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Company Boxhill Technologies PLC
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Final Results

Released 07:00 24-Dec-2013
Number 2804W07

RNS Number : 2804W
Boxhill Technologies PLC
24 December 2013
 



24 December 2013

BOXHILL TECHNOLOGIES PLC

 

("Boxhill", the "Group" or the "Company")

 

Final Results for the year to 31 July 2013 & Notice of AGM

 

Boxhill Technologies Plc (AIM:BOX), the AIM quoted lottery, software, gaming and leisure company, is pleased to announce its Final Results for the year ended 31 July 2013. 

 

The Company will hold its Annual General Meeting ("AGM") at 11.00am on 17 January 2014 at the offices of Allenby Capital Limited, 3 St Helen's Place London EC3A 6AB.

 

Financial Highlights

 

§ Operating loss before exceptional items £(34,000)

§ Impairment of tangible and intangible assets £382,000

§ Group operating loss £(416,000)

§ Interest payable £22,000

§ Loss from ordinary activities £(438,000)

 

 Operational Highlights

 

§ Phil Jackson was appointed Chief Executive Officer

§ Acquired lottery games and payment processing technologies firm Poseve Limited ("Poseve")

§ Refocused operations, closing FC Betz and selling Devil Fish, while Soccerdome has been mothballed while the wider site is redeveloped.

 

Post-period Highlights

 

§ The Company changed its name from The Weather Lottery plc to Boxhill Technologies plc in October 2013 to reflect the range of activities within the software, lottery, gaming and leisure sectors - with the focus firmly on developing its Lottery and Gaming & Payment Software divisions

§ Further acquisition of payment processing business in September 2013

§ Appointment of Kevin Dale as Chief Operating Officer

§ Secured a convertible loan agreement for £250,000 from a consortium of private investors to help fund the Company's working capital requirements following the acquisition of Sormelle

§ David Griffiths became General Manager of the lottery in November 2013

 

Commenting on the Final Results, Chairman Lord E T Razzall said:

 

"The entry into ecommerce services perhaps best represents the future of the company, with existing and proposed products ranging from internet payment services provision to managing ewallet and physical and virtual prepaid services moving the company into profitability. 

 

"With an improved balance sheet, new products and services the group is strongly placed to build upon these foundations and the Board continue to look for new profit sources to give much needed shareholder value, which if achieved as expected will no doubt be the most welcome change we will see in the coming twelve months."

 

 

For further information contact:

 

Boxhill Technologies PLC                                                       020 7618 9000      

Philip Jackson, CEO

Website www.boxhillplc.com

 

Allenby Capital Limited (Nomad & Broker)                               

Nick Harriss/Nick Athanas/James Reeve                                   020 3328 5656

 

Bishopsgate Communications (Financial PR)

Nick Rome/Sam Allen                                                                020 7562 3350

 

 

Chairman's Statement

 

2013 has been a transitional year, not just in name but in the fundamental outlook for the Company.  The change of name from The Weather Lottery plc to Boxhill Technologies plc reflects a confident move into new areas of business, principally ecommerce and online transactions; further the new board has made some bold moves, in closing subsidiaries that had little chance of generating meaningful revenues. 

 

Financial Summary

 

In my review of the half-year figures to 31 January 2013 the Company made losses of £88,000 (EBITDA £41,000). Whilst these were a considerable improvement on the previous very difficult year I pointed out that they included a number of legacy problems from the past and I hoped the second half would show much improvement. I am pleased to report that the operating loss before exceptional items for the full year has been cut to £34,000 against £291,000 in the year ending 31 July 2012. There is often an unavoidable impact of closing businesses and in this case resulting in an exceptional loss of £382,000 through the write down of tangible and intangible assets. Therefore in summary:

 

·      Revenue £1,271,000

·      Operating loss before exceptional items £(34,000)

·      Impairment of tangible and intangible assets £382,000

·      Group loss before interest £(416,000)

·      Interest payable £22,000

·      Loss from ordinary activities £(438,000)

 

These improved underlying figures represent the continuing hard work in settling losses from the gambling sector, the focus on improving the cash position of the company and improving the balance sheet as a foundation for expanding the business into new areas.

 

Operational Summary

 

The Board saw a few changes during the year - with Phil Jackson joining in May 2013 and Kevin Dale joining after the year end.  At an operating level, Jeff Williams left the organisation in June 2013 and David Griffiths became General Manager of the lottery in November 2013. The company intends to make further appointments to the Board in due course, with a particular view to adding experienced non-executives.

