RNS Number:1800N
XploiTe PLC
04 February 2008
4 February 2008
Xploite plc
Preliminary results
Xploite plc ("Xploite", "the Group", AIM: XPT), the operator and aggregator of
strategic and high growth IT services businesses, publishes its preliminary
results for the twelve months to 31 October 2007.
Highlights
* Turnover �31.2m (2006: �29.5m)
* �5.5m increase in adjusted operating profit* to �1.2m (2006: loss �4.3m)
* �10.3m cash returned to shareholders
* �5.8m cash inflow from operations (2006: outflow �4.5m)
* 4 Acquisitions completed to begin new phase of buy and build cycle:
Posetiv, Anix, Red Squared plc and Itheon
* Disposal of Fujin Technology Trading
* Major new contract wins including �5m infrastructure project for
Camelot and �1.1m managed service contract with AG Thames
* Discussions with third parties which may lead to an offer are continuing
* Encouraging start to trading and increases in managed services contracts
in current financial year
Ian Smith, Xploite Chief Executive commented,
"Having returned substantial funds to shareholders, we have made good progress
in rapidly building a new IT services group with a strong emphasis on lengthy
managed service contracts. We have seen 40% year on year organic growth within
our managed service operation and have secured �10m of new contracts over the
last five months."
Enquiries
Xploite plc www.xploite.com 0870 737 2001
Ian Smith, Chief Executive Officer
Robert Arrowsmith Finance Director
KBC Peel Hunt Ltd 0207 418 8900
Oliver Scott/Nicholas Marren
College Hill 020 7457 2020
Adrian Duffield / Jon Davies
*Refer to reconciliation on page 8
Chairman's statement
Xploite is a company that identifies, acquires, consolidates and develops
businesses in the IT services sector. The Group creates shareholder value by
identifying and acquiring businesses that have a good strategic fit, integrating
and consolidating operations, reducing costs and developing recurring revenue
streams through the efficient deployment of people, processes and technologies.
Overview
I am very pleased to report on a successful year for the Group.
In the year to 31 October 2007, we completed both the last phase of our previous
buy and build cycle and embarked on a new one and so the year may be viewed as
one of transition from one phase to another.
Following the disposal of Matrix Communications and completion of the associated
earn out with its acquirer Calyx Group plc, we returned �10.3m to shareholders.
Since February the Board has been implementing a buy and build strategy to
acquire and build scale and depth in the managed services and storage sectors of
the IT services market. To date the Group has made four acquisitions
Month Company Cash Deferred Maximum Consideration
February Posetiv Limited �4.2m - �4.2m
April Anix Holdings Limited �11m - �11m
October Red Squared plc �3.2m - �3.2m
October Itheon Limited �3.6m �3.2m �6.8m
Since these acquisitions were made, Posetiv, Anix and Red Squared, all
businesses that are focussed on managed services and storage, have been
consolidated under the Anix brand. Successful consolidation of these businesses
in the second half of the year has given the Group a very strong customer base
with significant recurring revenues. Itheon remains as a standalone business
focused on the supply of network assurance software. Anix is both a customer
and channel to market for Itheon's innovative software.
The Group expects operational and other synergies from the acquisition of Red
Squared and Itheon to be realised over the course of the next year. The full
benefits of the acquisitions will only be apparent as the current year unfolds.
Results
Our results have to be considered in the context of strategic transition.
Revenues for the year to 31 October 2007 were �31.2m (2006: �29.5m) and we
recorded an operating loss of �0.9m (2006: loss �7.5m) an adjusted operating
profit of �1.2m (2006: loss �4.3m), and a loss per share of (1.4p) (2006:profit
26.2p).
Comparing our results for 2007 with those of 2006 is complicated by the
following factors:
* The 2006 results comprised the Equip distribution business for three
months, the Integration division for seven and a half months and Fujin
Technology Trading for twelve months.
* The 2007 figures reported herein include Fujin Technology Trading for ten
months up to its disposal, Posetiv Limited for nine months, Anix Group for
seven months and Red Squared Plc and Itheon Limited for two weeks each
following their respective acquisitions.
* In November 2006 we returned 26p per share to shareholders.
As a result of the acquisitions and the disposal of Fujin, the Group now has two
trading brands, Anix and Itheon.
