TIDMMMX
RNS Number : 1895D
Minds + Machines Group Limited
25 April 2017
Strictly embargoed until: 07.00 on 25 April 2017
Minds + Machines Group Limited
("mmx" or the "Company")
Final Results for the Year Ended 31 December 2016
Minds + Machines Group Limited (AIM: MMX), one of the world's
leading owners and operators of Internet Top-Level Domains
("TLDs"), announces Final Results for the year ended 31 December
2016.
Financial Highlights
-- FY 2016 billings up 100% to $15.8million (2015: $7.9million);
-- FY 2016 revenue less partner payments up 146% to $13.5million (2015: $5.5million);
-- FY 2016 gross profit up 159% to $10.9million (2015: $4.2million);
-- FY 2016 ongoing operating costs cut 44% to $6.5million (2015:
$11.7million) with the current OPEX run-rate now below the
$6.0million target;
-- FY 2016 operating EBITDA before one-off restructuring costs
up to $3.6million delivering FY 2016 EBITDA profit before
restructuring costs of $3.0million compared to a FY2015 loss of
$4.4million;
-- FY 2016 Billings Operating EBITDA before restructuring costs
up to $4.2million (FY 2015: loss of $6.6million);
-- Cash & cash equivalents post share buy-backs, tender
offer, foreign currency charges, share payments and costs
associated to discontinued operations and restructuring of
$15.3million (2015: $34.7million);
-- Intangible assets of $45.6million based on their book value; and
-- Ongoing operations Earning per Share, on Operating EBITDA
(before restructuring costs), of 0.49 cents.
Operating Highlights
-- Company successfully transitioned into a pure-play registry on-time and on-budget:
o Registrar operations shut down and customers migrated to a
registrar partner;
o Registry technical back-end outsourced to industry leading
registry service partner;
-- Cumbersome historic partner contract successfully
renegotiated onto terms that can now potentially deliver future
economic value;
-- Office opened in Xiamen, China and US offices centralised into single location in Seattle;
-- Company headcount reduced from 43 to 20 and staffing
comprehensively restructured with only nine of the original team
kept;
-- Board reduced from seven to four; and
-- Issued share capital reduced from 767,104,685 (2015) to
699,857,562 (2016), with warrants, options, and RSU's reduced from
73,141,493 (2015) to 42,809,590 (2016).
Post Period Highlights
-- Business development teams strengthened;
-- 40%+ registration growth year-to-date when confirmed sales taken into account:
o US and European registrations up 37% to circa 350,000;
o China registrations up 44% to over 817,000;
-- Launch of .boston scheduled for release in September 2017;
-- Submissions to MIIT, China's regulatory body for the
Internet, being progressed on up to a further eight of MMX's wholly
owned TLDs, which (if approved) will allow mmx to further target
the China's growing SME; and
-- New gTLD market growth up circa 6% year-to-date at over 29
million domain name registrations (source nTLDStats.com), this
following on from last year where net new registrations in new
gTLDs outstripped those in .com/.net by nearly seven-fold, and
those in country codes by nearly four-fold.
Commenting on the results Toby Hall, CEO of MMX said:
"To understand the key market drivers of the new gTLD industry
that saw net new registrations outstrip those in .com and the
country codes combined in 2016, it is important to recognize the
trends both from within the industry as well as external
factors.
"It is therefore central to our strategy that we are positioned
to support the three end markets that management sees are looking
to benefit from those trends through our registrar partners -
namely; new-start SME's that are coming online for the first time,
as well as established businesses already online; digital
entrepreneurs that are looking to develop significant new markets
and applications based around domain address conventions and domain
investors who serve both as early pioneers, as well as marketeers,
of new extensions.
"We believe much of the business development work and tests we
have been conducting over the last 12 months are now providing the
backdrop to the growth the portfolio is now enjoying and will, we
believe, continue to enjoy."
Commenting on current trading and outlook he added:
"We continue to have significant scope for billings and revenue
improvement as the Group's premium and standard name inventory
across its world-class portfolio of top-level domains is better
monetized.
"In short, the progress we made in 2016 to restructure the
business into a pure-play registry and cost efficiently enter new
markets has built strong foundations for the current year and
beyond. We therefore remain confident of our ability to deliver
meaningful value as we continue to grow our domains under
management and resulting revenues and transition the Group into a
highly predictable annuity based business of scale."
*-ends-*
For further information:
Minds + Machines Group Limited
Toby Hall, CEO Tel: +44 (0)
7713 341072
Michael Salazar, COO/CFO Tel: +1 (310)
740 7499
finnCap Ltd Tel: 020 7220
0500
Corporate finance - Stuart Andrews/Carl
Holmes/Simon Hicks
Corporate broking - Tim Redfern/Camille
Gochez
Belvedere Communications Limited Tel: +44 (0)
20 3567 0510
John West
Kim van Beeck
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
EXECUTIVE SUMMARY
Much has been discussed already about the successful
restructuring of the Group's ongoing operations into a pure-play
registry and its accessing of China by the new management team over
the last 12 months - the results of which, speak loudly for
themselves:
-- FY 2016 billings up 100% to $15.8million (2015: $7.9million);
-- FY 2016 revenue less partner payments up 146% to $13.5million (2015: $5.5million);
-- FY 2016 gross profit up 159% to $10.9million (2015: $4.2million);
-- FY 2016 ongoing operating costs cut 44% to $6.5million (2015:
$11.7million) with the current OPEX run-rate now below the
$6.0million target;
-- FY 2016 operating EBITDA before one-off restructuring costs
up to $3.6million delivering FY 2016 EBITDA profit before
restructuring costs of $3.0million compared to a FY2015 loss of
$4.4million;
-- FY 2016 Billings Operating EBITDA before restructuring costs
up to $4.2million from FY 2015 Billings Operating EBITDA loss of
$6.6million;
-- Cash & cash equivalents post share buy-backs, tender
offer, foreign currency charges, share payments and costs
associated to discontinued operations and restructuring of
$15.3million (2015: $34.7million);
-- Intangible assets of $45.6million based on their book value; and
-- Ongoing operations Earning per Share, on Operating EBITDA
(before restructuring costs), of 0.49 cents.
Of equal importance is the significant registration growth we
are now seeing across our portfolio and the wider continued growth
of the new gTLD sector. In particular,
-- In China we have experienced a 44% registration growth
year-to-date with currently over 817,000 registrations in .vip;
-- In our US and European portfolio we are now seeing real
indications of meaningful development with a 37% registration
growth year-to-date when confirmed sales are taken into account,
with existing and committed registrations now at circa 350,000;
and
-- Significantly, new gTLD market growth is up circa 6%
year-to-date in 2017 at over 29 million domains under management
(source nTLDStats.com), this following on from last year where net
new registrations in new gTLDs outstripped those in .com/.net by
nearly seven-fold, and those in country codes by nearly
four-fold.
Net Registrations
31 December 31 December Net Growth
2016 2015
Verisign (.com, .net) 142.2m 139.8m 2.4m
Country codes 142.7m 138.1m 4.6m
New gTLDs 27.6m 11.2m 16.4m
Source: Verisign
In short, we are a young business experiencing significant
growth in a rapidly expanding, but still nascent, industry that has
the potential to match .com/.net or the country codes (142.2m and
142.7m registrations respectively at 31 December 2016) within a
five to 10 year time-frame.
Likewise, the registration growth that we are now achieving is
being done without MMX adopting the "freemium" strategy favored by
many of our competitors, where first year registrations are
effectively given away for free. Our new registrations are real
sales generating revenue and profits in their first year of
registration.
Our portfolio and its strengths
As a registry operator, we currently operate or have financial
interests in 23 launched new gTLDs - of which 20 we wholly or
majority own.
We own an additional five TLDs that remain unlaunched.
We also have interests in seven TLDs that remain contested, .eco
having been awarded to another applicant, some of which may be
resolved via private auctions in 2017.
It should be noted, a basic core strength of our portfolio is
its diversity - both in terms of underlying standard name price
points, geography, and target audiences. It has allowed us to
establish strong footprints in China and Europe as well as the
US.
In 2016, the geographic break-down of gross billings was China
59%, US 24%, Europe 17%. In 2017, MMX anticipates China will
account for approximately 50% of Group billings, with growing
contributions from North America and Europe.
As can be expected, each geography and domain extension sector
has its own dynamics. In essence, we see four complementary
dynamics emerging:
-- High volume lower standard-priced generics (e.g., .work) and
Asia specific domains (e.g., .vip) where premium inventory rises in
popularity broadly in-line with the number of paid standard name
registrations achieved;
-- Mid volume, higher priced geographic domains (e.g., .bayern)
where renewal rates typically trend significantly above industry
norms and which present significant opportunities to strategic
partners;
-- Lower volume, mid-priced vertical interest domains (e.g.,
.fashion, .beer) where the Board believes there is significant
scope for deeper market penetration, particularly in the US over
the coming 18 months; and
-- High priced, low volume specialist interest domains
(e.g.,.law) where usage and renewal rates also trend significantly
above industry norms.
However, given that in commercial terms many of the extensions
within MMX's portfolio are still in their infancy, we believe it is
not appropriate to provide more granular break-downs per category
at this stage of the Group's development other than to indicate
each group is materially contributing to both the blended top-line
billings and renewal rates currently being experienced by the Group
where top-line registrations are up 44% year to date in China and
37% in Europe and US when new orders are taken into account.
Likewise, renewal rates in US/Europe for a significant majority of
our TLDs are currently trending above 75% with early indications
from China being that renewal rates for .vip will be significantly
ahead of new gTLD renewal rates for that region, given investors of
certain key categories of .vip names have confirmed they will be
renewing all of their inventory in these categories.
In terms of unrealized asset value, it should also be noted that
our portfolio is listed at its book value - $45.6million which the
Board believes does not accurately reflect its true potential. For
example, in context to the wider market, the unlaunched .shop
top-level domain was acquired via public auction for $41.5million
and .web for $135million; as it relates to the MMX portfolio - .vip
was won at an ICANN auction for $3.1 million and recouped that
investment within the first four weeks of launch and subsequently
has derived significantly more in revenue within its first 11
months since launch.
Key market drivers
To understand the key market drivers of the new gTLD industry
that saw net new registrations outstrip those in .com and the
country codes combined in 2016, it is important to recognize trends
both from within the industry as well as external factors.
It is therefore central to our strategy that we are positioned
to support the three end markets that management sees are looking
to benefit from those trends through our registrar partners -
namely:
-- New-start SME's that are coming online for the first time, as
well as established businesses already online;
-- Digital entrepreneurs that are looking to develop significant
new markets and applications based around domain address
conventions; and
-- Domain investors who serve both as early pioneers, as well as
marketeers, of new extensions.
We believe much of the business development work and tests we
have been conducting over the last 12 months are now providing the
backdrop to the growth the portfolio is now enjoying and will, we
believe, continue to enjoy.
Our revenue model
Much work has been carried out over the last 12 months so that
we have the appropriate pricing and revenue models in place to
allow us to deliver the growth we are now experiencing.
As a business, we have both premium and standard inventory.
Premium inventory are names that carry specific meaning or interest
to given audiences where we are able to charge a higher first year
amount with annual renewal fees then reverting to the standard
rate. Standard inventory is where the first and following year
charges remain constant.
Across our portfolio of TLDs, the value of our not yet released
or sold premium names, based on values achieved in 2016, remains
significant and has the potential to be multiples of the current
book value of our underlying portfolio of top-level domains.
Meanwhile our standard name inventory per TLD is potentially
limitless, it being made up of any letter or number combination an
end-user may want.
Therefore, over the next three to five years our monetization
strategy is to achieve accelerated high-margin earnings in the
early years of each TLD's development through the sale of correctly
priced premium and high-value sequences of standard name inventory,
whilst allowing standard renewals and sales volume to grow over the
same period. This will ensure that revenue from standard names are
able to account for the majority of a domain's revenue by the end
of the development phase of each top-level domain. In short, it is
a model designed to allow us to achieve high-margin sales in the
early years which can then morph into a highly predictable annuity
based model, such as Verisign's, based on standard registrations
and renewals as each TLD properly establishes itself.
Critical to this strategy is finding the appropriate pricing
points for our premium inventory across our portfolio of TLDs. If
we set the first year pricing, or equally the renewal pricing, too
high then both sales and renewals can be adversely impacted. To
that end, significant work has been conducted over the last six
months to better structure the pricing of our premium inventory,
and this new pricing will be introduced to the market shortly.
It should also be noted that under this model, first year sales
can provide a healthy yard-stick by which to gauge where the likely
registration levels might be for a TLD as it matures. For example,
the success of .vip in its first eleven months would indicate a
target of 2.5 million standard registrations being readily
achievable over the next five years, a target we believe we are on
track to meet and hopefully exceed.
In line with management's expectations, premium sales in 2016
accounted for 66% of our total billings. We would anticipate this
percentage trending down in future years as standard renewal and
new registration revenue grows.
Development programme
Core to MMX's ongoing development of top-line billings and
renewal revenues will be:
-- The successful launch of new extensions;
-- The ongoing development of first year premium sales in areas
of the portfolio where there has been historic under-performance;
and
-- The ongoing expansion of MMX's geographic footprint.
To that end, MMX is pleased to confirm:
-- .boston will formally enter General Availability in mid September;
-- The completion and relaunch of MMX's premium inventory to the US and European markets;
-- The application to MIIT, China's industry regulator, of up to
8 wholly-owned MMX extensions; and
-- The ongoing evaluation of opportunities in India, South East Asia and South America.
As stated earlier, the Group's monetization strategy is to
achieve accelerated high-margin earnings in the early years of each
TLD through the sale of correctly priced premium inventory whilst
allowing standard renewals and sales volume to grow over the same
period to allow for balanced and measurable revenue growth as each
TLD matures.
Key Performance Indicators ("KPI's")
The Board sees the following as the business's KPI's:
-- Domains under management ("DUM"s) (the number of registrations we have);
-- Annual gross billings;
-- Gross margin;
-- Annual renewals - $ amount and percentage of OPEX; and
-- Billings operating EBITDA.
1) Domains under management (DUMs)
2015 2016 2017 -
to date
Registrations 289,000 821,000 1,200,000
In 2016, our domains under management grew nearly threefold from
approximately 289,000 as of 31 December 2015 to approximately
821,000 at 31 December 2016. As at the time of writing
registrations, including committed orders, now stand at
approximately 1.2million DUMs.
2) Annual gross billings
2015 2016
Annual Gross Billings $,7922,000 $15,800,000
This is a key measurement for management as it presents the
underlying incoming cash from domain sales for the year. In 2016 we
experienced a 100% increase to $15.8million (2015:
$7.9million).
3) Gross margin
2015 2016
Gross margin % 84.0% 83.92%
In April 2016, we gave guidance that cost of sales would be
contained to within 20% of top-line billings (i.e. before partner
payments). We are pleased to report this has been achieved for
2016, cost of sales being flat at 16.08% ($2.5million) of top line
billings compared to 15.96% of top line billings ($1.3million) in
2015, delivering a gross profit margin against top-line billings of
84% for FY2016 and a reported gross margin profit of 81% net of
partner payments. We aim to target gross profit margins against top
line billings of 80% or above on a go-forward basis.