 

The Weather Lottery has seen change itself - with a new team at the helm, revised website, a new ability to join online, and improved services for the hundreds of societies and good causes it serves.  The Weather Lottery has now raised over £5 million for good causes, a significant amount of money, often providing much needed income for very small localized charities and societies who sometimes don't have access to the large marketing budgets of bigger charities and societies.  Small societies are not the only customers, and the team has been working closely with the Liberal Democrat Party with an innovative new scheme to aid fund raising at local levels - we hope this new approach will be adopted across other national societies which have a localized presence.

 

The site operated by Soccerdome Limited remains closed and we are working with Nottingham Council on proposals for the development of the site in conjunction with the broader development of the surrounding Harvey Hadden Sports Complex.  We believe that the site would make an attractive investment opportunity for either an existing five-a-side operator or an entrepreneur wishing to enter into the sport and leisure arena. The whole development is expected to complete in 2015.

 

The Board has concluded that The Gambling Division lacked the critical mass required to make significant returns. Activity in FC Betz has now ceased following a final wind down of operations and Devil Fish Poker was sold to Jeff Williams after the year end.

 

Outlook

 

Current contracted business through the payments division continues to grow healthily; we have added a number of clients for whom we are processing payments both in the UK and across Europe.  Our customers range from claims management companies, gaming and entertainment operators and resellers of services such as visa applications and congestion charges.  Estimated revenues (based on seven live and seven yet to go live but signed contracts) for the final quarter of the current financial year are expected to generate circa £175,000 to £250,000 in profit (EBIT), which would move the company comfortably into long term profitability.

 

This year has therefore seen significant changes - the lottery business is much improved from an operational point of view and winning new, as well as reinvigorating existing, customers continue to be the focus for the lottery team.  The entry into ecommerce services perhaps best represents the future of the company, with existing and proposed products ranging from internet payment services provision to managing ewallet and physical and virtual prepaid services moving the company into profitability.  With an improving balance sheet, new products and services the group is strongly placed to build upon these foundations and the Board continue to look for new profit sources to give much needed shareholder value, which if achieved as expected will no doubt be the most welcome change we will see in the coming twelve months.

 

 

Lord E T Razzall

Chairman

 

Date 23 December 2013

 



CONSOLIDATED INCOME STATEMENT

For the year ended 31 July 2013

 

 

  

Note

2013

£'000

2012

 £'000

 

Revenue

 

Cost of sales

 

 

 

 

1,271

 

(836)

 

1,142

 

(723)

 

Gross profit


 

435

 

419

 

Administrative expenses

 

6

 

(469)

 

(705)

Operating loss before exceptional items


 

(34)

 

(286)

Impairment of intangible assets

Impairment of tangible assets


 

(309)

 

(73)

 

-

 

-

 

Loss before interest


 

(416)

 

(286)

 

Finance income

    

 9

 

-

 

 -

 

Finance costs

      

9

 

(22)

 

(5)

Loss before taxation


(438)

(291)

Income tax expense

10

-

-

Loss


(438)

(291)

 

PROFIT/(LOSS) PER SHARE




Basic profit/(loss) per ordinary share

 

11

 

(0.06)

 

(0.07)

Diluted profit/(loss) per ordinary share

 

11

 

(0.05)

 

(0.06)

 

 

All of the (loss) for the period is attributable to equity holders of the parent company.  The Group has no recognised gains or losses for the year other than the loss for the current year.



BOXHILL TECHNOLOGIES PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 July 2013

 


Note

2013

£'000

2012

£'000

ASSETS




Non current assets




 

Property, plant and equipment

 

14

 

378

 

476

Goodwill

12

505

467

Other intangible assets

13

34

44

Total non current assets


 

917

 

987

 

Current assets




Inventories

16

2

2

Trade and other receivables

17

120

101

Cash and cash equivalents

17

256

18

Total current assets


378

121

Total assets


1,295

1,108

 

Current liabilities




Trade and other payables

20

711

805

Bank and other borrowings

18

287

37

Current tax payable


-

-

Total current liabilities


998

842

Non-current liabilities




Trade and other payables


-

40

Bank and other borrowings

18

14

-

Deferred tax provision

22

-

-

Total non-current liabilities


14

40

Total liabilities


1,012

882

Net assets                              


283

226

 