Anix
Anix now comprises two divisions encompassing managed services and the resale of
software and hardware for data storage solutions. Anix is one of four Platinum
partners to IBM and one of two Platinum partners to NetApp. It is also a
Microsoft Gold partner and holds many other vendor accreditations. This is in
line with our strategy of building strong relationships with best of breed
vendors.
Through the successful consolidation of Anix and Posetiv and the acquisition of
Red Squared, Anix is now positioned as one of the UK's strongest mid market
managed services specialists, Itheon owns the software required to deliver these
services creating further opportunities for the Group.
Ovum predicts that this market will be worth $41.5Bn by 2009 and that the
fastest growing region in the world is Europe, Middle East and Africa (EMEA).
When taken over the last twelve months of our acquired companies' trading, the
managed services billing grew at an annualised rate of 40% year on year with new
total contract margin signings growing by 51% through the focus on the mid
market. We are expecting similar growth this year. Since 1 November 2007 Anix
has signed or is negotiating contracts with total contract values in excess of
�10m.
Anix now owns two data centres with a total capacity for 100 racks of which 50%
is currently occupied. Further space is sublet from national suppliers. The
Group has chosen to focus on higher value managed services rather than simple
low margin co-location or server hotel activities. The market has seen much
activity in this area recently with the successful public offering of Telecity
and the acquisition of IX Europe by Equinix. This area of the business typically
generates higher margins than the server hotel activity. The Group currently
services approximately 220 customers across two network operating centres in
Bristol and Manchester and expects to build out these operations as the customer
base grows.
Hardware sales of Anix remains important to the Group; were it not for this side
of the business we would not enjoy the benefits of top tier vendor relationships
and accreditations. However, by its very nature this source of revenue is
harder to predict. Anix saw some softening in this area in 2007 but early cost
and operational control has meant that this side of the business will continue
to deliver strong results for the Group. Indeed toward the end of the year the
Group was delighted to report a large contract with Camelot worth some �5m, of
which �4m has been recognised in the current year.
Itheon
The Group was delighted to complete the acquisition of Itheon. This modular
based software enables us to replicate an IBM Tivoli(TM) or HP Openview(TM)
style of monitoring and reporting for our services customers. Traditionally,
Itheon has sold its software through third parties and it will continue to do so
using Anix as both a further channel to market and a customer. Unlike the
software from the larger vendors, Itheon's software is ideal for our mid market
focus both in terms of cost and scalability.
Rather than integrate this business under the Anix brand the Group has decided
to continue to trade as Itheon in order to protect the third party revenues that
already exist. Indeed, given the traditionally high margins enjoyed by software
businesses, it is our aim to try and extend the offering across Europe Middle
East and Africa with a positive impact on revenues and profitability.
A particularly exciting element of the Itheon software is the ability to provide
storage allocation tracking. In simple terms this means the customer can
measure and bill the use of storage at a very granular level via an automated
process. This has already been successfully deployed in the UK with NHS
electronic patient records. Having proved the model the Group is now going to
host this aspect of the software and turn the provision of this into Software as
a Service ("Saas"). This will enable customers to simply log in and pull down
this service on a subscription basis and means we can launch it globally.
Gartner reports that by 2011 25% of all software sold will be via SaaS and will
have a global value of $19.3bn.
Fujin Technology
In September 2007, the Group disposed of Fujin Technology Trading Limited.
Having undertaken a strategic review of this business, the Board decided that
Fujin's mobile web content filtering platform was no longer core to the Group's
activities. The business was sold to Fujin's management for a cash
consideration of �1.0 million realising a profit on sale of �437,000. Under the
terms of this agreement Xploite retained the rights to Fujin's patented
innovative content filtering and categorisation software, thereby protecting any
future value that might arise from its investment to date.
Board
During the year we made a number of significant Board changes. The Group
welcomed back Tony Weaver who rejoined the Board in February 2007 as Chief
Operating Officer. Tony was previously the COO of Matrix Communications and had
left only to facilitate the successful earn out and integration of that business
with its acquirer Calyx Group plc. Robert Arrowsmith joined as Finance Director
and brought with him many years experience of mergers and acquisitions within IT
services. I joined the Board in April as non executive Chairman and I was
joined in July by Richard Ramsay who is our independent senior non-executive
director. I consider that the skills of the Board are very well suited to the
strategic goals of the Group.
Employees
As a specialist service company it is imperative that we retain high quality
employees. As the business grows through acquisition it is often an unsettling
time and I would like to extend my sincere thanks and gratitude to all members
of our staff for their commitment and loyalty. The high level of service that
our customers expect has always been maintained and it is thanks to the
dedication of our colleagues that this has been possible.
