
+-------------------------+----------------------------+
Chairman's statement
The Board is pleased with the technological progress made by the Group during
the year. The main investment phase has been largely completed; additional
patents and trademarks have been secured. However, despite a number of
successful pilots, there has been insufficient momentum carrying through to
converting the Group's innovative technology into substantive contracts. The
Board remains of the view that the Group's products have a very promising future
and sees increasing signs of market readiness.
SAMS, the Group's secure SMS product, was implemented by a major international
bank for a pilot which involved transmitting sensitive data via SMS to a number
of individuals in different countries. The success to date of this pilot has
proven not just the security of the Group's technology, but also its ability to
track and guarantee message delivery. The pilot also demonstrates the growing
readiness of the banking industry to use the Group's technology in the
increasingly important area of data security.
In addition to the continued trialling of Broca's security products, the period
also saw the initiation of two significant pilots of the Group's data capture
technology. One pilot was for Sony Ericsson, one of the world's leading mobile
handset manufacturers, which has embedded the Group's technology directly into
its trial handsets. This was accompanied by an additional pilot with Sony
Ericsson, run jointly with T-Mobile (UK).
In terms of market readiness for the Company's technology, it is the directors'
view that the awareness of issues regarding the security of data in the mobile
telecommunication market has started to increase within the police, Governments
and regulatory bodies. The market for systems dealing with the security and
management of privacy of information, particularly with respect to mobile
communications, is set to increase, in part due to the drive to make events such
as the 2012 Olympics paperless. Mobile payment services, transportation and
ticketing all have a massive part to play in this type of event and Broca's
unique technology has the ability to address many of the security concerns
raised. The directors believe that the Group has built a world-class security
system capable of complementing other mobile technologies to deliver mobile
payments, ticketing, transportation and medical services.
Nevertheless, post year end and despite securing additional revenues for pilot
activity for mobile banking services in partnership with Telnet in Africa, there
has been significant slippage in the completion of a number of key licence
contracts. Consequently, in its efforts to secure additional funding to support
the Group's ongoing investment plans, the directors have explored a number of
options. The Board has received an offer of acquisition from 2ergo Group plc
(2ergo) and considers that the proposed acquisition by 2ergo will allow the
Group to continue to develop its portfolio of technology products and reach full
scale commercialisation. As announced on 5 February 2009, the independent
directors of the Group have therefore recommended the offer and it is proposed
that this is effected by means of a Scheme of Arrangement under Part 26 of the
Companies Act 2006.
The 2ergo directors believe that the intellectual property assets of the Group
can be exploited more effectively by the Group becoming a part of the enlarged
2ergo group. The existing routes to market, sales networks and geography of the
2ergo group will, in addition to the existing sales network of Broca, enable the
Group's products to be marketed effectively across Europe, the Americas and
(following 2ergo's partnership announcement on 26 January 2009) Asia.
The 2ergo directors consider the technology developed within Broca to have
significant potential to generate future earnings as part of the 2ergo group and
to complement, and further differentiate, the existing suite of services that
2ergo currently offers to its customer base. The 2ergo directors believe that in
the current economic climate the development constraints experienced by Broca
will be eased within an enlarged 2ergo group.
In addition, whilst the 2ergo Board believes that Broca's patented technology
could provide security solutions for most mobile phone networks globally, it has
recognised demand and feels that there is particularly strong potential in
emerging markets such as Asia, Africa and South America. For example, in Asia
the 2ergo directors believe these opportunities will be best exploited via
2ergo's partnership with ActiveMedia Technologies, a partner with direct
connectivity to the Indian mobile network operators, which opens access for
2ergo and Broca to over 300 million subscribers, a number which is increasing by
up to 10 million subscribers per month.
The acquisition is also expected to enable material cost savings to be made in
the operation of Broca's existing business including the elimination of certain
central costs associated with Broca's listing on AIM.
2ergo also expects that further acquisitions will be made pursuant to its stated
acquisition strategy which will bring further complementary benefits to the
Broca product suite.