EQUITY




Share capital

23

795

442

Share premium account

24

1,463

1,321

Retained earnings

24

(1,975)

(1,537)

Equity attributable to equity holders of the parent


 

283

 

226

 

The financial statements were approved by the Board of Directors and authorised for issue on 23 December 2013. They were signed on its behalf by:

 

P I Jackson

Director

 

BOXHILL TECHNOLOGIES PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July 2013

 

 


Called up share capital

 

£'000

Share premium account

 

£'000

Retained Earnings

 

£'000

 

Total Equity

 

£'000

 

Balance 31 July 2011

 

380

 

 

1,233

 

(1,246)

 

367

(Loss) for the year

-

-

(291)

(291)

Shares issued in year less costs

 

62

 

88

 

-

 

150

Balance 31 July 2012

 

442

 

1,321

 

(1,537)

 

226

Shares issued in year less costs

 

 

353

 

142

 

-

 

495

(Loss) for the year

-

-

(438)

(438)

Balance 31 July 2013

 

795

 

1,463

 

(1,975)

 

283







BOXHILL TECHNOLOGIES PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 July 2013

 

 



Year ended 31 July 2013

£'000

Year ended 31 July

2012

£'000


Note





Profit / (Loss) for the year



(438)


(291)

Adjustment for:






Finance costs recognised in profit or loss


22


5


Depreciation and amortisation of non-current assets


35


71


Impairment of non-current assets


382


-


Expense recognised in respect of shares issued in exchange for consulting services


109


-





548






110


(215)

Movement in working capital:






Decrease / (increase) in receivables


59


109


Increase / (decrease) in payables


(216)


(29)





(157)


80

Cash generated from operations



(47)


(135)

Interest paid



(22)


(5)

Net cash generated / by operating activities



(69)


(140)







Cash flows from investing activities:



-


-

Payment for intangible assets


(1)

-

(11)


Net cash inflow on acquisition of subsidiary

27

8

-

-


Purchases of property, plant and equipment


-

7

(5)

(16)

Net cash generated / (used in) investing activities



7


(16)

Proceeds from issue of equity instruments of the company


63




Payment for share issue costs


(27)


150


Proceeds from borrowings


267


-


Repayment of borrowings


(3)

300

(50)

100

Net cash generated / (used in) financing activities



300


100

Net increase/(decrease) in cash and cash equivalents



238


(56)

 

Cash and cash equivalents at 1 August 2012


18

74

Cash and cash equivalents at 31 July 2013


256

18

 

Comprising of:




Cash and cash equivalents per the balance sheet


256

18

Less:




Bank overdraft


-

-

Cash and cash equivalents for cash flow statement purposes

27

256

18

 

As described in the accounting policies, bank overdrafts and borrowings repayable on demand fluctuate from being positive to overdrawn and are considered an integral part of the Group's cash management for cash flow statement purposes.

 

There is no material difference between the fair value and the book value of cash and equivalents.

 

 



BOXHILL TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 July 2013

 

1.   General Information

 

Boxhill Technologies Plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 21 Knightsbridge, London, SW1X 7LY. The nature of the Group's operations and its principal activities are described in the Directors' Report.

 

These Financial Statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Group operates.

 

2.   Adoption of new and revised International Financial Reporting Standards

 

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on or after 1 August 2012.

 

At the date of authorisation 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:

 

IAS 19 - Employee Benefits

IAS 27 - Consolidated and separate financial statements (revised)

IAS 28 - Investments in associates and joint ventures (revised)

IFRS 9 - Financial instruments (revised 2010)

IFRS 10 - Consolidated financial statements

IFRS 11 - Joint arrangements

IFRS 12 - Disclosure of Interests in Other Entities

IFRS 13 - Fair Value Measurement

 

These Standards and Interpretations are not expected to have any significant impact on the Group's Financial Statements in their periods of initial application.

 

3.   Significant accounting policies

 

Basis of Accounting

 

The Financial Statements, upon which this financial information is based, have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS).

 

The financial information has been prepared on a going concern basis, as at 31 July 2013, in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as well as all interpretations issued by the


International Financial Reporting Interpretations Committee ("IFRIC"). The Group has not availed itself of early adoption options in such standards and interpretations.

 

The Financial Statements, upon which this financial information is based, have been prepared under the historical cost basis except where specifically noted. The principal accounting policies adopted are set out below:

 

Going concern

 

The financial statements have been prepared on a going concern basis notwithstanding a loss for the financial year of £438,000.