Group Strategy
The Group continues its strategy of identifying, acquiring and consolidating
businesses that have a clear strategic fit focused on managed services and
storage solutions, two of the fastest growing segments of the IT services
market. We remain focussed on value improvement by integrating and consolidating
operations, reducing costs and developing recurring revenue streams through the
efficient deployment of people, processes and technologies, and the subsequent
realisation of these businesses creating value for shareholders.
Current trading and outlook
Our trading is encouraging and we are confident that our strategy will prove
rewarding for our shareholders.
Currently less than 10% of mid market customers outsource any or all of their IT
- this is our opportunity. This market is growing strongly at some 40% annually
amongst FTSE 250 customers and it is our aim to be the UK's number one supplier
to this market.
We announced on 11 December 2007, that discussions were taking place which may
or may not lead to an offer for all or part of the company. These discussions
are ongoing and there is no certainty that they will result in a formal offer.
We will make a further announcement as appropriate.
John Standen
Chairman
Business and Financial review
Business Review
Xploite is a company that identifies, acquires, consolidates and develops
businesses in the IT services sector.
In order to give a meaningful review of the company's achievement against its
objectives two separate elements will be considered.The first is the "identify
and acquire" objective and the second is the "consolidate and develop"
objective.
Throughout this review these objectives will be considered separately as our
ability to identify and acquire businesses that fit our strategic objective is
separate to our ability to consolidate and develop the businesses once they have
been acquired.
Objectives and strategies of the business
The company first adopted its buy and build strategy in 2003 when Matrix
Communications,(as the business was then called) acquired the AIM shell Offshore
Telecom plc.
Between 2003 and 2006 the company acquired nine businesses in the network
integration sector of the IT industry. These were consolidated into two
operating divisions. In February 2006 and June 2006 the company disposed of
these two operating divisions realising a profit of �19.2m. In December 2006 the
company returned �10.3m to shareholders.
In February 2007 the group embarked on a second buy and build programme by
announcing its plans to acquire and consolidate in the managed services sector
of the IT industry. Since then the Group has acquired four businesses pursuant
to this strategy. The acquisitions were:
* Posetiv Limited
* Anix Holdings Limited
* Itheon Limited
* Red Squared plc
In this period the group also disposed of the last remaining business from its
previous cycle; Fujin Technology Trading Limited.
The strategy of the business is to continue to grow both organically and by
acquisition and to convert this growth into higher profit and cash flow through
margin expansion mainly as a result of cost optimisation programmes and revenue
mix management.
The Company's brands and market position
The company is consolidating its acquisitions under two brands, Anix and Itheon.
The Anix brand represents the hardware distribution and managed services
business and Itheon the network assurance software business. Anix is a leading
implementer of advanced storage solutions and one of IBM's leading partners in
the UK.
Itheon was established in 1987 and is a UK software vendor focused on designing
and implementing IT business service and application management solutions that
monitor, meter and automatically recover critical IT business services.
The industry, market and competitive environment
There are two distinct areas of "The industry, market and competitive
environment" that have a bearing on the company's performance. The first is the
environment that influences the company's ability to source and fund
acquisitions and the second is the market and competitive environment in which
the acquired companies operate.
The company's ability to source and fund acquisitions that will be complementary
to the existing group companies is a function of the "pipeline" of acquisition
opportunities that the company has. This is built up and constantly revised by a
programme of research, meetings and general networking by the Board and its
advisors. The company has funded the four acquisitions it has made during the
year from its own cash resources and from bank debt. The company considers that
the relationship it has with its bankers to be very important and so
considerable time is spent communicating with the bankers and ensuring the loan
covenants are met.
The second area is the market and competitive environment in which the acquired
companies operate. Demand for managed services in both the public and private
sector is increasing as organisations look to third parties with the necessary
specialist skills and scale to implement and host key applications on a cost
effective basis.
In the medium term, the Board expects that the anticipated migration to managed
service solutions may lead to a decline in headline revenue, but with a
resultant improvement in overall margin. Furthermore, the Board expects the
revenue visibility of the business to improve as the operating group moves
towards long term customer contracts and away from low margin, one-off hardware
sales.
The Board expects the demand for the group's services to increase as more
companies recognise the benefits of having their data networks actively managed
by a third party.