4) Annual renewals - $ amount & as percentage of OPEX
2015 2016
Renewals - $ $1.8million $3.8million
Annual renewals as
a % of OPEX 15% 52%
In 2015, revenue from renewals stood at $1.8million, growing to
$3.8million in 2016. As our DUMs grow, we expect renewal revenue to
increase in line with this growth. Trend to date in 2017 reinforces
management's expectation and target for renewal revenue to cover
the Group's fixed operating expenditure ("OPEX") over the next
eighteen to twenty-four months, meaning that once this point has
been reached, revenue from new registrations after partner payments
and cost of sale, drops directly to the bottom line.
This objective has been aided by the significant steps taken in
2016 to reduce OPEX, it being cut from $11.5million (FY 2015) to
$6.5million (FY 2016) with the Group now operating within its
$6.0million OPEX target. Indeed, as a percentage of gross billings,
OPEX has been reduced to 45% from 148% in FY 2015. Management's
target moving forward is that OPEX should not exceed 33% of gross
billings in a stable state environment.
In relation to managing OPEX, management does not, however,
subscribe to the notion of simply stripping the business down to a
skeleton staff simply to inflate EBITDA numbers. We will continue
to manage our costs, and likewise invest in talented staff, so that
the business can continue to be profitably grown within our stated
OPEX guidelines. To that end, we are pleased to report that
consultancy fees and commissions, which in 2016 accounted for over
$700,000, have been reduced to just under $250,000 for 2017.
5) Billings Operating EBITDA, before profits on gTLD auctions and restructuring costs for 2016
Billings Operating EBITDA is a key metric for the management
team as it is based on current year billings against current year
costs and provides a better snapshot of current year performance
than accounting Operating EBITDA where billings are subject
deferred revenue calculations.
Given the significant restructuring that occurred in 2016 to
transition MMX into a pure-play registry, for the purposes of
presenting a clear picture of our ongoing operations, we are
focusing on Billings Operating EBITDA before profits on gTLD
auctions and the one-off restructuring costs for the year under
review. In 2017, we will simply report Billings Operating EBITDA as
a KPI.
2015 2016
Billing Operating
EBITDA, before restructuring
costs - $ ($6,574,000) $4,209,000
As can be seen, on a like-for-like basis, the combination of
increased gross billings growth and a restructuring of the business
and its operating costs has resulted in a significant turnaround in
Billings Operating EBITDA, before profits on gTLD auctions and
restructuring costs, up from a loss of $6.6million in 2015 to a
profit of $4.2million in 2016. It should be noted there was no
one-off revenue from gTLD auctions in 2016.
Financials - Ongoing Operations
As we have indicated in previous financial statements and above,
accounting rules dictate that revenue generated from domain
billings are subject to deferred revenue calculations which can
distort an investor's perspective of Group performance over the
short term i.e., over the financial reporting year. Accordingly,
Billings Operating EBITDA, which is based on current year billings
against current year costs, is provided below. Management believes
that the Billings Operating EBITDA provides a better snapshot of
current year performance.
FY 2016 FY 2015 %
Billing operating
EBITDA $000's $'000's Change
Billings(1) 15,800 7,922 100%
Partner payments (1,868) (1,487) 26%
Revenue less partner
payments 13,932 6,435 117%
Cost of sales (2,541) (1,264) 101%
Gross margin 11,391 5,171 120%
Gross margin % 82% 80%
Cash expenditure
Operating expenses
- ongoing (6,536) (11,745) (44%)
Operating expenses (646) - N/A
- forfeited
Billing Operating
EBITDA (before restructuring
costs) (2) 4,209 (6,574) (164%)
(1) Billings refer to total sales generated during the year (not
deferred for accounting purposes)
(2) Operating earnings before interest, tax, depreciation &
amortization and other non-cash charges where earnings are
calculated on the basis of billings as opposed to accounting
revenue. It should be noted that for accounting purposes Operating
EBITDA before restructuring was $3.6 million as highlighted in the
Group's 2016 Income Statement.
By transitioning into a pure-play registry and focusing our
attention to registry revenue growth, we have successfully been
able to double our top line billings in 2016 to $15.8million from
$7.9million in 2015 while reducing our overall cost base
significantly to $6.5million in 2016 from $11.7million in 2015.
Included in the Group's income statement is $0.7million of
forfeited operating expenses, which are expenses that the Group is
no longer expected to incur in 2017. Going into 2017, we remain
committed to running an effective and efficient cost base with
operating costs expected to be below the management's stated
$6.0million cap.
The net result, which reflects the underlying strength of the
Group's restructured business, is that Billings Operating EBITDA
has grown to $4.2million compared to a loss of $6.6million in
2015.
Restructuring and one-offs
There are three major areas to highlight in relation to the
one-off costs incurred in 2016.
Discontinued operations
As highlighted in our financials, we have separated the
reporting of the revenue and costs associated with running the
discontinued registrar operations. The registrar operation was a
large undertaking by the previous management team with considerable
investments in software development, staffing and other resources.
It was a strategy that did not prove to be a profitable
venture.
In Q3 2016, having successfully navigated an extensive ICANN
process, the Group:
-- Sold the registrar's customers to Uniregistry in exchange for
a perpetual ongoing affiliate commission from the renewal of those
domains;
-- Worked with our reseller customer, join.gop to move their
back-end to another registrar platform; and
-- Completed the outsourcing of the reseller business for .law
(i.e. join.law) to Instra, a leading registrar.
In our H1 2016 interims we indicated that the registrar
operations had incurred a loss of $2.0million and gave guidance
that registrar losses in H2 would be less than $0.5million. We are
pleased to report that H2 losses were less than indicated with
annual losses from the registrar standing at $2.3million versus
$2.5million. It should be noted that a significant portion of the
loss can be attributed to writing off capitalized software
development costs of $1.0million which is a non-cash item.
Restructuring - operations
A significant restructuring of the Group was carried out in
2016. A summary of the key points are:
-- A significant reduction in personnel where, as of 24 April
2017, there are now 20 personnel, of which 11 reside in the US
compared to 43 at the beginning of 2016;
-- outsourcing our technical registry service provider
operations to Nominet completed in November with great success and
within budget;
-- our US offices consolidated into a single location in
Seattle, Washington and the office footprint in Dublin decreased;
and
-- As highlighted in Discontinued operations, the registrar operations closed down.
As indicated in our H1 2016 interim financials, we had incurred
restructuring costs of $0.9 million in the first half and gave
guidance that restructuring costs in H2 would be less than $0.4
million. We are pleased to report that H2 restructuring costs were
below this target at $0.3million, bringing total restructuring
costs to $1.2million for the full year. Restructuring activities
will result in ongoing operational savings of approximately
$1.5million on an annualised basis.
Restructuring - contracts
In very early 2012, at the time when ICANN was still accepting
new generic Top Level Domain applications, the then Executive Team
entered into an overly ambitious agreement that it believed would
provide value to the overall profile of the Group. The agreement
had very significant financial commitments over the life of the
contract and did not include any clauses that could allow the Group
to renegotiate those commitments should the specific top-level
domain not perform to the agreed financial projections. The growth
of this top-level domain has not come close to meeting those
expectations and the agreement has proven - and would have
continued proving - to be a significant drag on the Group's ability
to generate positive cashflow from the given TLD.
In late Q4 of 2016 the current Executive team was able to
successfully conclude renegotiations of certain components of the
agreement by either restructuring or buying out certain financial
commitments thus making it more economically viable going forward.
As a result of the renegotiation effort, the Group has revised its
modeling and believes that it can derive future economic benefit
from the renegotiated contract. Accordingly, based on Management's
review, a portion of the buy out ($3.8million) has been expensed as
a one-off restructuring cost while the remaining portion
($3.9million) will be capitalized as an intangible asset with
future economic benefit.
Use of cash
As at the year-end cash stood at $15.3million compared to
$34.7million at the start of the year.
The change is as a direct result of significant outflows
relating to the share buy program and tender offer ($20.3million),
acquisition of intangible assets ($1.8million), executive and other
option payouts ($1.2million), one-time restructuring operating
costs ($1.2million), financing the Group's registrar business which
has been shut down and is treated as discontinued operations
($1.3million), the paying off trade payables (approximately
$0.4million), and finally the restructuring of an economically
challenging contract, which resulted in a cash payout in 2016
($1.9million).
However, the cash balance was boosted by the share issuance to
Hony Capital which amounted to $6.5million and the net cash flow
contribution from continuing operations of $4.2million to cash (of
which approximately $2.0million is collectible as trade receivables
at the year end).
We have seven contended applications remaining (.eco was awarded
by ICANN to another applicant) with the possibility that some may
be resolved via a private auction. As such the Board believes that
maintaining its existing cash reserves better positions the Group's
ability to participate in the resolution of these contended
applications.
It is also evident that there are increasing opportunities for
consolidation in the industry and maintaining a strong balance
sheet is beneficial in this regard. Indeed, it is the Board's
belief that the ultimate winners in the currently fragmented new
gTLD arena will be those that can achieve significant scale both in
terms of top-line billings and renewal growth.
The Board also remains committed to returning surplus cash to
shareholders whether in the form of a share buy-back, a special
dividend, the introduction of a progressive dividend policy or
mechanism that is believed to be in the best interest of the
Group's shareholders at that time. An example of such an event,
beyond the ongoing cashflow generation of operations, may be
one-off cash proceeds from the private auction process from the
Group's remaining seven contested new gTLD applications.
Conclusion
In conclusion:
-- We are a young business that is experiencing significant
growth in a rapidly expanding, but still nascent, industry that has
the potential to match .com/.net or the country codes (142.2million
and 142.7million registrations respectively at 31 December 2016)
within a 5-10 year time-frame;
-- MMX's registrations are already up over 40% year to date,
following a near three-fold increase of registrations in 2016;
-- A loss making business has been transformed into a profitable
one - Billings Operating EBITDA before one off restructuring costs
has grown to $4.2million compared to a loss of $6.6million in
2015;
-- We have an expanding global foot-print and distribution partner network; and
-- We continue to have significant scope for billings and
revenue improvement as the Group's premium and standard name
inventory across its world-class portfolio of top-level domains is
better monetized.
In short, the progress we made in 2016 to restructure the
business into a pure-play registry and cost efficiently enter new
markets has built strong foundations for the current year and
beyond. We therefore remain confident of our ability to deliver
meaningful value as we continue to grow our DUMs and resulting
revenues and transition the Group into a highly predictable annuity
based business of scale.
Toby Hall Michael Salazar
CEO COO/CFO
Date: 24 April 2017 Date: 24 April 2017
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Notes Year Ended Restated Year
Ended
31 December 31 December
2016 2015
$ 000's $ 000's
=================================== ======= ========================== =============
Billings 15,800 7,922
==================================== ====== ========================== =============
Continuing Operations:
==================================== ====== ========================== =============
Of which:
==================================== ====== ========================== =============
Revenue 15,001 6,324
==================================== ====== ========================== =============
Less: Partner payments 3 (1,520) (844)
==================================== ====== ========================== =============
Revenue less partner
payments 13,481 5,480
==================================== ====== ========================== =============
Cost of sales 4 (2,541) (1,264)
==================================== ====== ========================== =============
Gross Profit 10,940 4,216
==================================== ====== ========================== =============
Gross Profit Margin % 81% 77%
==================================== ====== ========================== =============
Profit on gTLD auctions 22 - 7,943
==================================== ====== ========================== =============
Loss on withdrawal of
gTLD applications 22 (148) (148)
==================================== ====== ========================== =============
Operating expenses -
ongoing 8 (6,536) (11,745)
==================================== ====== ========================== =============
Operating expenses -
forfeited 8 (646) -
==================================== ====== ========================== =============
Operating earnings before
interest, taxation, depreciation
and amortisation (Operating
EBITDA) before restructuring
costs 3,610 266
==================================== ====== ========================== =============
Foreign exchange gain
/ (loss) 251 (1,240)
==================================== ====== ========================== =============
Loss on disposal of fixed
assets (19) (161)
==================================== ====== ========================== =============
Share based payments 27 (745) (3,235)
==================================== ====== ========================== =============
Share of (loss) / results
of joint venture 21 (25) 1
==================================== ====== ========================== =============
Earnings / (loss) before
interest, taxation, depreciation,
and amortisation (EBITDA)
before restructuring
costs 9 3,072 (4,369)
==================================== ====== ========================== =============
Restructuring costs -
operating 5 (1,166) -
==================================== ====== ========================== =============
Restructuring costs -
contracts 6 (3,748) -
==================================== ====== ========================== =============
Loss before interest,
depreciation, taxation
and amortisation (EBITDA) (1,842) (4,369)
==================================== ====== ========================== =============
Depreciation and amortisation
charge 18/19 (285) (417)
==================================== ====== ========================== =============
Finance revenue 12 39 82
==================================== ====== ========================== =============
Finance costs 13 - (18)
==================================== ====== ========================== =============
Loss on disposal of joint
ventures 21 (276) -
==================================== ====== ========================== =============
Loss before taxation (2,364) (4,722)
==================================== ====== ========================== =============
Income tax 14 195 52
==================================== ====== ========================== =============
Loss from the year from
continuing operations (2,169) (4,670)
==================================== ====== ========================== =============
Loss from discontinued
operations 7 (2,332) (4,684)
==================================== ====== ========================== =============
Retained loss for the
period (4,501) (9,354)
==================================== ====== ========================== =============
Notes Year Ended Restated Year
Ended
31 December 31 December
2016 2015
$ 000's $ 000's
==================================== ====== ============ ================ =================
Other comprehensive income
==================================== ====== ============ ================ =================
Items that may be reclassified
subsequently to profit
or loss:
==================================== ====== ============ ================ =================
Currency translation
differences (648) 732
==================================== ====== ============ ================ =================
Other comprehensive (loss)
/ income for the year
net of taxation (648) 732
==================================== ====== ============ ================ =================
Total comprehensive loss
for the year (5,149) (8,622)
==================================== ====== ============ ================ =================
Retained loss for the
period attributable to:
==================================== ====== ============ ================ =================
Equity holders of the
parent (4,508) (9,335)
==================================== ====== ============ ================ =================
Non-controlling interests 7 (19)
==================================== ====== ============ ================ =================
(4,501) (9,354)
==================================== ====== ============ ================ =================
Total comprehensive loss
for the period attributable
to:
==================================== ====== ============ ================ =================
Equity holders of the
parent (5,169) (8,639)
==================================== ====== ============ ================ =================
Non-controlling interests 20 17
==================================== ====== ============ ================ =================
(5,149) (8,622)
==================================== ====== ============ ================ =================
Loss per share (cents)
==================================== ====== ============ ================ =================
From continuing operations
==================================== ====== ============ ================ =================
Basic 16 (0.29) (0.56)
==================================== ====== ============ ================ =================
Diluted 16 (0.29) (0.56)
==================================== ====== ============ ================ =================
From discontinued operations
==================================== ====== ============ ================ =================
Basic 16 (0.31) (0.56)
==================================== ====== ============ ================ =================
Diluted 16 (0.31) (0.56)
==================================== ====== ============ ================ =================
The notes set out below form an integral part of these financial
statements.