 

The Directors' cashflow forecasts indicate that the Group will be able to operate within its existing bank facilities in the future. As with any business, there are uncertainties in the forecast, but as at the date of approval of these financial statements the Directors are unaware of any indications that would suggest inappropriate assumptions have been made in relation to trading volumes. As a result of these, the Directors are of the opinion that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and have continued to adopt the going concern basis in preparing the financial statements. The financial statements do not include any adjustments which would result from this basis of preparation being inappropriate.

 

Basis of consolidation

 

The consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 July each year.  Control is achieved where the Company has the power to govern the financial and operating policies so as to obtain benefits from its activities.

 

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

 

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

 

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

Business Combinations

 

The purchase method of accounting is used for all acquired businesses as defined by IFRS 3 - Business Combinations.

 

As a result of the application of the purchase method of accounting, goodwill is initially recognised as an asset being the excess at the date of acquisition of the fair value of the purchase consideration plus directly attributable costs of acquisition over the net fair values of the identifiable assets, liabilities and contingent liabilities of the subsidiaries acquired. Where fair values are estimated on a provisional basis they are finalised within 12 months of acquisition with consequent changes to the amount of goodwill.

 

Intangible assets

 

Identifiable intangible assets acquired as part of a business combination are initially recognised separately from goodwill if the assets fair value can be measured reliably, irrespective of whether the asset had been recognised by the acquirer before the business combination was affected. An intangible asset is considered identifiable only if it is separable or arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

 

Intangible assets relate to the development of the lottery and on-line gaming (software and related costs). It is considered that the software has a finite useful life and amortisation has been calculated so as to write off the carrying value of it over its useful economic life of 5 years.

 

Goodwill

 

Goodwill arising on consolidation represents the excess cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is initially recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

 

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 of impairment. The amount of the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised 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.

 

Negative goodwill arising on consolidation is credited to the income statement where the Directors consider that the fair value of the assets is reliable and do not need adjustment and that the negative goodwill relates to a true bargain purchase.

 

Revenue recognition

 

Lottery turnover represents takings received for entry into the lottery prize draws. Revenue is recognised upon receipt of the money for the period that the draw takes place. Online gaming turnover represents commission earned on game plays. Football pitch turnover represents cash takings received. Payment processing turnover is recognised when transactions are processed.

 

Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax.

 

The tax currently payable is based on taxable profits 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 current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

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 corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all, or part, of the asset to be recovered.

 

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 realised. 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 the deferred tax is also dealt with in equity.

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Useful lives are reviewed annually by the Directors.

 

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives using the straight-line method, on the following bases:

 

Property                                    - 5% per annum

Fixtures, fittings and equipment   - 25% per annum

 

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. Where there is evidence of impairment, fixed assets are written down to their recoverable amount.

 

Leased assets

 

Rentals payable under non-onerous operating leases are expensed in the income statement on a straight-line basis over the lease term.

 

Impairment of tangible 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 in order 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. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

 



Recoverable amount is the higher of fair values less costs 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 the estimate of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued 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 (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 recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Foreign currencies

 

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 Pounds Sterling, which is the functional currency of the Group, and the presentation currency for the consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's function currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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 costs in a foreign currency are not retranslated.

 

Exchange differences are recognised in profit or loss in the period in which they arise.

 

Share based payments

 

Other than for business combinations, the only share based payments of the Group are equity settled share options and certain liability settlements. The Group has applied the requirements of IFRS 2 Share-based Payments.

 

For share options granted an option pricing model is used to estimate the fair value of each option at grant date. That fair value is charged on a straight line basis as an expense in the income statement over the period that the holder becomes unconditionally entitled to the options (vesting period), with a corresponding increase in equity.

 

For shares issued in settlement of fees and/or liabilities, the Directors estimate the fair value of the shares at issue date and that value is charged on a straight line basis as an expense in the income statement (for fees) or reduction in the balance sheet liability (for liabilities) with a corresponding increase in equity.

 

Inventories

 

Inventories are stated at the lower of cost and net recognised value. Cost comprises direct materials using the first in first out (FIFO) basis. Net recognised value represents the estimated selling price less estimated costs of completion, marketing and selling.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise of cash on hand and demand deposits and are subject to an insignificant risk of changes in value.

 

Trade receivables

 

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit and loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate compound at initial recognition.