RESOURCES
The Group has the following key resources which assist in its pursuit of its key
objectives:
"Identify and acquire"
* Extensive knowledge of the IT markets;
* Strong relationships with debt providers.
* Employees who have extensive knowledge of the key markets and
therefore can assist in the development of the business;
"Consolidate and develop."
* Well-established and respected brands;
* Strong distribution channels and established working relationships
with business partners;
* Quality products and services with strong market positions;
* Employees who have extensive knowledge of the key markets and
therefore can assist in the development of the business.
* Strong corporate reputation for quality products and services.
* Highly qualified and stable employee base.
Relationships, principal risks and uncertainties
"Identify and acquire"
The company's critical relationships are with the business owning community and
the providers of capital be it our bankers or our shareholders.
Acquisitions play a key role in the strategy and the successful integration and
operation of the acquired businesses represents a commercial risk to the Group.
The risk is mitigated by a very structured approach to the integration process
using a detailed project plan, dedicated teams and careful monitoring of
performance post acquisition
"Consolidate and develop"
The company's critical external relationships are with its major customers and
its major suppliers.
The Group's customer base is diverse with no single customer accounting for more
than 7% of the gross margin, and the top 10 customers accounting for 39% of the
gross margin.
The Group maintains its relationships with its customers through the efforts of
its sales force, including key account managers.
The principal market risks are that the current slowdown in the demand for new
hardware may continue and competition may reduce the Company's market share and
margins.
In order to mitigate these market risks the Group constantly monitors the market
through its own sales force, by attendance at industry groups and monitoring of
competitors. This information enables us to make informed decisions about where
the sales force should be targeted and informs our discussions with suppliers.
The principal operational risks are that key management may leave or management
turnover may significantly increase; unfavourable economic or business
conditions may adversely disrupt operations; or a major failure may occur at one
of the network operation centres.
In order to mitigate these operational risks the Group aims to create a
rewarding working environment that will attract staff by offering competitive
salaries and benefits, structured career paths, tailored training and by
encouraging free thinking and innovation. Also, the Group prepares recovery
plans for most foreseeable situations so that our business operations would
continue should these situations occur.
Commercial relationships
The principal risks around our commercial relationships are that some of our
products utilise software licensed to us by independent, third-party software
developers. We also depend on third parties to enhance their current products,
to develop new products on a timely and cost-effective basis and to respond to
rapid technological change. Any absence or failure of key third-party products
could have a material effect on our business. To mitigate this risk, we keep
under review all key commercial relationships and developments in technology in
our marketplace. We also work with a range of partners to mitigate the risk
inherent in working with a single partner.
Financial review
Basis of preparation.
The table below shows which companies have been included in the group
consolidation and the approximate period for which they were members.
Anix Holdings Limited Seven months to 31 October 2007
Posetiv Limited Nine months to 31 October 2007
Itheon Limited Nineteen days to 31 October 2007
Red Squared plc Fourteen days to 31 October 2007
Fujin Technology Trading Limited Ten months to disposal on 31 August 2007
Reconciliation of statutory numbers to adjusted numbers
Set out below is a reconciliation of the Groups statutory profit/(loss), which
the Directors believe is a more helpful indicator of the company's underlying
performance
2007 2006
�000 �'000
Operating loss per financial statements (877) (7,496)
Exceptional items 171 -
Depreciation 524 23
Amortisation of goodwill 1,357 1,796
Impairment of goodwill - 1,340
Adjusted operating profit/(loss) 1,175 (4,337)
References to adjusted operating profit refers to profit before depreciation,
amortisation and impairment of goodwill and exceptional items.
This figure is shown as it is more representative of the underlying performance
of the business.
Profit
The group has realised an adjusted operating profit for the year of �1.2m, a
more than �5.5m improvement on the previous year which was a loss of �4.3m
The operating loss for the year is �877k which is an improvement of over �6.6m
on the previous year loss of �7.5m. The loss before tax (that is after having
taken into account the profit on sale of subsidiaries) is �341k against a profit
last year of �11.5m. The 2006 figures included �19.2m profit on sale of
subsidiaries compared to �0.3m in 2007.
Restructuring
In the year to 31October 2007 the group has incurred net operating exceptional
costs of �171k. This figure is made up of restructuring expenses of �374k and an
exceptional credit realised on the settlement of a liability of �203k.