COMPANY STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Notes Year ended Restated Year
ended
31 December 31 December
2016 2015
$ 000's $ 000's
=============================== ===== ============ =============
Billings 13,817 4,121
=============================== ===== ============ =============
Of which:
=============================== ===== ============ =============
Revenue 12,417 2,092
=============================== ===== ============ =============
Less: Partner payments (1,049) (496)
=============================== ===== ============ =============
Revenue less partner
payments 11,368 1,596
=============================== ===== ============ =============
Cost of sales (1,446) (835)
=============================== ===== ============ =============
Gross profit 9,922 761
=============================== ===== ============ =============
Gross profit margin
% 87% 48%
=============================== ===== ============ =============
Profit on gTLD auctions 22 - 7,943
=============================== ===== ============ =============
Loss on withdrawal of
gTLD applications 22 (148) (148)
=============================== ===== ============ =============
Operating expenses (8,098) (2,747)
=============================== ===== ============ =============
Operating earnings before
interest, taxation,
depreciation and amortisation
(Operating EBITDA) 1,676 5,809
=============================== ===== ============ =============
Foreign exchange profit
/ (loss) 317 (2,781)
=============================== ===== ============ =============
Impairment of investment
in subsidiaries 20 (6,859) -
=============================== ===== ============ =============
Share based payment
expense (794) (2,017)
=============================== ===== ============ =============
Earnings before interest,
taxation, depreciation
and amortisation (EBITDA)
before restructuring
costs (5,660) 1,011
=============================== ===== ============ =============
Restructuring costs
- operating 5 (80) -
=============================== ===== ============ =============
Earnings before interest,
taxation, depreciation
and amortisation (EBITDA) (5,740) 1,011
=============================== ===== ============ =============
Depreciation and amortisation
charge 18 (73) (61)
=============================== ===== ============ =============
Finance revenue 12 39 82
=============================== ===== ============ =============
Loss on disposal of
joint ventures 21 (276) -
=============================== ===== ============ =============
(Loss) / profit before
taxation (6,050) 1,032
=============================== ===== ============ =============
Income tax 14 - -
=============================== ===== ============ =============
Retained (loss) / profit
for the period (6,050) 1,032
=============================== ===== ============ =============
Other comprehensive - -
income
=============================== ===== ============ =============
Total comprehensive
(loss) / income for
the year (6,050) 1,032
=============================== ===== ============ =============
All operations are considered to be continuing.
The notes set out below form an integral part of these financial
statements.
GROUP STATEMENT OF FINANCIAL POSITION
as at 31 December 2016
Notes Restated Restated
31 December 31 December 31 December
2016 2015 2014
$ 000's $ 000's $ 000's
==================== === ===== ============ ============ ============
ASSETS
==================== === ===== ============ ============ ============
Non-current
assets
==================== === ===== ============ ============ ============
Goodwill 17 2,828 2,828 2,828
========================= ===== ============ ============ ============
Intangible
assets 18 45,603 41,291 40,597
========================= ===== ============ ============ ============
Fixtures &
equipment 19 89 189 871
========================= ===== ============ ============ ============
Interest in
joint ventures 21 385 835 833
========================= ===== ============ ============ ============
Other long-term
assets 22 3,327 3,448 5,982
========================= ===== ============ ============ ============
Total non-current
assets 52,232 48,591 51,111
========================= ===== ============ ============ ============
Current assets
==================== === ===== ============ ============ ============
Trade and other
receivables 24 7,953 5,606 4,638
========================= ===== ============ ============ ============
Cash and cash
equivalents 23 15,275 34,651 45,796
========================= ===== ============ ============ ============
Total current
assets 23,228 40,257 50,434
========================= ===== ============ ============ ============
TOTAL ASSETS 75,460 88,848 101,545
========================= ===== ============ ============ ============
LIABILITIES
==================== === ===== ============ ============ ============
Current liabilities
==================== === ===== ============ ============ ============
Trade and other
payables 25 (14,984) (8,972) (6,314)
========================= ===== ============ ============ ============
Obligations
under finance
lease - (2) (342)
========================= ===== ============ ============ ============
Total current
liabilities (14,984) (8,974) (6,656)
========================= ===== ============ ============ ============
NET ASSETS 60,476 79,874 94,889
========================= ===== ============ ============ ============
EQUITY
==================== === ===== ============ ============ ============
Share capital 26 - - -
========================= ===== ============ ============ ============
Share premium 26 60,060 73,816 82,866
========================= ===== ============ ============ ============
Foreign exchange
reserve 742 1,403 707
========================= ===== ============ ============ ============
Retained earnings 4 4,987 11,665
========================= ===== ============ ============ ============
60,806 80,206 95,238
======================== ===== ============ ============ ============
Non-controlling
interests (330) (332) (349)
========================= ===== ============ ============ ============
TOTAL EQUITY 60,476 79,874 94,889
========================= ===== ============ ============ ============
The notes set out below form an integral part of these financial
statements.
These financial statements were approved by the Board of
Directors on 24 April 2017 and signed on its behalf by:
Toby Hall Michael Salazar
CEO COO/CFO
COMPANY STATEMENT OF FINANCIAL POSITION
as at 31 December 2016
Notes 31 December Restated Restated
2016 31 December2015 31 December
2014
$ 000's $ 000's $ 000's
==================== === ===== =========== ================ ============
ASSETS
==================== === ===== =========== ================ ============
Non-current
assets
==================== === ===== =========== ================ ============
Intangible
assets 18 39,389 39,463 38,835
========================= ===== =========== ================ ============
Investment
in subsidiaries 20 39,384 4,189 3,548
========================= ===== =========== ================ ============
Interest in
joint ventures 21 486 911 911
========================= ===== =========== ================ ============
Other-long
term assets 22 3,327 3,448 5,962
========================= ===== =========== ================ ============
Total non-current
assets 82,586 48,011 49,276
========================= ===== =========== ================ ============
Current assets
==================== === ===== =========== ================ ============
Trade and
other receivables 24 8,519 39,901 39,384
========================= ===== =========== ================ ============
Cash and cash
equivalents 23 10,544 23,990 26,952
========================= ===== =========== ================ ============
Total current
assets 19,063 63,891 66,336
========================= ===== =========== ================ ============
TOTAL ASSETS 101,649 111,902 115,612
========================= ===== =========== ================ ============
LIABILITIES
==================== === ===== =========== ================ ============
Current liabilities
==================== === ===== =========== ================ ============
Trade and
other payables 25 (13,880) (3,852) (2,201)
========================= ===== =========== ================ ============
Total current
liabilities (13,880) (3,852) (2,201)
========================= ===== =========== ================ ============
NET ASSETS 87,769 108,050 113,411
========================= ===== =========== ================ ============
EQUITY
==================== === ===== =========== ================ ============
Share capital 26 - - -
========================= ===== =========== ================ ============
Share premium 26 60,060 73,816 82,866
========================= ===== =========== ================ ============
Retained earnings 27,709 34,234 30,545
========================= ===== =========== ================ ============
TOTAL EQUITY 87,769 108,050 113,411
========================= ===== =========== ================ ============
The notes set out below form an integral part of these financial
statements.
These financial statements were approved by the Board of
Directors on 24 April 2017 and signed on its behalf by:
Toby Hall Michael Salazar
CEO COO/CFO
GROUP CASH FLOW STATEMENT
for the year ended 31 December 2016
Notes Year ended Restated Year
ended
31 December 31 December
2016 2015
$ 000's $ 000's
=============================== ===== ============= =============
Net cash flow from operating
activities 23 (629) (10,745)
=============================== ===== ============= =============
Cash flows from investing
activities
=============================== ===== ============= =============
Interest received 12 39 82
=============================== ===== ============= =============
Interest paid 13 - (18)
=============================== ===== ============= =============
Amounts transferred from
restricted cash (64) 684
=============================== ===== ============= =============
Payments to acquire intangible
assets (3,796) (1,139)
=============================== ===== ============= =============
Receipts from the disposal
of intangible assets - 47
=============================== ===== ============= =============
Payments to acquire fixtures
& equipment (28) (108)
=============================== ===== ============= =============
Receipts from the disposal
of tangible assets 90 -
=============================== ===== ============= =============
Amounts received in gTLD
auctions - 9,155
=============================== ===== ============= =============
Net cash flow from investing
activities (3,759) 8,703
=============================== ===== ============= =============
Cash flows from financing
activities
=============================== ===== ============= =============
Repayments of obligations
under finance lease - (360)
=============================== ===== ============= =============
Issue of ordinary shares 26 6,811 -
=============================== ===== ============= =============
Share issue costs 26 (300) -
=============================== ===== ============= =============
Purchase of own shares 26 (20,267) (9,050)
=============================== ===== ============= =============
Repurchase of vested
equity instruments (1,219) (577)
=============================== ===== ============= =============
Net cash flow from financing
activities (14,976) (9,987)
=============================== ===== ============= =============
Net decrease in cash
and cash equivalents (19,364) (12,029)
=============================== ===== ============= =============
Cash and cash equivalents
at beginning of period 34,651 45,796
=============================== ===== ============= =============
Exchange (loss)/gain
on cash and cash equivalents (12) 884
=============================== ===== ============= =============
Cash and cash equivalents
at end of period 15,275 34,651
=============================== ===== ============= =============
The notes set out below form an integral part of these financial
statements
COMPANY CASH FLOW STATEMENT
for the year ended 31 December 2016
Notes Year ended Restated Year
ended
31 December 31 December
2016 2015
$ 000's $ 000's
=============================== ===== ============= =============
Net cash flow from operating
activities 23 7,490 (3,800)
=============================== ===== ============= =============
Cash flows from investing
activities
=============================== ===== ============= =============
Interest received 12 39 82
=============================== ===== ============= =============
Amounts transferred from
restricted cash - 684
=============================== ===== ============= =============
Payments to acquire intangible
assets - (500)
=============================== ===== ============= =============
Investment in subsidiaries (7,218) -
=============================== ===== ============= =============
Amounts received in gTLD
auctions - 9,155
=============================== ===== ============= =============
Net cash flow from investing
activities (7,179) 9,421
=============================== ===== ============= =============
Cash flows from financing
activities
=============================== ===== ============= =============
Issue of ordinary shares 26 6,811 -
=============================== ===== ============= =============
Share issue costs 26 (300) -
=============================== ===== ============= =============
Purchase of own shares 26 (20,267) (9,050)
=============================== ===== ============= =============
Net cash flow from financing
activities (13,756) (9,050)
=============================== ===== ============= =============
Net decrease in cash
and cash equivalents (13,445) (3,429)
=============================== ===== ============= =============
-
=============================== ===== ============= =============
Cash and cash equivalents
at beginning of period 23,990 26,952
=============================== ===== ============= =============
Exchange (loss)/gain
on cash and cash equivalents (1) 467
=============================== ===== ============= =============
Cash and cash equivalents
at end of period 10,544 23,990
=============================== ===== ============= =============
The notes set out below form an integral part of these financial
statements
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Foreign
Share currency
Share premium translation Retained Non-controlling Total
Capital reserve reserve earnings Total interest equity
====================== ======== ======== ============ ========= ======== =============== ==========
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
====================== ======== ======== ============ ========= ======== =============== ==========
At 1 January
2015, as previously
reported - 82,866 707 11,461 95,034 (349) 94,685
====================== ======== ======== ============ ========= ======== =============== ==========
Cumulative effect
of change in
accounting policy
for partner payments - - - 204 204 - 204
====================== ======== ======== ============ ========= ======== =============== ==========
As restated - 82,866 707 11,665 95,238 (349) 94,889
====================== ======== ======== ============ ========= ======== =============== ==========
Loss for the
year - - - (9,335) (9,335) (19) (9,354)
====================== ======== ======== ============ ========= ======== =============== ==========
Currency translation
differences - - 696 - 696 36 732
====================== ======== ======== ============ ========= ======== =============== ==========
Total comprehensive
(loss) / income - - 696 (9,335) (8,639) 17 (8,622)
====================== ======== ======== ============ ========= ======== =============== ==========
Acquisition of
own shares - (9,050) - - (9,050) - (9,050)
====================== ======== ======== ============ ========= ======== =============== ==========
Credit to equity
for equity-settled
share based payments - - - 3,223 3,223 - 3,223
====================== ======== ======== ============ ========= ======== =============== ==========
Share based payments
(repurchase of
vested equity
instruments) - - - (566) (566) - (566)
====================== ======== ======== ============ ========= ======== =============== ========
As at 31 December
2015 - 73,816 1,403 4,987 80,206 (332) 79,874
====================== ======== ======== ============ ========= ======== =============== ========
Loss for the
year - - - (4,508) (4,508) 7 (4,501)
====================== ======== ======== ============ ========= ======== =============== ========
Currency translation
differences - - (661) - (661) 13 (648)
====================== ======== ======== ============ ========= ======== =============== ========
Total comprehensive
(loss) / income - - (661) (4,508) (5,169) 20 (5,149)
====================== ======== ======== ============ ========= ======== =============== ========
Additions to
share premium - 6,811 - - 6,811 - 6,811
====================== ======== ======== ============ ========= ======== =============== ========
Cost of share
issue - (300) - - (300) - (300)
====================== ======== ======== ============ ========= ======== =============== ========
Acquisition of
own shares - (20,267) - - (20,267) - (20,267)
====================== ======== ======== ============ ========= ======== =============== ========
Credit to equity
for equity-settled
share based payments - - - 653 653 (2) 651
====================== ======== ======== ============ ========= ======== =============== ========
Share based payments
(repurchase of
vested equity
instruments) - - - (1,128) (1,128) - (1,128)
====================== ======== ======== ============ ========= ======== =============== ========
Adjustment arising
from change in
Non-Controlling
Interest - - - - - (16) (16)
====================== ======== ======== ============ ========= ======== =============== ========
As at 31 December
2016 - 60,060 742 4 60,806 (330) 60,476
====================== ======== ======== ============ ========= ======== =============== ========
-- Share premium - This reserve includes any premiums received
on issue of share capital. Any transaction costs associated with
the issue of shares are deducted from share premium
-- Foreign exchange translation reserve - This reserve
represents gains and losses arising on the translation of foreign
operations into the Group's presentational currency.
-- Retained earnings - This reserve represents the cumulative profits and losses of the Group.
-- Non-controlling interests reserve - This reserve represents
the share of the interest held by the non-controlling shareholders
of the subsidiary undertakings.
The notes set out below form an integral part of these financial
statements.
Company Statement of Changes in Equity
for the year ended 31 December 2016
Share
Share premium Retained
capital reserve earnings Total
==================================== ======== ======== ========= ========
$ 000's $ 000's $ 000's $ 000's
==================================== ======== ======== ========= ========
At 1 January 2015 (as previously
reported) - 82,866 30,545 113,411
==================================== ======== ======== ========= ========
Effect of change in accounting - - - -
policy for partner payments
==================================== ======== ======== ========= ========
Profit for the year (restated) - - 1,032 1,032
==================================== ======== ======== ========= ========
Total comprehensive income - - 1,032 1,032
==================================== ======== ======== ========= ========
Acquisition of own shares - (9,050) - (9,050)
==================================== ======== ======== ========= ========
Credit to equity for equity-settled
share based payments - - 3,223 3,223
==================================== ======== ======== ========= ========
Share based payments (repurchase
of vested equity instruments) - - (566) (566)
==================================== ======== ======== ========= ========
As at 31 December 2015 - 73,816 34,234 108,050
==================================== ======== ======== ========= ========
Loss for the year - - (6,050) (6,050)
==================================== ======== ======== ========= ========
Total comprehensive income - - (6,050) (6,050)
==================================== ======== ======== ========= ========
Additions to share capital
/ premium - 6,811 - 6,811
==================================== ======== ======== ========= ========
Cost of share issue - (300) - (300)
==================================== ======== ======== ========= ========
Acquisition of own shares - (20,267) - (20,267)
==================================== ======== ======== ========= ========
Credit to equity for equity-settled
share based payments - - 653 653
==================================== ======== ======== ========= ========
Share based payments (repurchase
of vested equity instruments) - - (1,128) (1,128)
==================================== ======== ======== ========= ========
As at 31 December 2016 - 60,060 27,709 87,769
==================================== ======== ======== ========= ========
-- Share premium - This reserve includes any premiums received
on issue of share capital. Any transaction costs associated with
the issue of shares are deducted from share premium
-- Retained earnings - This reserve represents the cumulative profits and losses of the Group.