 

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

 

Financial liability and equity

 

Financial liabilities and equity instruments are classified according to the substance of the contractual agreements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recognised at the amount of proceeds received net of costs directly attributable to the transaction. To the extent that those proceeds exceed the par value of the shares issued they are credited to a share premium account.

 

Bank borrowings

 

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in profit or loss using effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

 

Trade payables

 

Trade payables are not interest-bearing and are stated at their nominal value.

 

Provisions

 

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

 

 

 

4.   Critical accounting judgements and key sources of estimation uncertainty

 

In application of the Group's accounting policies above, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities.  These estimates and assumptions are based on historical experience and other factors considered relevant. Actual results may differ from estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period which the estimate is revised if the revision affects only that period or in the period of the revision and future payments if the revision affects both current and future periods.

 

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty 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.

 

Impairment of goodwill

 

Determining whether goodwill is impaired requires an estimation of the value in use of cash generating units to which goodwill has 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.

 

Share-based payments

 

Share-based payments are measured at grant date fair value. For share options granted to employees, in many cases market prices are not available and therefore the fair value of the options granted shall be estimated by applying an option pricing model. Such models need input data such as expected volatility of share price, expected dividends or the risk-free interest rate for the life of the option. The overall objective is to approximate the expectations that would be reflected in a current market price or negotiated exchange price for the option.  Such assumptions are subject to judgements and may turn out to be significantly different to expected.

 

 

5.   Segment analysis

 

The primary reporting format is by business segment, based on the different services offered by the operating companies within the Group. The Directors consider that the Group now has four business segments, namely that of lottery administration, on-line gaming, IT facilities and astro-turf football pitches. The Group operates solely in one geographical area, the United Kingdom.

 

The Directors consider that none of the operations are classed as Discontinued and hence all operations are considered to be Continuing throughout the period. Since the year end the online gaming segment has discontinued following the sale of Devil Fish Poker Limited.

 

The analysis of operations per segment for the year ended 31 July 2013 is as follows:

 


Lottery

 

 

£'000

On-line Gaming

 

£'000

IT Facilities

 

 

£'000

Football Pitches

 

£'000

Unallocated

 

 

£'000

Group total

 

 

£'000

 

 

Revenue

 

 

798

 

 

35

 

 

394

 

 

44

 

 

-

 

 

1,271

 

Amortisation

 

-

 

10

 

-

 

-

 

-

 

10

 

Depreciation

 

-

 

-

 

-

 

24

 

1

 

25

 

Impairment

 

-

 

309

 

-

 

73

 

-

 

382

 

Operating

profit/(loss)

 

(30)

 

 

(255)

 

35

 

(55)

 

(111)

 

(416)

 

 

Finance costs

 

-

 

-

 

-

 

-

 

(22)

 

(22)

 

Profit/(loss)

before tax

 

(30)

 

(255)

 

35

 

(55)

 

(133)

 

(438)

Tax charge

-

-

-

-

-

-

 

Profit/(loss)

for the year

 

 

 

(30)

 

 

 

(255)

 

 

 

35

 

 

 

(55)

 

 

 

(133)

 

 

 

(438)

 

Balance

sheet







Total assets

254

11

124

378

528

1,295

Non current asset additions

 

-

 

-

 

-

 

-

 

-

 

-

Total liabilities

349

13

351

12

287

1,012

 

 

5.   Segment analysis (continued)

 

The following table analyses assets and liabilities not allocated to business segments as at 31

July 2013:

 


£'000

Assets


Intangible fixed assets

18

Tangible fixed assets

-

Investments

488

Other receivables

22

Cash and cash equivalents

-


528

 

 

Liabilities


Trade and other payables

273

Borrowings

14


287

 

6.   Expenses

 

The following material expenses are included in cost of sales:


2013

£'000

 

2012

£'000

 

Revenue Share

-

91

Processing and Transaction Fees

-

32

Fees to Clients

664

389

Prizes Payable

129

111

Player Rake Back

5

28

 

 

The following material expenses are included in administrative expenses:


2013

£'000

 

2012

£'000

 




Consultancy fees

52

190

Office rent and rates

50

37

Hotel and travel

42

25

Professional fees

84

80

Bank charges

12

34

 

 

7.   Operating (loss)

 

Operating loss has been stated after charging/(crediting) the following:

 


2013

£'000

2012

£'000

Impairment of goodwill in period

309

-

Impairment of short term lease

73

-

Amortisation of intangible fixed assets

10

40

Depreciation of tangible fixed assets

25

32

Operating lease charges

16

37

Auditors' remuneration - Audit services to the parent company

6

1

Auditors' remuneration - Audit services to the Group

11

10

 

Auditors' remuneration - Taxation services

 

2

 

1

 

As permitted by Section 408 of the Companies Act 2006, the holding company's profit and loss account has not been included in these financial statements. The loss for the period after taxation was £1,272,000 (2012 - £196,000).