Net interest
The Group had interest receivable of �327k in the year. This related to interest
on the proceeds of the disposal of the integration business and to the write
back of �127k of accrued interest not required due to the settlement of a
liability. The Group had �102k of interest payable in the year arising on bank
loans and overdrafts and hire purchase commitments.
Taxation
The tax charge of �224,000 for the year resulted in an effective tax rate of 66%
(2006 charge 13%).
The profit on sale of Fujin Technology Trading Limited will be exempt from tax
under the Substantial Shareholder Exemption rules.
Cash flow and net funds
The cash generated from operating activities improved from an outflow of �4.5m
in 2006 to an inflow of �5.8m in 2007.
Cash inflows included �5.9m deferred consideration on prior year disposals,
�3.1m on acquisition of subsidiaries and a new loan of �2.5m.
Cash outflows included �21.7m on purchase of subsidiaries, �1.9m on deferred
consideration from prior years, �0.9m repayment of loans and �10.3m on repayment
of capital to shareholders.
These above cash flows together with a number of less significant cash flows
resulted in funds reducing from �22.3m at 31 October 2006 to �852k at 31 October
2007.
Balance sheet
At the end of 2007 the Group had shareholders funds of �14.6m. This is a
reduction on 2006 of �10.4m; the key reason for this was a repayment to
shareholders of �10.3m.
At 31 October 2007 the Group had net current liabilities of �6.0m. The Board
does not consider this to be a problem for a number of reasons:
* The Group secured a new �3m long term loan facility from HSBC Bank plc
in November 2007 and has a further undrawn overdraft facility of �2.5m.
* The Board is confident that sufficient funding is available to meet
its liabilities as they fall due.
Key performance indicators
The Board has identified a number of Key Performance Indicators that are most
relevant to the Group and are used to measure performance.
These KPIs are:
Financial:
* Growth in gross margin
* Adjusted operating profit
* Adjusted earnings per share
* Internal Rate of Return on businesses sold
Commercial
* Total value of contracts signed
* Service level agreements governing our response to customer enquiries
Group prospects and future developments
The Group believes that it is well positioned to continue to deliver on its
strategic objectives.
Consolidated profit and loss account
for the year ended 31 October 2007
2007 2006
Restated
note 1
Notes �'000 �'000
Turnover
Acquisitions 29,098 -
Discontinued operations 2,126 29,481
Turnover 4 31,224 29,481
Cost of sales (23,967) (21,914)
Gross profit 7,257 7,567
Administrative expenses (excluding exceptional items, (6,606) (11,927)
amortisation and impairment of goodwill)
Amortisation and impairment of goodwill (1,357) (3,136)
Exceptional items (171) -
Total Administrative expenses (8,134) (15,063)
Operating loss
Continuing operations (1,355) (2,753)
Acquisitions (14) -
Discontinued operations 492 (4,743)
Operating loss 4 (877) (7,496)
Profit on sale of subsidiaries 3 311 19,220
(Loss)/Profit on ordinary activities before interest and taxation (566) 11,724
Interest receivable and similar income 327 325
Interest payable and similar charges (102) (568)
(LOSS)/Profit on ordinary activities before taxation (341) 11,481
Tax on (loss)/profit on ordinary activities 5 (224) (1,517)
(LOSS)/Profit retained for the financial year 6 (565) 9,964
Basic (Loss)/earnings per share (pence) (1.4) 26.2
Diluted (LOSS)/earnings per share (pence) (1.4) 25.9
There is no difference between the(loss)/profit on ordinary activities before
taxation and the (loss)/profit for the year stated above and their historical
cost equivalent.