The notes set out below form an integral part of these financial
statements.
NOTES TO FINANCIAL STATEMENTS
for the year ended 31 December 2016
1 Summary of Significant Accounting Policies
a) General information
Minds + Machines Group Limited is a company is registered in the
British Virgin Islands under the BVI Business Companies Act 2004
with registered number 1412814. The Company's ordinary shares are
traded on the AIM market operated by the London Stock Exchange. The
nature of the Group's operations and its principal activities are
set out in note 2 and in the Strategic Report on pages 8 to 10.
These financial statements are presented in US Dollars and
rounded to the nearest thousand.
Foreign operations are included in accordance with the policies
set out in note 1(l).
(b) Statement of compliance with IFRS
The Group's and Company's financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Adoption of new and revised standards
The Group's and Company's financial statement have been prepared
on the basis of accounting policies consistent with those applied
in the financial statement for the year ended 31 December 2015
except for the change in the partner payments accounting policy as
set out in note 1(k) and for the implementation of a number of
minor adjustments issued which applied for the first time in 2016.
These new pronouncements do not have a significant impact on the
accounting policies, methods of computation or presentation applied
by the Group and Company and therefore prior-year financial
statements have not been restated for these pronouncements.
Future changes in accounting policies
At the date of authorization of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
Mandatory
for 2017
Amendments Amendments to IAS 12 Recognition of
to IAS 12 Deferred Tax Asset for Unrealized
Losses. These amendments on the recognition
of deferred tax assets for unrealized
losses clarify how to account for
deferred tax assets related to debt
instruments measured at fair value.
IAS 7 IAS 7 Statement of Cash flows, Narrow-scope
amendments. The amendments introduce
an additional disclosure that will
enable users of financial statement
to evaluate changes in liabilities
arising from financial activities.
Mandatory
for 2018
IFRS 15 IFRS 15 Revenue from Contracts with
Customers. The core principle of IFRS
15 is that an entity recognizes revenue
to depict the transfer to promised
goods or services when control of
the goods or services passes to customers.
The amount of revenue recognized should
reflect the consideration to which
the entity expects to be entitled
in exchange for those goods or services.
A modified transitional approach is
permitted under which a transitional
adjustment is recognized in retained
earnings at the date of implementation
of the standard without adjustment
of comparatives. The new standard
will only be applied to contracts
that are not completed at that date.
IFRS 9 Financial Instruments. This
IFRS 9 standard includes a single approach
for the classification of financial
assets, based on cash flow characteristics
and the entity's business model, which
requires expected losses to be recognized
when financial instruments are first
recognized. The standard amends the
rules on hedge accounting to align
the accounting treatment with the
risk management practices of an entity.
Mandatory
for 2019
IFRS 16 IFRS 16 Leases. Under the new standard,
a lessee is in essence required to:
a) Recognize all lease assets and
liabilities (including those currently
classed as operating leases) on the
balance sheet, initially measured
at the present value of unavoidable
lease payments;
b) Recognize amortization of lease
assets and interest on lease liabilities
in the income statement over the lease
term; and
Separate the total amount of cash
paid into a principal portion (presented
within financial activities) and interest
(which companies can choose to present
within operating or financing activities
consistent with presentation of any
other interest paid) in the cash flow
statement.
The directors do not expect that the adoption of the Standards
and Interpretations listed above will have a material impact on the
financial statements of the Group in future periods, except
that:
-- IFRS 9 will impact both the measurement and disclosure of Financial Instruments; and
-- IFRS 16 will impact on the recognition of those leases
currently classified as operating leases. Information on the
undiscounted amount of the Group's operating lease commitments
under IAS 17, the current lease standard, is disclosed in note 26.
Under IFRS 16, the present value of these commitments would be
shown as a liability on the balance sheet together with an asset
representing the right of use.
Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a
detailed review has been completed
(c) Basis of accounting
The consolidated financial statements have been prepared on the
historical cost basis.
(d) Basis of consolidation
The consolidated financial information incorporates the results
of the Company and entities controlled by the Company (its
subsidiaries) (the "Group") made up to 31 December each year.
Control is achieved when the Company:
-- has the power over the investee;
-- is exposed or has rights, to variable return from its involvement with the investee; and
-- has the ability to use its power to affect its returns.
The company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company losses
control of the subsidiary. Specifically, the results of
subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the date the Company
gains control until the date when the Company ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income
are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of the
subsidiaries is attributed to the owners of the Company and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members of the
Group are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified
separately from the Group's equity therein. Those interests of
non-controlling shareholders that are present ownership interests
entitling their holders to a proportionate share of net assets upon
liquidation may initially be measured at fair value or at the
non-controlling interests' proportionate share of the fair value of
the acquiree's identifiable net assets. The choice of measurement
is made on an acquisition-by-acquisition basis. Other
non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition
plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests
having a deficit balance.
Changes in the Group's interests in subsidiaries that do not
result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference
between the amounts by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received
is recognized directly in equity and attributable to the owners of
the Company.
When a Group loses control of a subsidiary, the gain or loss on
disposal recognized in profit or loss is calculated as the
difference between the aggregate of the fair value of the
consideration received and the fair value of any retained interest
and the previous carrying amount of the assets (including
goodwill), less liabilities of the subsidiary and any
non-controlling interests. All amounts previously recognized in
other comprehensive income in relation to that subsidiary are
accounted for as if the Group had directly disposed of the related
assets or liabilities of the subsidiary (i.e. reclassified to
profit or loss or transferred to another category of equity as
specified / permitted by applicable IFRS). The fair value of any
investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial
recognition for subsequent accounting under IAS 39 Financial
Instruments: Recognition and Measurement or, when applicable, the
costs on initial recognition of an investment in an associate or
jointly controlled entity.
When a separate identifiable segment meets the definition of
Discontinued Operations (i.e. when agreement has either been
reached to sell a component of the Group's business or the sale has
taken place in the reporting period), results of that segment are
accounted for, in line with those applicable accounting standards,
as discontinued operations on the Group Statement of Total
Comprehensive Income. Prior period results are also disclosed on a
like for like basis. Any assets in still held by the group at the
end of the reporting period are in respect of these discontinued
operations are classified as held for sale in the Group Statement
of Financial Position.
(e) Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements.
Further detail is contained in the Strategic Report on page 8.
(f) Business combinations
Acquisition of subsidiaries and business are accounted for using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of assets transferred by
the Group, liabilities incurred by the Group to the former owners
of the acquiree and the equity interest issued by the Group in
exchange for control of the acquire. Acquisition-related costs are
recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognized at their fair value at the
acquisition date, except that:
-- deferred tax assets of liabilities and assets or liabilities
related to employee benefits arrangement are recognized and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed.
(g) Joint ventures
A joint venture is an entity where the group has joint control
and have rights to the net assets of the arrangement. The group has
interests in joint ventures, which are jointly controlled entities,
whereby the ventures have a contractual arrangement that
establishes joint control over the economic activities of the
entity. The contractual agreement requires unanimous agreement for
financial and operating decisions among ventures.
The Group's interests in jointly controlled entities are
accounted for by using the equity method. Under the equity method,
the investment in the joint venture is carried in the statement of
financial position at cost plus post acquisition changes in the
Group's share of net assets of the joint venture. The income
statement reflects the share of the results of operations of the
joint venture. The financial statements of the joint venture are
prepared for the same reporting period as the Group. Adjustments
are made where necessary to bring the accounting policies in line
with those of the Group.
Losses on transactions are recognized immediately if the loss
provides evidence of a reduction in the net realizable value of
current assets or an impairment loss. The joint venture is
accounted for using the equity method until the date on which the
Group ceases to have joint control over the joint venture.
Upon loss of joint control, the Group measures and recognizes
its remaining investment at its fair value. Any difference between
the carrying amount of the former jointly controlled entity upon
loss of joint control and the fair value of the remaining
investment and proceeds on disposal are recognized in profit or
loss. When the remaining investment constitutes significant
influence, it is accounted for as investment in an associate.
(h) Goodwill
Goodwill is initially recognized and measured as set out
above.
Goodwill is not amortized but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognized for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
(i) Leases (the group as a lessee)
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognized as assets of the
group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
expenses are recognized immediately in profit or loss.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease except
where another more systematic basis is more representative of the
time pattern in which economic benefits from the lease assets are
consumed. Contingent rentals arising under operating leases are
recognized as an expense in the period in which they are
incurred.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognized as a liability.
The aggregate benefit of incentives is recognized as a reduction of
rental expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time
pattern in which economic benefits from the leased assets are
consumed.
(j) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for
services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes. Revenue is reduced
for estimated customer rebates and other similar allowances.
Registry revenue
Registry revenue primarily arise from fixed fees charged to
registrars for the initial registration or renewal of domain
names.
Where the fee from the initial registration matches the fee from
the renewal, the fee from both the initial registration and renewal
is recognized on a straight line basis over the registration
term.
Where the fee from the initial registration is higher than the
renewal fee (arising mainly from 'premium name'), the 'premium'
(the difference between the first year fee and ongoing renewal fee)
is recognized as revenue immediately with the balance recognized on
a straight line basis over the registration period. The renewal fee
carries on to be recognized on a straight line basis as well.
Fees from renewals are deferred until the new incremental period
commences.
Rendering of services (Registry service provider ("RSP") revenue
and consultancy services)
Revenue is generated by providing RSP and consultancy services
over a period of time. Fees for these services are deferred and /
or accrued and recognized as performance occurs, typically on a
straight-line basis over that period.
(k) Partner payments
Partner payments represents the expense relating to certain TLDs
where royalty and similar payments are required to be made.
Such payments are based on the Group's and Company's billing and
are deferred in line with accounting revenue.
This represents a change in the Group's and the Company's
accounting policy. Previously the Group and the Company did not
defer such payments, recognizing the payment immediately as an
expense.
The change in accounting policy has been made to more accurately
reflect the Group's and Company's performance in relation to its
revenue. The change has been applied retrospectively. As such, a
"third" balance sheet is presented showing the opening position of
the 31 December 2015 period.
The change in accounting policy impacted the partner payment
expense with the corresponding impact on either prepayments (trade
and other receivables) or accruals (trade and other payables), as
follows:
2016 2015
$ 000's $ 000's
=============================== ======== ========
Increase/(decrease) in partner
payments 569 (643)
=============================== ======== ========
The cumulative impact prior to 2015 was a decrease in partner
payments of $204,000.
2016 2016 2015 2015
$ 000's $ 000's $ 000's $ 000's
======================== =========== ============== =========== ==============
As reported As reported As reported As reported
in these or as in these or as
financial would financial would
statements have statements have
(cents) been (cents) been
reported reported
if there if there
were were
no change no change
in accounting in accounting
policy policy
(cents) (cents)
======================== =========== ============== =========== ==============
Basic EPS (continuing
operations) (0.29) 0.17 (0.56) (0.64)
======================== =========== ============== =========== ==============
Diluted EPS (continuing
operations) (0.29) 0.16 (0.56) (0.64)
======================== =========== ============== =========== ==============
(l) Foreign currencies
Functional and presentation currency
The individual financial statements of each group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each group company are expressed in US Dollars, which
is the presentation currency for the consolidated financial
statements. The Company's functional currency is US Dollars.
Transactions and balances
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognized at the
rates of exchange prevailing on the dates of transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rate
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
foreign currencies are not retranslated.
Exchange differences are recognised in profit and loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
the transactions are used. Exchange differences arising, if any,
are recognized in other comprehensive income and accumulated in
equity (attributed to non-controlling interests as
appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation, loss of joint control over a jointly controlled entity
that includes a foreign operation, or loss of significant influence
over an associate that includes a foreign operation), all of the
accumulated exchange differences in respect of that operation
attributable to the Group are reclassified to profit or loss.
In addition, in relation to a partial disposal of a subsidiary
that includes a foreign operation that does not result in the Group
losing control over the subsidiary, the proportionate share of
accumulated exchange differences are re-attributed to
non-controlling interests and are not recognized in profit or loss.
For all other partial disposals (i.e. partial disposals of
associates or joint arrangements that do not result in the Group
losing significant influence or joint control), the proportionate
share of the accumulated exchange differences is reclassified to
profit or loss.
(m) Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortization and
accumulated impairment losses. Amortization is recognized on a
straight-line basis over their estimated useful lives. The
estimated useful life and amortization method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful lives that are acquired separately
are carried at cost less accumulated impairment loss.
Internally generated intangible assets -research and development
expenditure
Expenditure on research activities is recognized as an expense
in the period in which it is incurred.
An internally generated intangible asset arising from the
development (or from the development phase of an internal project)
is recognized if, and only if all of the following conditions have
been demonstrated:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
-- the intention to complete the intangible asset and use or sell it;
-- the ability to use or sell the intangible asset;
-- how the intangible asset will generate probable future economic benefits;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
The amount initially recognized for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally generated intangible asset can be
recognized, development expenditure is recognized in profit or loss
in the period in which it is incurred.
Subsequent to initial recognition, internally generated
intangible assets are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately.
Useful live and amortisation
Amortization is recognized so as to write off the cost of assets
less their residual values over their useful lives, using the
straight-line method, on the following basis.
-- Generic Top Level Domains - indefinite life (not amortized)
-- Contractual based intangible assets - indefinite life (not amortized)
-- Software and development costs - over 3 or over its useful life (as below)
Software and development costs are amortized over their useful
economic life. The amortization period and the amortization method
for an intangible asset with a finite useful life are reviewed when
circumstances indicate a change to its useful life. Changes in the
expected useful life are accounted for by charging the amortization
period and treated as a change in accounting estimate. As a
consequence, certain software and development costs are amortized
over eight months (previously over 3 years).
(n) De-recognition of intangible assets
An intangible asset is de-recognized on disposal, or when no
future economic benefits are expected from use or disposal. Gains
and losses arising from de-recognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognized in profit or loss
when the asset is de-recognized.
(o) Fixtures & equipment
Fixtures & equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
recognized so as to write off the cost or valuation of assets less
their residual values over their useful lives, using the straight
line method, on the following basis.
-- Fixtures & equipment - over 3 to 7 years
(p) Impairment of fixtures & equipment and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to
individual cash-generating units, or otherwise they are allocated
to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
An intangible asset, with an indefinite useful life is tested
for impairment at least annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less cost to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less that its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognized immediately in
profit or loss, unless the relevant asset is carried at a re-valued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognized
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is being recognized immediately in profit or
loss, unless the relevant asset is carried at a re-valued amount,
in which case the reversal of the impairment loss is treated as a
revaluation increase.
(q) Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, described
in this note, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumption are based on historic
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the Group's accounting
policies
The Group does not have any critical judgements, apart from
those involving estimations (which are dealt with separately
below).
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainly at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below, in particular: Impairment of goodwill and
intangible assets; Financial instruments; Taxation; provisions;
Share-based payment transactions; and Investment in subsidiary
undertakings.
(r) Impairment of goodwill and intangible assets
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash-generating units to which goodwill
and intangible assets have been allocated. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value. Goodwill and
intangible assets have not been impaired.