 

8.   Personnel costs

 


2013

2012

The average monthly number of employees

(including executive and non executive Directors) was

No.

 

10

No.

 

7

The split of employees by function within the Group is as follows:

 

No.

 

No.

Administration and Sales

5

3

Management

5

4

 

Total

 

10

 

7


 

2013

 

2012

Their aggregate remuneration comprised

£'000

£'000

 

Wages and salaries

 

75

 

80

Social security costs

11

9

Sums paid to third parties for services

23

64

 

109

 

153

 

8. Personnel costs (continued)



 

 

Directors' emoluments

 

 

£'000

 

 

£'000

Emoluments

23

24

Sums paid to third parties for director services

20

64




 

43

 

88

 

Number of Directors accruing benefits

 

No.

 

No.

under money purchase schemes

-

-

 

Aggregate emoluments of highest paid Director



23

31

 

Included within Directors' emoluments is £20,000 (2012 - £64,000) paid to directors via related companies, as detailed in note 28. All of the Directors' emoluments relate to short-term employee benefits

 

 

 

 

9.   Finance income and costs

 


2013

£'000

 

 

2012

£'000

 

Finance income

 

-

 

 

 

-

 

Finance charges

 

22

 

 

 

5

 

 

 

10.  Income taxes

 


2013


2012


£'000


£'000

Current:




Current tax for the year

-


-

Total current tax charge

-


-

Deferred tax credit (note 22)

-


-

Total income taxes

-


-





10. Income taxes (continued)

 




 

Tax rate reconciliation





2013

£'000


2012

£'000

 

Profit/(Loss) for the year

 

(438)


 

(291)

 

 

Corporation tax charge thereon at 20%)

 

 

(88)

 

 

 

 

 

(58)

 

Adjusted for the effects of:




Disallowed net expenses/(income) for tax purposes

77


(25)

Depreciation in excess of capital allowances

7


26

Taxable losses and excess charges carried forward

4


57

Income tax expense for the year

-


-

 

 

 

11.  Earnings per share

 

The calculation is based on the earnings attributable to ordinary shareholders divided by the weighted average number of Ordinary Shares in issue during the period as follows:

 


2013

 


2012

Numerator: earnings attributable to equity (£'000)

(438)


(291)

Denominator: weighted average number of equity shares (No.)

 

468,094,865


 

404,312,311

 

In June 2010 the Company issued 24 million options to subscribe for Ordinary shares of 0.1p each. At the year end 8.1 million options were outstanding. None of these options were exercised in either the prior or the current period, but had they been they would have increased the weighted average number of equity shares to 476,194,865 (2012 - 428,312,311) and this amount is used in the calculation of diluted earnings per share.

 

 

12.  Goodwill

 


£'000

 

At 31 July 2012

 

467

Additions

347

Impairment

(309)

 

At 31 July 2013

 

505

 

 

12. Goodwill (continued)

 

The Group carried out an impairment test of goodwill for the period ended 31 July 2013 as required by IFRS. The Directors consider there to be four cash-generating units, as per note 5. During the period impairment of the on-line gaming and football pitches cash-generating units have been impaired.

 

Included within goodwill is an amount relating to the subsidiaries Prize Provision Services Limited and Poseve Limited. The carrying amount for goodwill for these respective subsidiaries is £158,000 and £330,000 respectively.

 

The principal assumptions made (in both 2013 and 2012) in determining the value in use of the cash-generating unit were:

 

Basis on which recoverable amount determined - value in use;

Period covered by management plans used in calculation - 1 year;

Pre-tax discount rate applied to cashflow projection - 5%;

Growth rate used to extrapolate cashflows beyond management plan - 3%;

Difference between above growth rate and long term rate for UK - 0.5%

 

The calculation of value in use shown above is most sensitive to the assumptions on discount rates and growth rates. The assumptions used are considered to be realistically achievable in light of economic and industry measures and forecasts. The Directors believe that any reasonable possible change in the key assumptions on which the recoverable amount is based would not cause its carrying amount to exceed its recoverable amount.