Peter Harvey
Chairman
Consolidated income statement
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | For the year | For the 7 months |
| | | | ended | ended |
| | | | 2008 | 2007 |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | Note | | GBP | GBP |
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Revenue | 2 | | 31,746 | 1,200 |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Cost of sales | | | (24,393) | (765) |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Gross profit | | | 7,353 | 435 |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Administrative costs | | | (1,676,504) | (725,333) |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Negative goodwill | 11 | | 73,815 | - |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Operating loss | 3 | | (1,595,336) | (724,898) |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Finance income | 5 | | 23,434 | 20,697 |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Finance cost | 5 | | (34,387) | - |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Loss before tax | | | (1,606,289) | (704,201) |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Taxation | 6 | | (164,995) | 164,995 |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Loss for the period | | | (1,771,284) | (539,206) |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Loss per share | | | | |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Basic | 7 | | (4.69)p | (1.43)p |
+----------------------------------+-----------+-----------------+---------------------+------------------+
| Diluted | 7 | | (4.69)p | (1.43)p |
+----------------------------------+-----------+-----------------+---------------------+------------------+
All activities relate to continuing operations.
Consolidated balance sheet
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | 2008 | 2007 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | Note | | GBP | GBP |
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Non-current assets | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Intangible assets | 9 | | 2,757,813 | 2,817,934 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Property, plant and equipment | 10 | | 61,634 | 64,166 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Deferred tax asset | 16 | | - | 164,995 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | 2,819,447 | 3,047,095 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
| Current assets | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Trade and other receivables | 12 | | 70,580 | 49,101 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Cash and cash equivalents | 17 | | 59,888 | 964,956 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | 130,468 | 1,014,057 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Total assets | | | 2,949,915 | 4,061,152 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Current liabilities | 13 | | (216,105) | (448,873) |
| Trade and other payables | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Borrowings | 14 | | (420,000) | - |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Provisions | 15 | | - | (100,000) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | (636,105) | (548,873) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | 14 | | (500,000) | - |
| Non-current liabilities | 15 | | - | (350,000) |
| Borrowings | | | | |
| Provisions | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
| | | | (500,000) | (350,000) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Total liabilities | | | (1,136,105) | (898,873) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Net assets | | | 1,813,810 | 3,162,279 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Equity | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Share capital | 18 | | 390,932 | 376,298 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Share premium | 18 | | 3,567,081 | 3,567,081 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Merger reserve | | | (572,306) | (857,672) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Share option reserve | | | 738,593 | 615,778 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Retained losses | | | (2,310,490) | (539,206) |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| Total equity | | | 1,813,810 | 3,162,279 |
+----------------------------------+-----------+-----------------+-----------------+------------------+
| | | | | |
+----------------------------------+-----------+-----------------+-----------------+------------------+
These financial statements were approved by the Board on 9 February 2009 and
signed on its behalf by
P Harvey
Director
I Price
Director
Consolidated statement of changes in equity
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | Share capital | Share premium account | Merger reserve | Share option reserve | Retained losses | Total |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | - | - | - | - | - | - |
| Balance at 1 February 2007 | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Loss for the period | - | - | - | - | (539,206) | (539,206) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Total recognised income and expense for the period | - | - | - | - | (539,206) | (539,206) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Issue of share capital | 376,298 | 3,825,124 | - | - | - | 4,201,422 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Share issue costs | - | (258,043) | - | - | - | (258,043) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Arising on consolidation | - | - | (857,672) | - | - | (857,672) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| IFRS 2 share based expense | - | - | - | 615,778 | - | 615,778 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Balance at 31 August 2007 | 376,298 | 3,567,081 | (857,672) | 615,778 | (539,206) | 3,162,279 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Loss for the year | - | - | - | - | (1,771,284) | (1,771,284) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Total recognised income and expense for the year | - | - | - | - | (1,771,284) | (1,771,284) |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Issue of share capital | 14,634 | - | 285,366 | - | - | 300,000 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| IFRS 2 share based expense | - | - | - | 122,815 | - | 122,815 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| | | | | | | |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
| Balance at 31 August 2008 | 390,932 | 3,567,081 | (572,306) | 738,593 | (2,310,490) | 1,813,810 |
+-------------------------------------------------------+----------------+---------------------------+------------------+------------------------+--------------------+-------------+
Consolidated cash flow statement