Consolidated statement of total recognised gains and losses
2007 2006
Restated
note 1
�'000 �'000
For the year ended 31 October 2007
(Loss)/profit for the year (565) 9,964
Prior year adjustment - FRS20 (note 1) (97)
Total recognised losses for the year (662)
Consolidated balance sheet
As at 31 October 2007
2007 2006
Restated note 1
Notes �'000 �'000 �'000 �'000
Fixed assets
Intangible assets 28,490 -
Tangible assets 1,966 62
30,456 62
Current assets
Stocks 20 861
Debtors 17,746 7,775
Investments - 2,000
Cash at bank and in hand 4,225 20,280
21,991 30,916
Creditors: Amounts falling due within (27,975) (5,941)
one year
Net Current(LIABILITIES)/ assets (5,984) 24,975
TOTAL ASSETS LESS CURRENT LIABILITIES 24,472 25,037
Creditors: Amounts falling due after
more than one year (9,828) (18)
Net assets 14,644 25,019
Capital and reserves
Called up share capital 3,952 3,820
Share premium account 1,647 11,926
Merger reserve 3,511 3,268
Share based payments reserve 191 97
Profit and loss account 5,343 5,908
Shareholders' funds - Equity 6 14,644 25,019
Consolidated cash flow statement
for the year ended 31 October 2007
2007 2006
Notes �'000 �'000 �'000 �'000
Cash inflow/(outflow) from operating activities (a) 5,796 (4,514)
Returns on investments and servicing of finance
Interest received 327 325
Interest paid (63) (567)
Interest element of hire purchase and finance (39) (1)
lease
Net cash inflow/(outflow) for returns on 225 (243)
investments and servicing of finance
Taxation (615) (868)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (347) (63)
Receipt from sale of tangible fixed assets 70 -
Net cash outflow for capital expenditure and (277) (63)
financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings (21,719) -
Deferred consideration paid on prior year (1,871) (4,646)
acquisitions
Deferred consideration received on prior year 5,875 -
disposals
Net cash acquired with subsidiaries 3,129 -
Net cash disposed of on disposal of subsidiaries (348) (1,570)
Cash received from sale of subsidiaries 600 41,612
Net cash (outflow)/inflow from acquisitions and (14,334) 35,396
disposals
Cash (outflow)/inflow before use of liquid (9,205) 29,708
resources and financing
Sale of investments 2,000 -
Net cash inflow from management of liquid 2,000
resources
Financing
Issue of ordinary share capital 63 139
Capital repayment - reduction in share premium (10,312) -
New loans advanced 2,500 -
Loans repaid (855) (9,705)
Loan notes paid - (2,181)
Capital element of hire purchase and finance (246) (8,850) (13) (11,760)
lease
(6,850) (11,760)
(Decrease)/increase in cash in year (16,055) 17,948
Consolidated group cash flow statement continued
for the year ended 31 October 2007
The net cash disposed of with subsidiaries and cash received from sale of
subsidiaries are the only cash flows materially affected by the disposed
subsidiaries.
(a) Reconciliation of operating loss to net cash inflow/(outflow) from
operating activities
restated
2007 2006
�'000 �'000
Operating loss (877) (7,496)
Depreciation of tangible fixed assets 524 23
Amortisation of goodwill 1,357 1,796
Impairment of goodwill - 1,340
Loss on disposal of fixed assets 5 13
Share based payments charge 94 46
Decrease/(increase) in stock 522 (1,255)
(Increase)/decrease in debtors (5,433) 994
Increase in creditors 9,604 25
Net cash inflow/(outflow) from operating activities 5,796 (4,514)
(b) Reconciliation of net cash flow to movement in net funds/(debt)
2007 2006
�'000 �'000
(Decrease)/increase in cash in the year (16,055) 17,948
Net cash (inflow)/outflow in respect of bank loan (1,645) 9,705
Cash (outflow)/ inflow from (decrease)/increase in (2,000) 2,000
investments
Loan notes settled - 2,181
Cash outflow in respect of hire purchase and finance lease 246 13
Changes resulting from cash flows (19,454) 31,847
Non cash changes:
Loans and finance leases acquired with subsidiaries (1,400) -
New finance leases (547) (32)
Change in net debt (21,401) 31,815
Net funds/(debt) at 1 November 2006 22,253 (9,562)
Net funds at 31 October 2007 852 22,253
(c) Analysis of changes in net funds/(debt)
Acquisitions
At 1 Nov Cash flows (ex Cash) Non cash changes At 31 Oct 2007
2006
�'000 �'000 �'000 �'000 �'000
Cash at bank and in 20,280 (16,055) - - 4,225
hand
Debt due within one - (1,645) - (830) (2,475)
year
Debt due after one year - (830) 830 -
Current asset 2,000 (2,000) - - -
investments
Hire purchase and (9) 211 (429) (168) (395)
finance lease
agreements due within 1
year
Hire purchase and (18) 35 (141) (379) (503)
finance lease
agreements due after
one year
Net funds/(debt) 22,253 (19,454) (1,400) (547) 852
Note 1
Accounting policies
The financial statements have been prepared on the going concern basis under the
historical cost convention, in accordance with the Companies Act 1985 and
applicable accounting standards in the United Kingdom.