Details of goodwill and intangible assets are set out in note 17
and 18 respectively.
(s) Finance costs/revenue
Interest expenses are recognized using the effective interest
method.
Finance revenue is recognized using the effective interest
method.
(t) Financial instruments
Financial assets and financial liabilities are recognized in the
Group's balance sheet when the Group becomes party to the
contractual provision of the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit of loss are
recognized immediately in profit or loss.
Financial assets
All financial assets are recognized and derecognized on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial assets
within the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except
for those financial assets classified as at fair value through
profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: 'available for sale' financial assets and 'loans and
receivables'. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial
recognition.
Effective interest method
The effective interest method is a method of calculating the
amortized cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimates future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premium or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt
instrument.
Loans and other receivables
Trade receivables, loans and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortized cost using the effective interest method,
less Impairment. Interest income is recognized by applying the
effective interest rate, except for short-term receivables when
recognition of interest would not be material.
Loans and receivables include cash and cash equivalents. Cash
and short-term deposits in the balance sheet comprise cash at bank
and in hand and short-term deposits with an original maturity of
three months or less. For the purposes of the Cash Flow Statement,
cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
Impairment of financial asset
Financial assets are assessed for indicators of impairment at
each balance sheet date. Financial assets are impaired where there
is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
For all other financial assets objective evidence of impairment
could include:
-- significant financial difficulty of the issuer or counterparty; or
-- default of delinquency in interest or principal payments; or
-- it becoming probable that the borrower will enter bankrupt or financial re-organization.
For Financial assets carried at amortized cost, the amount of
the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit and loss.
With the exception of available for sale equity instruments, if,
in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss to the extent
that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost
would have been had the impairment not been recognized.
De-recognition of financial assets
The Group derecognizes a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognizes its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognize
the financial asset and also recognizes a collateralized borrowing
for the proceeds received.
On de-recognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain or
loss that had been recognized in other comprehensive income and
accumulated in equity is recognized in profit or loss.
Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognized
at the proceeds received net of direct issue costs.
Financial liabilities
Financial liabilities are classified as other financial
liabilities.
Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortized costs using the effective interest method, with interest
expense recognized on an effective yield basis.
The effective interest method is a method of calculating the
amortized costs of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition.
De-recognition of financial liabilities
The Group de-recognizes financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
(u) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for the current year is calculated using jurisdictional
tax rates that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the tax computations, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognized
for all taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilized.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realized. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case it is also dealt with in
equity.
Current and deferred tax for the year
Current and deferred tax are recognized in profit of loss,
except when they relate to items that are recognized in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognized on other comprehensive
income or directly inequity respectively.
(v) Provisions
Provisions are recognized when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimates to settle the present obligation, its carrying
amount is the present value of those cash flows (when the effect of
the time value of money is material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
(w) Share-based payment transactions
Equity-settled share-based payments to employees are measured at
the fair value of the equity instrument at the grant date. The fair
value excludes the effect of non market-based vesting conditions.
The fair value is determined by using the Black-Scholes model.
Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in Note 27.
The fair value determined at the grant date of the
equity-settled shared-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of the
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non
market-based vesting conditions. The impact or the revision of the
original estimates, if any, is recognized in profit or loss such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
The dilutive effect, if any, of outstanding options is reflected
as additional share dilution in the computation of earnings per
share (see Note 16)
(x) Investment in subsidiary undertakings
In the parent company financial statements, fixed asset
investment in subsidiaries and joint ventures are shown at cost
less provision for impairment.
2 Operating segments - Group
Information reported to the Group's management and internal
reporting structure (including the Group's Chief Executive Officer)
for the purpose of resources allocation and assessment of segment
performance is focused on the category for each type of activity.
The principal categories (and the Group's segments under IFRS 8)
are:
-- Registry ownership ('Registry') - applicant of top level
domain name from ICANN and wholesaler of domain names of those top
level domain names
-- Registry service provider ('RSP') and consulting services -
back end service provider for a registry
Segment revenues and results
2016 Registry RSP Other Elimination Total
$ 000's $ 000's $ 000's $ 000's $ 000's
==================== ======== ======== ======== =========== ========
Revenue
==================== ======== ======== ======== =========== ========
External sales 13,818 1,058 125 - 15,001
==================== ======== ======== ======== =========== ========
Total Revenue 13,818 1,058 125 - 15,001
==================== ======== ======== ======== =========== ========
Operating EBITDA 12,031 401 (169) (8,653) 3,610
==================== ======== ======== ======== =========== ========
Foreign exchange
gain 251
==================== ======== ======== ======== =========== ========
Loss on disposal
of tangible assets (18)
==================== ======== ======== ======== =========== ========
Share based payment
expense (745)
==================== ======== ======== ======== =========== ========
Share of loss
of joint venture (25)
==================== ======== ======== ======== =========== ========
EBITDA before
Restructuring 3,073
==================== ======== ======== ======== =========== ========
Restructuring
costs - operating (1,166)
==================== ======== ======== ======== =========== ========
Restructuring
costs - contract (3,748)
==================== ======== ======== ======== =========== ========
EBITDA (1,841)
==================== ======== ======== ======== =========== ========
Amortisation
and depreciation (285)
==================== ======== ======== ======== =========== ========
Finance revenue 39
==================== ======== ======== ======== =========== ========
Loss on disposal
of joint venture (276)
==================== ======== ======== ======== =========== ========
Profit before
tax (2,363)
==================== ======== ======== ======== =========== ========
Income tax 195
==================== ======== ======== ======== =========== ========
Profit after
tax (2,168)
==================== ======== ======== ======== =========== ========
Inter-segment sales are charged at prevailing market prices.
2015 - Restated Registry RSP Other Elimination Total
$ 000's $ 000's $ 000's $ 000's $ 000's
==================== ======== ======== ======== =========== ========
Revenue
==================== ======== ======== ======== =========== ========
External sales 3,705 2,554 65 - 6,324
==================== ======== ======== ======== =========== ========
Total Revenue 3,705 2,554 65 - 6,324
==================== ======== ======== ======== =========== ========
Operating EBITDA 4,250 (3,155) (237) (592) 266
==================== ======== ======== ======== =========== ========
Foreign exchange
gain (1,240)
==================== ======== ======== ======== =========== ========
Loss on disposal
of tangible assets (161)
==================== ======== ======== ======== =========== ========
Share based payment
expense (3,235)
==================== ======== ======== ======== =========== ========
Share of loss
of joint venture 1
==================== ======== ======== ======== =========== ========
EBITDA before
Restructuring (4,369)
==================== ======== ======== ======== =========== ========
Restructuring -
costs
==================== ======== ======== ======== =========== ========
EBITDA (4,369)
==================== ======== ======== ======== =========== ========
Amortisation
and depreciation (417)
==================== ======== ======== ======== =========== ========
Finance revenue 82
==================== ======== ======== ======== =========== ========
Finance costs (18)
==================== ======== ======== ======== =========== ========
Profit or loss -
on disposal of
subsidiaries
==================== ======== ======== ======== =========== ========
Loss on disposal -
of joint venture
==================== ======== ======== ======== =========== ========
Profit before
tax (4,722)
==================== ======== ======== ======== =========== ========
Income tax 52
==================== ======== ======== ======== =========== ========
Profit after
tax (4,670)
==================== ======== ======== ======== =========== ========
*Included within Operating EBITDA is Profit on gTLD auctions of
$7,943k allocated to the Registry segment and loss on withdrawal of
gTLD applications $148k allocated to RSP.
Inter-segment sales are charged at prevailing market prices.
Other segment information
Segment assets Depreciation and
amortization
========= ================= ==================
2016 Restated 2016 Restated
2015 2015
========= ======= ======== ======== ========
$ 000's $ 000's $ 000's $ 000's
========= ======= ======== ======== ========
Registry 66,143 73,114 278 61
========== ======= ======== ======== ========
RSP 5,736 9,446 4 356
========== ======= ======== ======== ========
Other 3,581 6,288 3 -
========== ======= ======== ======== ========
Total 75,460 88,848 285 417
========== ======= ======== ======== ========
For the purpose of monitoring segment performance and allocating
resources between segments, the Group's Chief Executive Officer
monitors the tangible, intangible and financial assets attributable
to each segment. All assets are allocated to reportable segments
with the exception of interest in joint ventures. Goodwill has been
allocated to reportable segments as described in note 17.
Geographical information
The Group's information about its segment assets by geographic
location are detailed below.
Revenue from Non-current Additions to
external customers assets Non-current
assets
========= ===================== ================= =================
2016 Restated 2016 Restated 2016 Restated
2015 2015 2015
========= ========= ========== ======= ======== ======= ========
$ 000's $ 000's $ 000's $ 000's $'000's $'000's
========= ========= ========== ======= ======== ======= ========
British
Virgin
Islands 3,858 2,303 43,103 43,751 3 500
========== ========= ========== ======= ======== ======= ========
Ireland 2,278 120 49 807 35 631
========== ========= ========== ======= ======== ======= ========
United
Kingdom 1,047 2,434 3,817 8 3,815 -
========== ========= ========== ======= ======== ======= ========
Germany 1,483 1,143 452 333 165 -
========== ========= ========== ======= ======== ======= ========
Hungary - - 174 181 - -
========== ========= ========== ======= ======== ======= ========
USA 6,335 324 4,637 3,511 1,561 801
========== ========= ========== ======= ======== ======= ========
Total 15,001 6,324 52,232 48,591 5,579 1,932
========== ========= ========== ======= ======== ======= ========
Included in revenues arising from the Registry segment are
revenues of $1,963k (2015: $589k), which arose from sales to the
Group's largest customer.
Revenue for the Company is all derived from the Registry
segment.
3 Partner payments
Group Company
========= ========= ======== ======== ======== ========
Restated Restated
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
========= ========= ======== ======== ======== ========
Partner Payments 1,520 844 1,049 496
==================== ======== ======== ======== ========
Partner payments represents the expense relating to certain TLDs
where royalty and similar payments are required to be made. Such
payments are based on the Group's and Company's billing and are
deferred in line with accounting revenue. This represents a change
in the Group's and the Company's accounting policy. Previously the
Group and the Company did not defer such payments, recognizing the
payment immediately as an expense. See note 1 (k) for further
details.
4 Cost of sales
Group Company
============= ===== ======== ======== ======== ========
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
============= ===== ======== ======== ======== ========
Third Party Fees 918 295 190 59
==================== ======== ======== ======== ========
ICANN
Fees 882 813 642 647
==================== ======== ======== ======== ========
Other 741 156 614 129
==================== ======== ======== ======== ========
Total 2,541 1,264 1,446 835
==================== ======== ======== ======== ========
5 Restructuring costs - operating
Group Company
==================== ======== ======== ======== ========
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
==================== ======== ======== ======== ========
Executive severance
pay-outs 522 - - -
==================== ======== ======== ======== ========
Employee severance
pay-outs 247 - - -
==================== ======== ======== ======== ========
Relocation costs 118 - - -
==================== ======== ======== ======== ========
Migration costs 279 - 80 -
==================== ======== ======== ======== ========
Total 1,166 - 80 -
==================== ======== ======== ======== ========
The nature of the restructuring activities and costs are
detailed in the Executive Summary.
6 Restructuring costs - contracts
Group Company
======================== ======== ======== ======== ========
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
======================== ======== ======== ======== ========
Restructuring contracts 3,748 - - -
======================== ======== ======== ======== ========
Restructuring costs - contracts, relates to costs incurred to
re-negotiate certain contracts. See the Executive Summary for
further details.
7 Discontinued operations
During the year, the group entered into a sale agreement to
dispose of the registrar customer list effectively closing down the
registrar business. The disposal was affected to pursue the group's
strategy of being a pure play registry. The disposal was completed
during the year.
Group
=== ========================= === === ======== ========
2016 2015
$ 000's $ 000's
=== ========================= === === ======== ========
Revenue - -
=== ========================= === === ======== ========
Expenses (1,312) (3,883)
=================================== ======== ========
Gross loss (1,312) (3,883)
=================================== ======== ========
Amortization (1,020) (801)
=================================== ======== ========
Loss before tax from
discontinued operations (2,332) (4,684)
=================================== ======== ========
Income tax - -
=== ========================= === === ======== ========
Loss after tax from
discontinued operations (2,332) (4,684)
=================================== ======== ========
Discontinued operations contributed to a cash outflow of $1,312k
(2015: $3,883k) to the group's net operating cash flows.
8 Operating expenses - ongoing / forfeited
Operating expenses have been separated into "ongoing" and
"forfeited". Ongoing operating expenses represent expenses that the
restructured Group and Company would have incurred for the current
year.
Forfeited expenses represent expenses that the Group and Company
would not have incurred under a restructured business, separate to
those specifically allocated to restructuring costs (note 5).
Forfeited expenses are mainly comprised of employee costs for
employees and certain expenses no longer required under the
restructured business.
During the year, the Group paid costs of $504k to Patrimoine
International Limited of which $200k has been recognized within
operating expenses, $90k within cost of goods sold and the
remainder allocated to cost of cash issue in equity. In addition,
Patrimoine International Limited was granted 2,500,000 share
options, vesting over 3 years with an exercise price of 13 pence
(15.9 cents) with a calculated fair value of $94k. The contract
with Patrimoine was terminated in Q1 2017.
9 EBITDA before restructuring costs
EBITDA before restructuring costs is arrived at after
charging:
Group Company
============================ ======== ======== ======== ========
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
============================ ======== ======== ======== ========
Auditors' remuneration
- current year auditors
============================ ======== ======== ======== ========
Audit of these financial
statements 68 71 68 69
============================ ======== ======== ======== ========
Audit of the financial
statements of subsidiaries 35 36 - -
============================ ======== ======== ======== ========
Tax compliance 11 5 - -
============================ ======== ======== ======== ========
Other services 20 4 - -
============================ ======== ======== ======== ========
Directors' emoluments
- fees and salaries 1,610 2,172 438 226
============================ ======== ======== ======== ========
Operating lease
rentals 237 770 - -
============================ ======== ======== ======== ========
Foreign exchange
gain (251) 1,240 (317) 2,781
============================ ======== ======== ======== ========
10 Employee information (excluding directors)
Group Company
============ ============ ================== ======================
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
============ ============ ======== ======== ======== ========
Staff costs comprised
of:
========================== ======== ======== ======== ========
Wages and salaries 3,670 5,581 - -
========================== ======== ======== ======== ========
Share based payment
(credit) / expense (71) 1,539 - -
========================== ======== ======== ======== ========
Total 3,599 7,120 - -
========================== ======== ======== ======== ========
Monthly average number Group Company
of employees:
========================== ======== ======== ======== ========
Administration 12 13 - -
========================== ======== ======== ======== ========
Finance 6 5 - -
========================== ======== ======== ======== ========
Sales & Marketing 7 9 - -
========================== ======== ======== ======== ========
Engineering 6 21 - -
========================== ======== ======== ======== ========
Total 31 48 - -
========================== ======== ======== ======== ========
11 Directors' emoluments
Group Company
==================== =================== ================== ======================
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
==================== =================== ======== ======== ======== ========
Directors emoluments 1,610 2,172 482 226
========================================= ======== ========
Share based payment expense (Note 27) 528 1,597 528 96
Total 2,138 3,769 1,010 322
Group
Salaries & Redundancy $'000 Bonus Benefits in Directors Share Option Total
2016 Fees $ 000's kind emoluments Pay-out $'000 $ 000's
$ 000's $ 000s $ 000s
Executive
Directors
Toby Hall (#) 199 - 100 - 299 - 299
Michael Salazar 326 - 100 29 455 75 530
Antony Van
Couvering (#) 137 522 - - 659 556 1,215
Caspar Veltheim
(#) 14 - - - 14 - 14
Non-Executive
Directors
Guy Elliott 100 - - - 100 - 100
Henry Turcan
(#) 53 - - - 53 - 53
David Weill (#) 10 - - - 10 - 10
Keith Teare (#) 10 - - - 10 56 66
Elliot Noss (#) 10 - - - 10 - 10
Total 817 522 242 29 1,610 687 2,297
(#): These Directors were not employed for the full 2016
financial period.