+---------------------------------------------+-----------------+-----------------+------------------+
| | | 2008 | 2007 |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | GBP | GBP |
| | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Cash flows from operating activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Loss before tax | | (1,606,289) | (704,201) |
+---------------------------------------------+-----------------+-----------------+------------------+
| Adjustments for: | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Depreciation | | 34,386 | 11,882 |
+---------------------------------------------+-----------------+-----------------+------------------+
| Amortisation | | 295,600 | - |
+---------------------------------------------+-----------------+-----------------+------------------+
| Share based expense | | 122,815 | 59,528 |
+---------------------------------------------+-----------------+-----------------+------------------+
| Finance income | | (23,434) | (20,697) |
+---------------------------------------------+-----------------+-----------------+------------------+
| Finance cost | | 34,387 | - |
+---------------------------------------------+-----------------+-----------------+------------------+
| Negative goodwill | | (73,815) | - |
+---------------------------------------------+-----------------+-----------------+------------------+
| Increase in trade and other receivables | | (20,677) | (49,101) |
+---------------------------------------------+-----------------+-----------------+------------------+
| (Decrease)/increase in trade and other payables | (267,368) | 448,873 |
+---------------------------------------------------------------+-----------------+------------------+
| | | (1,504,395) | (253,716) |
| Net cash flows from operating activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Cash flows from investing activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Purchase of subsidiary undertaking, net of cash acquired | (49,309) | - |
+---------------------------------------------------------------+-----------------+------------------+
| Payments to acquire property, plant and equipment | (31,854) | (76,048) |
+---------------------------------------------------------------+-----------------+------------------+
| Payments to acquire intangible assets | | (235,479) | (2,367,934) |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | (316,642) | (2,443,982) |
| Net cash flows from investing activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Cash flows from financing activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Proceeds from share issue | | - | 3,900,000 |
+---------------------------------------------+-----------------+-----------------+------------------+
| Expenses of public offering | | - | (258,043) |
+---------------------------------------------+-----------------+-----------------+------------------+
| Proceeds from borrowings | | 920,000 | - |
+---------------------------------------------+-----------------+-----------------+------------------+
| Interest received | | 23,434 | 20,697 |
+---------------------------------------------+-----------------+-----------------+------------------+
| Interest paid | | (27,465) | - |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | 915,969 | 3,662,654 |
| Net cash flows from financing activities | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Net (decrease)/increase in cash and cash | | (905,068) | 964,956 |
| equivalents in the year | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| Cash and cash equivalents at beginning of | | 964,956 | - |
| year | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
| | | 59,888 | 964,956 |
| Cash and cash equivalents at end of year | | | |
+---------------------------------------------+-----------------+-----------------+------------------+
Publication of non-statutory accounts
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the year ended 31 August 2008, as defined in
Section 240 of the Companies Act 1985, but is derived from those accounts, which
are prepared in accordance with International Financial Reporting Standards.
The financial statements for the year ended 31 August 2008 have not yet been
filed at Companies House, but will be in due course. The auditors have reported
on those accounts; their report was unqualified but included an emphasis of
matter paragraph concerning a material uncertainty regarding going concern.
Notes to the consolidated financial statements (extract)
1 Accounting policies (extract)
Basis of preparation
The consolidated financial statements have been prepared in accordance with
applicable International Financial Reporting Standards as issued by the
International Accounting Standards Board and adopted by the EU (IFRS). The
presentational currency of the Group and functional currency of the Company is
Sterling.
The financial statements have been prepared on a going concern basis under the
historical cost convention. The directors have also prepared a forecast which
identified that the Group will have insufficient working capital to continue
trading beyond 31 March 2009. However, the Group has announced that it has
received an offer from 2ergo Group plc to acquire the entire issued share
capital of the Company. In addition, the GBP1,000,000 loan facility provided by
2ergo Limited in July 2008 has been extended to GBP1,300,000. The independent
directors of the Group have recommended the offer and it is proposed that this
is effected by means of a Scheme of Arrangement under Part 26 of the Companies
Act 2006. The acquisition will only be completed if certain conditions,
including that the Scheme is sanctioned by the Court and approved by
shareholders, are satisfied, or if permitted, waived. At the date of this report
all of these conditions have not yet been satisfied or waived.
Subject to satisfaction of these conditions, 2ergo Group plc has indicated its
willingness to provide sufficient funding to allow the Group to meet its debts
as they fall due for a period of at least 12 months from the expected date of
completion of the proposed acquisition.
However there is a risk that these conditions will not be satisfied or waived
and therefore the necessary funding from 2ergo Group plc will not be
forthcoming. For the reasons set out above this creates a material uncertainty
over the ability of the Group to pay its debts as they fall due which casts
significant doubt over the Group's ability to continue as a going concern.
These financial statements do not include any adjustments that would result if
the going concern basis of preparation was inappropriate.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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