The financial statements for the year ended 31 October 2007 have been prepared
using accounting policies consistent with those applied in the previous year
except for the following:
In accordance with accounting standards the Group has adopted FRS20 "Share-based
payments" in this year's financial statements. The adoption of this standard
represents a change in accounting policy and comparative figures have been
restated accordingly. Applying the Black-Scholes valuation model gives a fair
value charge for these options which, in accordance with FRS 20 has been added
to administrative expenses in each period. The administrative expenses for 2006
have been restated to include a charge of �97,400 in respect of share based
remuneration. Since the corresponding adjustment to the FRS 20 charge is to
profit and loss reserves there is no restatement of the opening reserves
position.
Note 2
Acquisitions
Goodwill
Group �'000
Cost
At 1 November 2006 1,884
Acquisition of subsidiaries 29,847
Disposals (1,884)
At 31 October 2007 29,847
Amortisation
Balance at 1 November 2006 1,884
Disposals (1,884)
Charge for the year 1,357
Balance at 31 October 2007 1,357
Net book amount as at 31 October 2007 28,490
Net book amount as at 31 October 2006 -
Goodwill arising is being amortised over 10 years on a straight line basis,
which is the period over which the Directors estimate that the value of the
underlying business acquired is expected to exceed the value of the underlying
net assets acquired.
During the year, the Group through its subsidiary undertaking VBHG Limited
acquired a number of companies as follows:
* Posetiv Limited
* Anix Holdings Limited
* Itheon Limited.
* Red Squared plc
These transactions have been accounted for by the acquisition method of
accounting.
Company Date Consideration Fair value Goodwill
�'000 Of net (assets)/liabilities �'000
acquired �'000
Posetiv Limited 9 Feb 2007 4,210 2,772 6,982
Anix Holdings Limited 31 March 207 10,968 2,915 13,883
Itheon Limited 12 October 2007 6,832 (334) 6,498
Red Squared plc 17 October 2007 3,235 (751) 2,484
25,245 4,602 29,847
Anix Holdings Limited comprised a group of companies which included Anix Group
Limited, Anix Computers Limited and Anix Business Systems Limited.
Note 3
Profit on sale of subsidiaries - discontinued operations
2007 2006
�'000 �'000
Profit on sale of Fujin Technology Trading Ltd 437 -
Profit on sale of Equip Technology Ltd - 230
(Loss)/profit on sale of Integration business (126) 18,990
311 19,220
Taxation (note 5) - 1,500
The loss on sale of the Integration business arose after a deed of amendment was
entered into with Calyx Group plc. This entitled the Group to receive the
deferred consideration early, but at a discount. The amount of �126,000
represents loss on sale being the discount plus additional legal costs.
Note 4
Segmental analysis
Year to October 2007
Profit and loss account by operation
Discontinued Acquisitions Continuing
operations operations
Mobile internet Software Managed Central 2007
solutions Services & costs Total Total
Hardware
�'000 �'000 �'000 �'000 �'000 �'000
Turnover 2,129 171 28,927 - 29,098 31,227
Inter segment sales (3) - - - - (3)
Sales to third parties 2,126 171 28,927 - 29,098 31,224
Cost of sales (1,319) (7) (22,641) - (22,648) (23,967)
Gross profit 807 164 6,286 - 6,450 7,257
Administrative expenses (315) (97) (4,839) (1,355) (6,291) (6,606)
before amortisation of
goodwill and exceptional
items
Amortisation of goodwill - (33) (1,324) - (1,357) (1,357)
Exceptional items - - (171) - (171) (171)
Total administrative (315) (130) (6,334) (1,355) (7,819) (8,134)
expenses
Operating profit/(loss) 492 67 1,447 (1,355) 159 651
before amortisation and
exceptional items
Amortisation of goodwill - (33) (1,324) - (1,357) (1,357)
Exceptional items - - (171) - (171) (171)
Operating profit/ (loss) 492 34 (48) (1,355) (1,369) (877)
Profit on sale of 311 - - - - 311
subsidiaries
Net interest - 5 98 122 225 225
Profit/(loss) before tax 803 39 50 (1,233) (1,144) (341)
Segment net assets/ - (605) (7,910) 23,215 14,700 14,700
(liabilities)
Taxation - (80) (102) (726) (908) (908)
Net (debt)/funds - 1,035 6,901 (7,084) 852 852