Group
Salaries & Redundancy Bonus Benefits in Directors Share Option Total
2015 Fees $'000 $ 000's kind emoluments Pay-out $'000 $ 000's
$ 000's $ 000s $ 000s
Executive
Directors
Antony Van
Couvering 373 - 325 28 726 - 726
Michael Salazar 330 - 152 50 532 - 532
Caspar Veltheim 152 - 88 20 260 - 260
Frederick
Krueger (#) 149 - 260 19 428 - 428
Non-Executive
Directors
Guy Elliott (#) 21 - - - 21 - 21
David Weill (#) 21 - - - 21 - 21
Keith Teare (#) 92 - - - 92 - 92
Elliot Noss 92 - - - 92 - 92
Total 1,230 - 825 117 2,172 - 2,172
(#): These Directors were not employed for the full 2015
financial period.
Company
Salaries & Redundancy Bonus Benefits in Directors Share Option Total
2016 Fees $'000 $ 000's kind emoluments Pay-out $'000 $ 000's
$ 000's $ 000s $ 000s
Executive
Directors
Toby Hall (#) 199 - 100 - 299 - 299
Michael Salazar - - - - - - -
Caspar Veltheim - - - - - - -
(#)
Antony Van - - - - - - -
Couvering (#)
Non-Executive
Directors
Guy Elliott 100 - - - 100 - 100
Henry Turcan
(#) 53 - - - 53 - 53
David Weill (#) 10 - - - 10 - 10
Keith Teare (#) 10 - - 10 56 66
Elliot Noss (#) 10 - - - 10 - 10
Total 340 - 142 - 482 56 538
(#): These Directors were not employed for the full 2016
financial period.
Company
Salaries & Redundancy Bonus Benefits in Directors Share Option Total
2015 Fees $'000 $ 000's kind emoluments Pay-out $'000 $ 000's
$ 000's $ 000s $ 000s
Executive
Directors
Antony Van - - - - - - -
Couvering
Michael Salazar - - - - - - -
Caspar Veltheim - - - - - - -
Frederick - - - - - - -
Krueger (#)
Non-Executive
Directors
Guy Elliott (#) 21 - - 21 - 21
David Weill (#) 21 - - - 21 - 21
Keith Teare (#) 92 - - - 92 - 92
Elliot Noss 92 - - - 92 - 92
Total 226 - - 226 - 226
(#): These Directors were not employed for the full 2015
financial period.
No pension benefits are provided for any Director.
Details of Directors' share options exercised have been
disclosed in note 27 to the accounts.
12 Finance revenue
Group Company
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
Bank interest 35 82 35 82
Other interest received 4 - 4 -
Total 39 82 39 82
Finance revenues relate to assets classified as loans and
receivables.
13 Finance costs
Group Company
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
Interest on obligations under finance lease - 18 - -
2016 2015
$ 000's $ 000's
Current tax credit 195 52
Deferred tax - -
195 52
2016 Restated 2015
$ 000's $ 000's
Loss before tax on continuing operations (2,363) (4,722)
Tax at the BVI tax rate of 0% - -
Research and development tax credit 212 52
Income Tax (17) -
195 52
14 Income tax expense - Group
The charge for the current year can be reconciled to the loss
per the Group statement of comprehensive income as follows:
Company
The charge for the current year can be reconciled to the loss
per the Company statement of comprehensive income as follows:
2016 Restated 2015
$ 000's $ 000's
Current tax - -
Deferred tax - -
- -
2016 Restated 2015
$ 000's $ 000's
Profit before tax on continuing operations (6,050) 1,032
Tax at the BVI tax rate of 0% - -
- -
The British Virgin Islands under the IBC (international business
company) imposes no corporate taxes or capital gains. However, the
Company as a group may be liable for taxes in the jurisdictions
where it is operating.
No deferred tax asset has been recognized because there is
insufficient evidence of the timing of suitable future profits
against which they can be recovered. Tax losses carried forward,
which may be utilized indefinitely against future taxable profits
amount to $17m (2015: $12.9m) in the USA, $1.7m (2015: $2.2m) in
Germany, $6.8m (2015: $5.9m) in Ireland, $10.4m (2015: $6.6m) in
the United Kingdom, $31k (2015: $Nil) in Hungary and $22k (2015:
$Nil) in China.
15 Dividends
No dividends were paid or proposed by the Directors (2015:
$Nil).
16 Loss per share
The calculation of earnings per share is based on the profit /
(loss) after taxation divided by the weighted average number of
shares in issue during the period.
Loss 2016 Restated 2015
$ 000's $ 000's
Loss for the purpose of the basic and diluted earnings per share
Loss from continuing operations - excluding non-controlling interests (2,175) (4,651)
Loss from discontinued operations (2,332) (4,684)
Total loss for the year (4,507) (9,335)
2016 2015
Number of shares million million
Weighted average number of ordinary shares used in calculating basic loss per share 743.00 829.34
Effect of dilutive potential ordinary shares - share options and warrants - -
Weighted average number of ordinary shares for the purpose of diluted earnings per share 743.00 829.34
Loss per share from continuing operations 2016 Restated 2015
cent cent
Basic (0.29) (0.56)
Diluted (0.29) (0.56)
Loss per share from discontinued operations 2016 Restated 2015
cent cent
Basic (0.31) (0.56)
Diluted (0.31) (0.56)
All potential shares were anti-dilutive for 2016 and 2015
continuing and discontinued operations due to the loss
reported.
17 Goodwill
Cost Group
$ 000's
31 December 2015 and 31 December 2016 2,828
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units that are expected to
benefit from that business combination. Goodwill has been allocated
to the 'Registry' segment (a single 'CGU').
Impairment review
The Group tests goodwill annually for impairment, or more
frequently if there are indicators that goodwill might be
impaired.
At 31 December 2016, the Directors have carried out an
impairment review and have concluded that no impairment is
required.
The recoverable amount of the CGU is determined from value in
use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates
and expected changes to selling prices and direct costs. Management
estimate discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks
specific to the CGU.
The Group prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next five
years and extrapolates cash flows into perpetuity based on an
estimated growth rate of 5% (2015: 5%). The growth rate of 5% is
appropriate to the new gTLD market that the Group operates in. The
rate used to discount the forecast cash flows is 10% (2015:
9%).
The Group has carried out sensitivity analysis on the growth
rate and discount rate. A 2% change in either rate would not give
any indication of impairment.
18 Intangible assets
Group
generic Top Level Software & Development costs Contract based Other Total
Domains development costs (Assets under intangible assets $ 000's $ 000's
$ 000's $ 000's construction) $ 000's
$ 000's
Cost
At 1 January 2015 39,063 1,423 148 - 162 40,796
Additions 500 88 541 - 10 1,139
Transfer from
other long term
assets (note 22) 551 - - - - 551
Transfer from
assets under
construction - 666 (666) - - -
Exchange
differences (36) (107) (23) - (1) (167)
At 31 December
2015 40,078 2,070 - - 171 42,319
Additions 1,500 261 - 3,815 - 5,576
Exchange
differences (17) (34) - - (1) (52)
At 31 December
2016 41,561 2,297 - 3,815 170 47,843
Accumulated
Amortization
At 1 January 2015 - (199) - - - (199)
Charge for the
year - (677) - - (171) (848)
Exchange
differences - 19 - - - 19
At 31 December
2015 - (857) - - (171) (1,028)
Charge for the
year - (1,171) - - - (1,171)
Exchange
differences - (42) - - 1 (40)
At 31 December
2016 - (2,070) - - (170) (2,240)
Carrying amount
At 31 December
2016 41,561 227 - 3,815 - 45,603
At 31 December
2015 40,078 1,213 - - - 41,291
Company
generic Top Level Domains Software & development costs Other Total
Cost $ 000's $ 000's $ 000's $ 000's
At 1 January 2015 38,694 51 99 38,844
Additions 500 - - 500
Transfers from other long term assets 185 - - 185
At 31 December 2015 39,379 51 99 39,529
Additions - 3 - 3
At 31 December 2016 39,379 54 99 39,532
Accumulated amortization
At 1 January 2015 - (9) - (9)
Charge for the year - (19) (42) (61)
At 31 December 2015 - (28) (42) (70)
Charge for the year - (16) (57) (73)
At 31 December 2016 - (44) (99) (139)
Carrying amount
At 31 December 2016 39,379 10 - 39,389
At 31 December 2015 39,379 27 57 39,463
generic Top Level Domains
In 2012, the Group applied for new generic Top Level Domains to
the Internet Corporation for Assigned Names and Numbers (ICANN),
see note 22 for further details. Successful applications are
transferred from other long-term assets to Intangible assets. The
Group capitalises the full cost incurred to pursue the rights to
operate generic Top Level Domains including amounts paid at auction
to gain this right where there is more than one applicant to ICANN
for the same generic Top Level Domain.
This class of intangible assets are assessed to have an
indefinite life as it is deemed that the application fee and
amounts paid at auction give the Group indefinite right to this
generic Top Level Domain.
The Group tests intangible assets with an indefinite life
(generic Top Level Domains) annually for impairment, or more
frequently if there are indicators that the asset might be
impaired.
Impairment review of intangible assets
The Directors carried out an impairment review as at 31 December
2016 and have concluded that no impairment is required. The
recoverable amounts of each group of generic Top Level Domains (the
grouping of generic Top Level Domains is based on its
characteristics), software, contract based intangible assets and
other intangible assets are determined from value in use
calculations. The key assumptions for the value in use calculations
are those regarding the discount rates, growth rates and expected
changes to the selling process and direct costs. Management
estimate discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risk specific
to the asset.
The group prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next five
years, with the excpetion of Contract based intangible assets where
cash flows over the next eight years is used, and extrapolates cash
flows into perpetuity based on an estimated growth rate of 5%
(2015: 5%). The rate used to discount the forecast cash flow is 10%
(2015: 9%).
The group has carried out sensitivity analysis on the growth
rate and discount rate. A 2% change in either rates would not give
any indication of an impairment for all classes of intangible
assets, with the exception of contract based intangible assets,
where a 2% change in either rate would indicate an impairment
of:
-- Growth rate decrease by 2% - $1,620k
-- Discount rate increase by 2% - $2,160k
19 Fixtures and equipment
Fixtures & equipment
$000's
Cost
At 1 January 2015 1,196
Additions 108
Disposal (855)
Exchange differences (61)
At 31 December 2015 388
Additions 28
Disposal (99)
Exchange differences (7)
At 31 December 2016 310
Depreciation
At 1 January 2015 (325)
Depreciation charge for the period (367)
Disposal 476
Exchange differences 17
At 31 December 2015 (199)
Depreciation charge for the period (64)
Disposal 36
Exchange differences 6
At 31 December 2016 (221)
Carrying amount
At 31 December 2016 89
At 31 December 2015 189
20 Investment in subsidiaries
Company
Investments in subsidiary undertakings of the company 2016 2015
$ 000's $ 000's
Cost
At the beginning of the year 4,189 3,548
Movement in the year 42,054 641
Impairment (6,859) -
At 31 December 39,384 4,189
The movement in the year of $42,054k represents inter-company
loans receivable by the Company now treated as investments in
subsidiaries.
The Impairment in the year, relates to the impairment of the
Company's subsidiary, Minds and Machines Ltd (UK). The recoverable
amount of the subsidiary is calculated using a value in use method.
The Company prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next eight
years and extrapolates cash flows into perpetuity based on an
estimated growth rate of 5% (2015: n/a). The rate used to discount
the forecast cash flow is 10% (2015: n/a).
A 2% change in either rate would result in a further impairment
charge of:
-- Growth rate decreased by 2% - $1,620k
-- Discount rate increase by 2% - $2,160k
Details of the Company's subsidiaries are as follows:
Name Place of Incorporation Principal activity Proportion of Proportion of voting
(or registration and ownership interest (%) power (%)
operation)
Minds + Machines US,
Inc. (DE) US Holding company 100 100
Minds + Machines LLC
(3) US Registry 100 100
Minds + Machines LLC
(FL) (3) US Registry 100 100
Bayern Connect GmbH Germany Registry 80 100
Minds and Machines GmbH Germany Registry 80 100
Minds + Machines Ltd
(Ireland) Ireland RSP 100 100
Minds and Machines Ltd
(UK) England & Wales RSP 100 100
Minds + Machines
Registrar Ltd (IE) (4) Ireland Dormant 100 100
Minds and Machines
Registrar UK Ltd England and Wales Registrar 100 100
Emerald Names
Limited(2) Ireland Dormant 100 100
Dot Wedding Registry
Limited(2) Ireland Dormant 100 100
Minds + Machines
Hungary Hungary Registry 100 100
Emerald Names Inc US Registry 100 100
Boston TLD Management
LLC US Registry 99 99
Dot Law Inc (3) US Registrar 100 100
Beijing MMX Tech Co.
Ltd(1) China Registry 100 100
(1) Subsidiary incorporated in the year
(2) During the year, these entities were deregistered
(3) Minds + Machines LLC (CA), Minds + Machines LLC (FL) and Dot
Law, Inc. are direct subsidiaries of Minds + Machines US, Inc
(DE)
(4) Minds + Machines Registrar Limited (Ireland) is a direct
subsidiary of Minds + Machines Ltd (Ireland).
21 Interest in joint venture
At the start of the year, the group had a 50% interest in 4
joint ventures; Rugby Domains Ltd, Basketball Domains Ltd,
Entertainment Names Inc and Dot Country LLC. These joint ventures
were formed to sell second-level domain names to registrars. During
the year, the group disposed of its interest in Basketball Domains
Ltd and Rugby Domains Ltd, no proceeds were received from the
disposal of both. The loss on disposal of the two joint ventures
was $276k.
Group
Share of interest in assets / (liabilities) 2016 2015
$ 000's $ 000's
Assets
- Non-current 379 379
- Current 421 470
800 849
Liabilities
- Current (415) (14)
Share of interest in assets 385 835
- Revenue 16 29
- Cost of sales (15) (25)
- Expenses (26) (3)
(Loss) / profit after income tax (25) 1
There are no commitments arising in the joint ventures.
There are no contingent liabilities relating the Group's
interest in the joint ventures, and no contingent liabilities of
the venture itself.
Each joint venture is individually immaterial.
The principal place of business for Rugby Domains Ltd,
Basketball Domains Ltd and, Entertainment Names Inc. is the British
Virgin Islands. The principal place of business for Dot Country
LLC, is the Cayman Islands.
Company
Interests in joint ventures are accounted for at cost of $486k
(2015: $911k) in the Company financial statements.
22 Other long-term assets
Group and Company
2016 2015
$ 000's $ 000's
Restricted cash 2,217 2,153
Other long-term receivables 1,110 1,295
Total 3,327 3,448
The Group capitalizes the costs incurred to pursue the rights to
operate certain gTLD strings as these are deemed to provide
probable future economic benefit.
During the application process capitalized payments for gTLD
applications are included in Other Long Term Assets. While there is
no assurance that MMX will be awarded any gTLDs, long-term
receivables payments will be reclassified as intangible assets once
the gTLD strings are available for their intended use, which is
expected to occur following the delegation of gTLD strings by
ICANN. In general, MMX does not expect to withdraw any of its
applications unless the application has not passed the evaluation
process and there is no further recourse or there is an agreement
to sell or dispose of its interest in certain applications.
During the 2012 financial period, the Group paid US$13.5 million
in application fees to the Internet Corporation for assigned Names
and Numbers (ICANN) under ICANN's New generic Top Level Domain
(gTLD) Program and deposited US$3.6 million to fund the letters of
credit required by ICANN.
In 2013, 11 such applications were withdrawn either as a result
of participation in auctions or management decision. A further
application was transferred to a joint venture. As a result,
application fees paid to ICANN as at 31 December 2013 amounts to
$11,100k and deposits to fund letters of credit amounts to
$3,248k.
In 2014, 22 further applications were withdrawn either as a
result of participation in auctions or management decisions. As a
result, application fees paid to ICANN as at 31 December 2014
amounts to $3,145k. Due to the withdrawal on several applications
deposits to fund letters of credit decreased to $2,837k.
In 2015, 7 further applications were withdrawn either as a
result of participation in auctions or management decisions. As a
result, application fees paid to ICANN as at 31 December 2015
amounts to $1,295k. Due to the withdrawal on several applications
deposits to fund letters of credit decreased to $2,153k. Of the
applictaions withdrawn, 6 applictaions were withdrawn as a result
of participation in private auction where the Group did not win but
received a portion of the auction procees. Such auction proceeds,
less amounts not recovered from the Group's withdrawal of the
application to ICANN are accounted for on the profit and loss
acoount as profit on participation in gTLD auctions and amounted to
$7,943k.
In 2016, one further application was withdrawn due to management
decision. As a result, application fees paid to ICANN as at 31
December 2016 amounts to $1,110k and deposits to fund letters of
credit increased to $2,217k due to the funding of Boston. Deposits
to fund letters of credit increased to $2,217k due to additional
funding required for a TLD.
Where MMX receives a partial cash refund for certain gTLD
applications and/or to the extent the Group elects to sell or
dispose of its interest in certain gTLD applications throughout the
process, it may incur gains or losses on amounts invested. In such
cases the application fee will be reclassified from a long-term
asset. Refunds received will be properly recorded when received,
gains on the sale of the Group's interest in gTLD applications will
be recognized when realized, and losses will be recognized when
deemed probable. Other costs incurred by MMX as part of its gTLD
initiative not directly attributable to the acquisition of gTLD
operator rights are expensed as incurred.
Of the application which was withdrawn, $37k of the application
fee is recoverable, the amount not received from ICANN as a result
of such withdrawals are accounted for on the profit and loss
account as Loss in withdrawal of gTLD applications and amounted to
$148k (2015: $148k).
Restricted cash is interest bearing and is therefore stated at
fair value. Other long-term receivables are stated at amortized
cost.
23 Cash and cash equivalents
Net cash outflows from operations
Group Company
2016 Restated 2015 2016 Restated 2015
$ 000's $ 000's $ 000's $ 000's
Operating EBITDA 3,610 266 1,676 5,809
Adjustments for:
Loss from discontinued operations (note 7) (1,312) (3,883) - -
Restructuring costs (1,166) - (80) -
(Increase) / decrease in trade and other receivables including
long term receivables (1,926) 662 (4,495) 838
(Decrease) / increase in trade and other payables (350) 205 10,026 (169)
Profit on gTLD auction - (7,943) - (7,943)
Loss on withdrawal of gTLD application 148 148 148 148
Foreign exchange (gain) / loss 367 (200) 215 (2,483)
Net cash outflows from operations (629) (10,745) 7,490 (3,800)
Restricted cash
Included in the Group and company's cash and cash reserves is
restricted funds of $1million (2015: $Nil) held in escrow to
satisfy certain vendor requirements, to be released back to the
Group and Company over the next five years. Separate to restricted
cash held in other long term assets, is restricted funds of
$1m.
24 Trade and other receivables
Group Company
Current trade and other receivables 2016 Restated 2016 Restated
$ 000's 2015 $ 000's 2015
$ 000's $ 000's
Trade receivables 3,992 2,791 3,048 1,908
Other receivables 1,969 916 732 62
Prepayments 1,943 1,893 859 691
Balances due from subsidiaries - - 3,831 37,234
Due from joint ventures 49 6 49 6
Total 7,953 5,606 8,519 39,901
The loans due from subsidiaries are interest free and have no
fixed repayment date. The loans have been classified to current
receivables in the current year as the directors assess these
balances to be recoverable in 2017. The difference between the
carrying value and the fair value of the loan at the reporting date
is deemed to be immaterial.
Trade receivables - Group
Trade receivables disclosed above are classified as loans and
receivables and are therefore measured at amortized cost.
Ageing of past due but not impaired receivables:
2016 2015
$ 000's $ 000's
1 - 30 days - -
31 - 60 days 1,766 210
61-90 days 398 514
91 days and over 594 951
Total 2,758 1,675
Included in the ageing of past due but not impaired receivables
of 91 days and over an amount of $239k receivable from one customer
was received after the year end.
Trade receivables - Company
Trade receivables disclosed above are classified as loans and
receivables and are therefore measured at amortized cost.
Ageing of past due but not impaired receivables:
2016 2015
$ 000's $ 000's
1 - 30 days - -
31 - 60 days 1,635 194
61-90 days 398 502
91 days and over 354 42
Total 2,387 738
Included in the ageing of past due but not impaired receivables
of 91 days and over an amount of $239k receivable from one customer
was received after the year end.
25 Trade and other payables
Group Company
2016 2015 2016 2015
$ 000's $ 000's $ 000's $ 000's
Trade payables 878 211 181 114
Due to joint ventures 70 18 65 13
Due to subsidiaries - - 8,798 -
Taxation liabilities 171 206 - -
Other liabilities 5,917 2 228 -
Deferred revenue 6,095 5,613 3,523 2,225
Accruals 1,853 2,922 1,085 1,500
Total 14,984 8,972 13,880 3,852
All trade and other payables are due within one year and
approximate their fair value.
26 Share capital and premium
Called up, allotted, issued and fully paid ordinary shares of no par Number of shares Price per share Total
value (cents/pence) $ 000
As at 1 January 2014 650,558,522 49,481
30 January 2014 - cash on issue of shares 175,000,000 19.89/12 34,801
Options and warrants exercised:
4 April 2014 for cash on exercise of options 3,000,000 6.7/4 201
13 July 2014 for cash on exercise of options 738,299 18.1/11 134
14 July 2014 for cash on exercise of options 350,000 15.4/9 54
25 July 2014 for cash on exercise of options 350,000 15.8/9 55
12 September 2014 for cash on exercise of options 350,000 15.4/9 54
22 October 2014 for cash on exercise of warrants 1,622,664 6.5/4 106
14 November 2014 for cash on exercise of options 4,000,000 6.8/4 273
877
Cost of share issue (2,293)
As at 31 December 2014 835,969,485 82,866
Shares repurchased (68,864,800) 13/8.6 (9,050)
As at 31 December 2015 767,104,685 73,816
Shares repurchased (10,658,568) 11/7.7 (1,179)
Share warrants exercised:
24 May 2016 for cash on exercise of options 1,103,753 8.7/6 95
Shares repurchased:
3 October 2016 Tender Offer (100,000,000) 16.9/13 (19,088)
Shares issued:
10 October 2016 Shares issued for cash 42,307,692 16.2/13 6,716
Cost of share issue (300)
As at 31 December 2016 699,857,562 60,060
27 Share-based payments
2016 2015
Share-based payment expense $ 000's $ 000's
Equity settled share based payments 653 3,223
Expense as a result of modification of equity settled share based payments 92 12
Total 745 3,235
The company has the following share option schemes in place:
-- Directors and Employees Share Option Scheme - this scheme was
previously open to all directors and employees of the scheme.
Current employees are now enrolled under a new 'Restricted Share
Option' (RSU) scheme (see below) whilst this current scheme is only
open to Directors and certain senior executives.
-- Restricted Share Option ('RSU') scheme - the group opened a
new scheme for all employees of the group with the exclusion of
Directors and certain senior executives.
Directors and Employees Share Option Scheme
2016 2015
Number of share options Weighted average Number of share Weighted average
exercise price (cents / options exercise price (cents /
pence) pence)
Outstanding at the
beginning of the year 55,207,318 9.8/8.0 23,712,500 9.5/6.4
Granted during the year 15,000,000 9.8/8.0 41,950,000 13.17/8.88
Forfeited during the
year (1) (15,244,818) 8.5/6.9 (10,455,182) 12.06/8.14
Exercised during the
year (2) (25,150,000) 8.7/7.0 - N/A
Expired during the year - N/A - N/A
Outstanding at the end
of the year 29,812,500 14.7/11.9 55,207,318 11.78/7.95
Exercisable at the end
of the year 9,575,000 9.4/7.6 34,353,056 10.69/7.21
1. Included within the number of share options forfeited in the
year are 8,500,000 (2015: Nil) share options issued to Directors
that were forfeited and settled in cash. This change was treated as
a modification of a share based payment from equity settled to cash
settled. The amounts payable under this settlement amounted to
$75k, which has already been recognized as an expense in the prior
years and therefore reduced from equity in the current year as a
repurchase of equity instrument. No additional amounts were
expensed.
2. Included within the number of share options exercised during
the year are 25,150,000 (2015: Nil) share options issued that were
settled in cash. This change was treated as a modification of a
share based payment from equity settled to cash settled. The amount
payable under this settlement amounted to $676k, of which $639k had
already been recognized as a share based payment expense in the
prior years and therefore reduced from equity in the current year
as a repurchase of equity instrument. The balance of $37k was
expensed.
The weighted average contractual life of outstanding options at
the end of the year is 1.5 years (2015: 8.2 years). There were
15,000,000 options granted in 2016 (2015: 41,950,000). The
aggregate of the estimated fair values of the options granted under
this scheme during 2016 is $2,058k (2015: $3,311k).
The general terms of the share options, under the company share
options scheme, vest over 3 years (quarterly vesting, 1/12(th) of
options vest every quarter) and are exercisable over ten years from
the date of grant if the employee remains within the company. The
exercise price is determined by the average share price over the 30
days preceding the date of the grant.
Directors and employee share option scheme - share options
granted in the year:
2016 2015
Weighted average share price (cents/pence) 11.0/9.0 12.6/8.3
Weighted average exercise price (cents/pence) 10.7/8.7 13.6/8.9
Expected volatility 43.25% 54.69%
Expected life 3 years 10 years
Risk-free rate 2% 2%
Expected dividend yield Nil Nil
Expected volatility was determined by calculating the historic
volatility of the Group's share price over the previous year.
Volatility over earlier years is not representative and has
therefore not been used to calculated volatility. The expected life
used in the model has been adjusted, based on management's best
estimate.
Restricted Share Option Scheme
2016 2015
Number of share Weighted average Number of share Weighted average
options exercise price (cents options exercise price (cents
/ pence) / pence)
Outstanding at the
beginning of the
period 7,133,333 - - -
Granted during the
period - - 16,500,000 -
Forfeited during the
period (2,737,496) - (4,841,667) -
Exercised during the
period (3,595,836) - (4,525,000)* -
Expired during the - - - -
period
Outstanding at the end
of the period 800,001 - 7,133,333 -
Exercisable at the end
of the period 183,334 - 770,833 -
*All share options exercised during under the Restricted Shared
Option Scheme were settled in cash. This change was treated as a
modification of a share based payment from equity settled to cash
settled. The amount payable under this settlement amounted to
$458k, of which $466k had already been recognized as a share based
expense in prior years and therefore reduced from equity in the
current year as a repurchase of equity instrument. The balance of
$23k was expensed.
The weighted average contractual life of outstanding options at
the end of the year is 0.64 years (2015: 1.68 years). There were no
options granted in 2016 (2015:16,500,000). The aggregate of the
estimated fair values of the share options granted under the RSU
scheme in 2015 was $2,121k.
The general terms of the share options, under the RSU scheme,
vest over 3 years (quarterly vesting, 1/12(th) of options vest
every quarter) and are exercisable over three years from the date
of grant if the employee remains within the company, at a nil
exercise price.
Restricted Share Option Scheme - share options granted in the
year:
2016 2015
Weighted average share price (cents/pence) N/A 13.4/8.75
Weighted average exercise price (GBP) N/A Nil
Expected volatility N/A N/A
Expected life N/A 3 years
Risk-free rate N/A 2%
Expected dividend yield N/A Nil
The market price of the ordinary shares at 31 December 2016 was
$0.13 / GBP0.11 (2015: $0.12 / GBP0.08) and the range during the
year was $0.10 / GBP0.07 to $0.17 / GBP 0.13 (2015: $0.11 / GBP0.07
to $0.16 / GBP 0.11).
Directors' share options
Details of options for Directors' who served during the year are
as follows:
1 Jan 2016 Granted Forfeited Exercised Expired 31 Dec 2016
Antony Van Couvering (1)* 23,000,000 - - (23,000,000) - -
Michael Salazar (2) 8,500,000 7,500,000 (8,500,000) - - 7,500,000
Toby Hall (3) - 7,500,000 - - - 7,500,000
Caspar Veltheim (4)* 2,512,500 - - - - 2,512,500
Keith Teare (5)* 1,050,000 - - (1,050,000) - -
Elliott Noss (6)* 750,000 - - - - 750,000
Total 35,512,500 15,000,000 (8,500,000) (23,750,000) - 18,262,500
*These directors were not employed for the full 2016 financial
period
(1) 2,626,347 options - exercise price - GBP0.04, exercisable
from - 27 May 2009, expires on - 24 June 2014, 7,000,000 options
exercise price - GBP0.09, exercisable from - 22 May 2010, expires
on - 24 June 2014. 3,025,143 options - exercisable from 13 May
2013, expires on 13 February 2023 (quarterly vesting beginning 13
May 2013 of 1/12(th) of options). 9,474,857 options - exercisable
from 13 February 2013, expires on 13 February 2023. 10,500,000
options granted in the year - exercise price - GBP0.08, exercisable
from 1 August 2014, expires on - 31 July 2024 (quarterly vesting
beginning 1 August 2014 of 1/12(th) of options).
(2) At the beginning of the year 1,250,000 options -Exercise
price - GBP0.062, exercisable from - 1 Jun 2013, expires on - 30
Nov 2022 (quarterly vesting beginning at 1 Jun 2013 of 1/12(th) of
options) and 7,250,000 options - exercise price - GBP0.08,
exercisable from 1 August 2014, expires on - 31 July 2024
(quarterly vesting beginning 1 August 2014 of 1/12(th) of options).
During the year, these options were forfeited and a further grant
of 7,500,000 options were awarded - Nil exercise price -
exercisable on the publication of the 2018 financial
statements.
(3) 7,500,000 options granted in the year - exercise price Nil,
exercisable on the publication of the 2018 financial
statements.