Net assets by operation - 350 (1,111) 15,405 14,644 14,644
Segmental analysis
Year to October 2006
Profit and loss account by operation
Restated Discontinued operations Total Restated
Discontinued Total
Continuing Mobile Distribution Operations
operations Internet
solutions Integration Equip
�'000 �'000 �'000 �'000 �'000 �'000
Turnover - 608 22,495 6,912 30,015 30,015
Inter segment sales - - (92) (442) (534) (534)
Sales to third parties - 608 22,403 6,470 29481 29,481
Cost of sales - (398) (15,684 (5,832) (21,914) (21,914)
Gross profit - 210 6,719 638 7,567 7,567
Administrative expenses before (2,753) (1,229) (7,007) (938) (9,174) (11,927)
amortisation and impairment of
goodwill
Amortisation of goodwill - (189) (1,368) (239) (1,796) (1,796)
Impairment of goodwill - (1,340) - - (1,340)
(2,753) (2,758) (8,375) (1,177) (12,310) (15,063)
Operating (loss) before (2,753) (1,019) (288) (300) (1,607) (4,360)
amortisation and impairment
Amortisation of goodwill - (189) (1,368) (239) (1,796) (1,796)
Impairment of goodwill - (1,340) - - (1,340) (1,340)
Operating (loss) (2,753) (2,548) (1,656) (539) (4,743) (7,496)
Profit on sale of subsidiaries - - 18,990 230 19,220 19,220
Net interest (243) - - - (243)
Profit/(loss) before tax (2,996) (2,548) 17,334 (309) 14,477 11,481
Net assets by operation
Segmental net assets 5,127 727 - - 727 5,854
Taxation (1,088) - - - - (1,088)
Net funds 20,205 48 - - 48 20,253
Shareholders' net assets 24,244 775 - - 775 25,019
Note 5
Taxation
a) Analysis of charge in the year
2007 2006
�'000 �'000
Current tax charge:
UK Corporation Tax based on results for the year at 30% (2006: 30%) 142 1,517
Prior year adjustment 67 -
Current tax charge 209 1,517
Deferred tax:
Current year movement 15 -
Total tax on (loss)/profit on ordinary activities for the year 224 1,517
b) Factors affecting the tax charge for the year
The tax assessed on the (loss)/profit on ordinary activities for the year is
different to the standard rate of Corporation Tax for the UK of 30%. The factors
affecting this are set out below:
2007 2006
�'000 �'000
(Loss)/profit on ordinary activities before taxation (341) 11,481
Profit on ordinary activities before taxation multiplied by standard rate
of
UK Corporation Tax of 30% (2006: 30%) (102) 3,444
Effects of:
Amortisation and impairment of goodwill 407 941
Profit on disposal of subsidiaries (93) (5,766)
Tax liability on disposal of subsidiaries - 1,500
Items disallowable for tax 5 102
Timing differences between depreciation and capital allowances 30 2
Prior year adjustment 67 -
Impact of current year tax losses carried forward - 1,294
Brought forward losses utilised (105) -
Current tax charge 209 1,517
Note 6
Reconciliation of movements in shareholders' funds
2007 2006
Restated
note 1
Group �'000 �'000
Shareholders' funds at 1 November (restated) 25,019 14,870
(Loss)/profit retained for the year (565) 9,964
Movement on share based payment reserve- FRS 20 94 46
Shares issued in the year 132 27
Share premium on shares issued 33 112
Capital reduction in share premium (10,312) -
Issue of new shares on acquisition of subsidiary 243 -
Shareholders' funds at 31 October 2007 14,644 25,019
Note 7
2007 2006
Geographical analysis of turnover by �'000 �'000
destination
UK 30,945 28,702
Other EU countries 279 771
USA - 8
31,224 29,481
Note 8
Basis of preparation of preliminary announcement
Xploite Plc's financial statements for the Preliminary Results for the year
ended 31 October 2007 are unaudited. The financial information set out in the
announcement does not constitute the Group's statutory financial statements for
the years ended 31 October 2007 and 31 October 2006. The financial information
for the year ended 31 October 2006 is derived from the statutory accounts for
that year which have been delivered to the Registrar of Companies. The auditors
reported on those financial statements; their report was unqualiified and did
not contain a statement under either Section 237 (2) or Section 237 (3) of the
Companies Act 2005
This information is provided by RNS
The company news service from the London Stock Exchange
END
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