(4) 312,500 options - exercise price - GBP0.07, exercisable from
- 1 Aug 2012, expires on 31 Jul 2022 (quarterly vesting beginning
at 1 Nov 2012 of 1/12(th) of options). 2,200,000 options - exercise
price - GBP0.08, exercisable from 1 August 2014, expires on - 31
July 2024 (quarterly vesting beginning 1 August 2014 of 1/12(th) of
options).
(5) 300,000 options - exercise price - GBP0.063, exercisable
from - 13 Feb 2013, expires on 13 Feb 2023 (quarterly vesting
beginning at 13 Feb 2013 of 1/12(th) of options) and 750,000
options - exercise price - GBP0.08, exercisable from 1 August 2014,
expires on - 31 July 2024 (quarterly vesting beginning 1 August
2014 of 1/12(th) of options) 1,050,000 options exercised in
2016.
(6) 750,000 options - exercise price - GBP0.08, exercisable from
1 August 2014, expires on - 31 July 2024 (quarterly vesting
beginning 1 August 2014 of 1/12(th) of options).
There have been no variations to the terms and conditions or
performance criteria for share options during the financial
year.
Total warrants outstanding
As at 31 December 2016 the outstanding unexercised warrants in
issue were:
Exercise Price Expiry Date Number of warrants
10p 06 May 2019 8,000,000
12p 12 February 2017 1,047,089
15p 18 March 2021 650,000
13p 31 October 2019 2,500,000
In 2016 1,103,753 (2015:Nil) warrants were exercised at an
exercise price of 8.7 cents / 6 pence.
As at the 31 December 2015 the outstanding unexercised warrants
in issue were:
Exercise Price Expiry Date Number of warrants
10p 06 May 2019 8,000,000
6p 3 June 2016 1,103,753
12p 12 February 2017 1,047,089
15p 18 March 2021 650,000
28 Financial instruments
Capital risk management
The Group and Company manages its capital to ensure that
entities in the Group will be able to continue as going concerns
while maximizing the return to stakeholders through the
optimization of the debt and equity balance. The Group and
Company's overall strategy remains unchanged from 2015.
The capital structure of the Group and Company consists cash and
cash equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves, and retained
earnings.
The Group and Company is not subject to any externally imposed
capital requirements.
The Group and Company's strategy is to ensure availability of
capital and match the profile of the Group and Company's
expenditures. To date the Group has relied upon equity funding to
finance operations. The Directors are confident that adequate cash
resources exist to finance operations to commercial exploitation,
but controls over expenditure are carefully managed.
The Group and Company has a policy of not using derivative
financial instruments for hedging purposes and therefore is exposed
to changes in market rates in respect of foreign exchange risk,
However, it does review its currency exposures on an ad hoc basis.
Currency exposures relating to monetary assets held by foreign
operations are included within the foreign exchange reserve in the
Group Balance Sheet.
Categories of financial instruments
Group
Financial assets 2016 Restated 2015
$ 000's $ 000's
Cash and bank balances 15,275 34,651
Loans and receivables (including long term receivables) 8,178 6,707
Financial liabilities
Other financial liabilities at amortised cost 6,792 213
Company
Financial assets 2016 Restated 2015
$ 000's $ 000's
Cash and bank balances 10,544 23,990
Loans and receivables (including long term receivables) 9,828 42,013
Financial liabilities
Other financial liabilities at amortised cost 9,205 114
There are no material differences between the book values of
financial instruments and their market values.
Financial risk management objectives
The Group and Company's Finance function provides services to
the business, co-ordinates access to domestic and international
financial markets, monitors and manages financial risks related to
the operations of the Group and Company through internal risk
reports, which analyses exposures by degree and magnitude of risks.
These risks include market risk, credit risk, liquidity risk, and
cash flow interest rate risk.
It is, and has been throughout 2016 and 2015, the policy of both
the Group and the Company that no trading derivatives are
contracted.
The main risks arising from the Group and the Company's
financial instruments are foreign currency risk, credit risk,
liquidity risk, interest rate risk and capital risk. Management
reviews and agrees policies for mitigating each of these risks,
which are summarised below.
Market risk
The Group and Company's activities expose it primarily to the
financial risks of changes in foreign currency exchange rates and
interest rates. The risk is managed by the Group and Company by
maintaining an appropriate mix of cash and cash equivalents in the
foreign currencies it operates in. The Group and Company's
management did not set up any financial instruments policy to
manage its exposure to interest rates and foreign currency
risk.
Foreign currency risk
The Group and Company undertakes transactions denominated in
foreign currencies; consequently, exposures to exchange rate
fluctuations arise. The Group and Company evaluates exchange rate
fluctuations on a periodic basis to take advantage of favorable
rates when transferring funds between accounts denominated in
different currencies.
The carrying amount of the Group and Company's foreign currency
denominated monetary assets and monetary liabilities at the
reporting date is as follows
Group Liabilities Assets
2016 Restated 2015 2016 Restated 2015
$ 000's $ 000's $ 000's $ 000's
Sterling 5,682 159 3,708 7,541
USD 1,065 35 18,047 30,297
Euro 45 19 1,698 3,520
As at 31 December 6,792 213 23,453 41,358
Company Liabilities Assets
2016 Restated 2015 2016 Restated 2015
$ 000's $ 000's $ 000's $ 000's
Sterling 2,068 - 3,696 1,226
USD 5,524 114 14,780 64,777
Euro 1,613 - 1,896 -
As at 31 December 9,205 114 20,372 66,003
Foreign currency sensitivity analysis
The following table details the Group and Company's sensitivity
to a 10% increase and decrease in the functional currency against
the relevant foreign currencies. 10% represents management's
assessment of the reasonably possible change in foreign exchange
rates.
The sensitivity analysis includes only outstanding foreign
currency denominated financial instruments and adjusts their
translation at the period end for a 10% change in foreign currency
rates. The following table sets out the potential exposure, where a
positive number below indicates an increase in profit or loss and
other equity where the US Dollar strengthens 10% against the
relevant currency. For a 10% weakening of the US Dollar against the
relevant currency, there would be a comparable impact on the profit
or loss and other equity, and the balances below would be
positive.
Group Pound Sterling impact Euro impact
2016 Restated 2015 2016 Restated 2015
$ 000s $ 000s $ 000s $ 000s
Profit or loss (i) (1,129) (770) (174) (354)
Other equity (ii) - - - -
(1,129) (770) (174) (354)
Company Pound Sterling impact Euro impact
2016 Restated 2015 2016 Restated 2015
$ 000s $ 000s $ 000s $ 000s
Profit or loss (i) (576) (123) (351) -
Other equity - - -
(576) (123) (351) -
The main attributable to the exposure outstanding on Pound
Sterling and Euro is receivables and payables at the balance sheet
date.
There is no impact on other equity, as the Group does not hold
derivative instruments designated as cash flow hedges and net
investments hedges.
In management's opinion, the sensitivity analysis is
unrepresentative of the inherent foreign exchange risk as the
year-end exposure does not reflect the exposure during the year.
Whilst the group operates across Europe and North America,
operations are managed in US dollar and these financial statements
are presented in US Dollars.
Interest rate risk
The Group and Company's exposure to interest rate risk is
limited to cash and cash equivalents held in interest-bearing
accounts.
Interest rate sensitivity analysis
The impact of interest rate fluctuations is not material to the
Group and Company accounts.
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group and Company. The Group and the Company's financial assets
comprise of receivables, cash, and cash equivalents, and other
long-term assets.
The credit risk on trade and other receivables is limited as the
amount represents a pre-payment of revenue from a future
undertaking. The pre-payment has certain conditions associated with
it that require the counterparty to refund the amounts paid if
certain criteria are not met.
The credit risk on cash and cash equivalents is limited as the
counterparties are banks with high credit-ratings as determined by
international credit-rating agencies.
The credit risk on other long-term assets is limited as the
total amount represents two components: deposits for the right to
secure a revenue-generating asset and restricted cash. The deposits
for the right to secure revenue-generating assets are maintained by
a government sponsored global organization that is contractually
required to return a portion of these deposits if requested.
Furthermore, the agency, a not-for-profit organization, is well
funded by its member organizations and is not a risk to cease
operations. The restricted cash is deposited with banks with a
high-credit rating as determined by international credit-rating
agencies.
The exposure of the Group and the Company to credit risk arises
from default of its counterparty, with maximum exposure equal to
the carrying amount of receivables (excluding prepaid income), cash
and cash equivalents, and other long term assets in the Group and
Company statements of financial position.
The Group and Company do not hold any collateral as
security.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has established an appropriate
liquidity risk management framework for the management of the Group
and Company's short, medium, and long-term funding and liquidity
management requirements. The Group and Company manages liquidity
risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities, by continuously monitoring forecast
and actual cash flows, and by matching the maturity profiles of
financial assets and liabilities.
Cash forecasts are regularly produced to identify the liquidity
requirement for the Group and Company. To date, the Group has
relied on the issuance of stock warrants and shares finance its
operations. The Group made use of limited borrowing facilities as
at 31 December 2016.
The Group's and Company's remaining contractual maturity for its
non-derivate financial liabilities with agreed repayment periods
are:
Group Company
31 December 2016 Weighted average effective Within 1 year 1 - 5 years Within 1 year 1 - 5 years
interest rate $ 000s $ 000s $ 000s $ 000s
Non-interest bearing:
Trade and other payables 6,792 - 406 -
Fixed interest rate
instruments:
Obligations under finance
lease 13.76% - - - -
6,792 - 406 -
Group Company
31 December 2015 Weighted average effective Within 1 year 1 - 5 years Within 1 year 1 - 5 years
interest rate $ 000s $ 000s $ 000s $ 000s
Non-interest bearing:
Trade and other payables 213 - 114 -
Fixed interest rate
instruments:
Obligations under finance
lease 13.76% 2 - - -
215 - 114 -
Other Group and Company's non-derivative financial assets mature
within one year.
The Group and Company had no derivative financial instruments as
at 31 December 2016 and at 31 December 2015.
29 Commitments
The group as a lessee 2016 2015
$ 000's $ 000's
Lease payments recognised under operating leases recognised as an expense in the year 237 770
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
2016 2015
$ 000's $ 000's
Within one year 406 423
In the second to fifth years inclusive 2,734 312
After five years - -
3,141 735
Operating lease payments represent amounts payable by the group
for its office properties and outsourcing registry operations.
Leases in relation to office properties are negotiated for an
average period of three years with fixed rentals with only one
lease having the option to extend for a further three years at a
fixed rental. Leases in relation to outsourcing registry operations
are negotiated for a period of five years with fixed
commitments.
As at 31 December 2016 and 31 December 2015, the Group has no
capital commitments.
As at 31 December 2016 and 31 December 2015, the Company had no
lease or capital commitments.
30 Related party transactions - Group
Balances and transactions between the company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and its associates are disclosed below.
Transactions between the Company and its subsidiaries and
associates are disclosed in note 28.
Joint ventures
During the year, the Group entered into transactions with its
Joint Ventures that resulted in amounts owed to or due from the
Joint Ventures. The balances at the year-end were due to financial
and equity requirements across the Joint Ventures. The balances
have no fixed repayment and no interest is received or charged on
these balances.
2016 2015
$ 000's $ 000's
Due to Rugby Domains Ltd - 11
Due to Basketball Domains Ltd - (14)
Due from Entertainment Names Inc 44 44
Due to Dot Country LLC (33) (58)
Other
At the balance sheet date, an amount of $61k (2015: $61k) was
due from Frederick Krueger (a former Director of the company) in
relation to shares previously issued.
The Group also sells second level domain names to Tucows, Inc.
and receives certain registrar back end services from Tucows, Inc.
In 2016, the Group invoiced Nil (2015: $Nil) to Tucows, Inc. and
was invoiced $1.5k (2015: $27k) by Tucows. The net
payable/receivable from Tucows at year end was $1.5k (2015: $36k).
Tucows, Inc. is related by virtue of a common director who ceased
to be a director during 2016.
Remuneration of Key Management Personnel
The remuneration of the Executive Directors, who are the key
management personnel of the Group, is set out in note 8.
Related party - Company
Transactions between the Company and its subsidiaries and
associates are disclosed below.
Subsidiaries
During the year, the Company's subsidiaries have provided
certain services to the Company (RSP services) and recharged
certain costs to the Company. Details of these transactions are
shown below
Recharged costs and services from 2016 2015
$ 000's $ 000's
Minds and Machines LLC 4,350 1,113
Minds + Machines Limited (IE) 1,533 214
Minds and Machines Limited (UK) - 115
In addition, during the year, the Company has provided financing
to its subsidiaries. The net balances due to the Company are
detailed below. The balances have no fixed repayment terms and no
interest is charged on these balances.
Company 2016 2015
$ 000's $ 000's
Minds and Machines LLC (4,907) 13,240
Bayern Connect GmbH 1,001 1,032
Minds and Machines GmbH 651 670
Minds + Machines Limited (IE) (1,613) 11,460
Minds + Machines Registrar Limited (IE) - -
Minds and Machines Limited (UK) (2,068) 10,642
Minds and Machines Registrar UK Limited 2 3
Emerald Names, Inc 97 5
Minds + Machines (FL) (211) (40)
Minds + Machines, Inc. 5 5
Minds + Machines Hungary 240 218
Dot Law, Inc. 102 -
Boston TLD Management LLC 1,514 -
Beijing MMX Tech Co. Ltd 219 -
During the year the Company also sold second level domain names
to its subsidiaries and had trade receivable balances outstanding
at the year end:
Company Second level sale of domains Trade receivable outstanding
2016 2015 2016 2015
$ 000s $ 000s $ 000s $ 000s
Minds and Machines LLC 927 1,184 2,101 1,169
Minds + Machines Registrar Limited (IE) - 151 - -
Joint ventures
During the year, the Company entered into transactions with its
Joint Ventures that resulted in amounts owed to or due from the
Joint Ventures. The balances at the year-end were due to financial
and equity requirements across the joint ventures. The balances
have no fixed repayment and no interest is received or charged on
these balances.
2016 2015
$ 000's $ 000's
Due to Rugby Domains Ltd - 11
Due to Basketball Domains Ltd - (14)
Due from Entertainment Names Inc 49 49
Due to Dot Country LLC (33) (58)
Other
At the balance sheet date, an amount of $61k (2015: $61k) was
due from Frederick Krueger (a former Director of the company) in
relation to shares previously issued.
Remuneration of Key Management Personnel
The remuneration of the Executive Directors, who are the key
management personnel of the Group, is set out in note 7 and share
options issued set out in note 27.
31 Post Balance Sheet Events
On the 1 February 2017, awards of options over ordinary shares
of the Company were made to certain directors and senior managers
of the company.
Details of the options granted are as follows:
Number of Options Granted Exercise Price
Toby Hall 3,000,000 -
Michael Salazar 3,000,000 -
Senior Management 2,000,000 9.375p
The options granted to the Directors are structured as nil-cost
options and, subject to the achievement of vesting conditions, the
options will vest on the publication of the accounts of the Company
for the year ended 31 December 2018.
The options fully vest at a share price of 18.75p or higher per
share. Only a percentage of options vest at a share price of
between 9.375p and 18.75p per share, with no options vesting if the
share price is below 9.375p per share.
The options granted to senior managers vest on the publication
of the accounts of the Company for the year ended 31 December
2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWEDLFWSEFL
(END) Dow Jones Newswires
April 25, 2017 02:01 ET (06:01 GMT)
Minds + Machines (LSE:MMX)
Historical Stock Chart
From Apr 2024 to May 2024
Minds + Machines (LSE:MMX)
Historical Stock Chart
From May 2023 to May 2024