 

Whilst there can be no certainty that the forecasts used in the impairment calculation will be achieved, the carrying value of goodwill at 31 July 2013 reflects the Directors best estimate based on their knowledge of the business at 20 December 2013 and reflects all matters of which the Directors are aware as at the date of approval of these financial statements.

 

13. Other intangible assets


Website and software design and development


2013

2012


£'000

£'000

Cost



At 1 August 2012

258

247

Additions

-

11

 

At 31 July 2013

 

258

 

258



At 1 August 2012

214

174

Charge for the year

10

22

Impairment

-

18

 

At 31 July 2013

 

224

 

214

 

Net Book Value



At 31 July 2013

34

44

 

14. Property and office equipment

 


Land and buildings

Office equipment


Total





2013


£'000

£'000


£'000

Cost or valuation





At 1 August

503

16


519

Additions

-

-


-

 

At 31 July

 

503

 

16

 

 

 

519

 

Depreciation





At 1 August

28

15


43

Charge for the year

24

1


25

Impairment

73

-


73

 

At 31 July

 

125

 

16

 

 

 

141






Net Book Value





At 31 July 2013

378

-


378






At 31 July 2012

475

1


476

 

15. Subsidiaries

Details of the company's subsidiaries at 31 July 2013 are as follows:

 

 

 

 

Name of Subsidiary

 

 

 

Company number

Place of incorporation (or registration) and operation

Proportion of ownership interest & voting power held

 

 

 

Holding

 

 

 

Principal activity

Prize Provision Services

03152966

England and Wales

100%

Ordinary shares

Lottery provider

FC Betz Limited

07304154

England and Wales

100%

Ordinary shares

Online gaming activities

Clicknow Holdings Limited

 

05391900

England and Wales

100%

Ordinary shares

Dormant company

Devil Fish Poker

Limited

 

05529624

 

England and Wales

 

100%

 

Ordinary shares

 

Commission earned via website

Soccerdome Limited

02948017

England and Wales

100%

Ordinary shares

Operates floodlit pitches

Click Now Limited

05391900

England and Wales

100%

Ordinary shares

Operator of community search engine

Barrington Lewis Limited

07190212

England and Wales

100%

Ordinary shares

Payment processing products

Poseve Limited

126971C

Isle of Man

100%

Ordinary shares

Non trading holding company

 

16. Inventories

 


2013


2012


£'000


£'000

 

Finished goods

 

2

 

 

 

2

 

 

 

17. Other financial assets

 

Trade and other receivables





2013


2012


£'000


£'000

Trade receivables

89


2

Other receivables

15


44

Prepayments and accrued income

16


55


120


101

 

 

The average credit period taken on all sales is 26 days for the year ended 31 July 2013, 1 day for the year ended 31 July 2012.

 

The Group has provided fully for all receivables which are not considered recoverable. In determining the recoverability of all receivables, the Group considers any change in the credit quality of the receivable up to the reporting date. As at the year end date there were no receivables past due which were either not provided against nor not covered by set-off arrangements with trade payables.

 

The Directors consider that the carrying amount of the receivables approximates their fair value.

 

 

Cash and cash equivalents


2013


2012


£'000


£'000

 

Cash and cash equivalents

 

256

 

 

 

18

 

Cash and cash equivalents comprises cash held by the Group and short-term bank deposits with an original maturity of 6 months or less. The carrying amount of these assets approximates their fair value.

 

 

 

 

 

 

 

 

 

18. Borrowings

 

Borrowings at 31 July 2013 include bank loans of £301,000 (2012 : £14,000). All of the loans are repayable on a fixed monthly repayment basis.

 

£14,000 of the borrowings are due for settlement after 12 months but within 5 years, with £287,000 being due for settlement within 12 months.

 

Included within borrowings is a loan of £250,000 which can be converted at any point to 31 December 2014, at the lenders discretion, into ordinary shares at a fixed sum of 0.11p per share to repay the outstanding loan and any additional interest and fees.

 

19. Derivatives financial instruments and hedge accounting

 

At 31 July 2013 and 2012 the Group had no derivatives in place for cash flow hedging purposes.

 

 

20. Other financial liabilities

 

Trade and other payables


2013


2012


£'000


£'000

Trade payables

260


395

Other payables

401


349

Accrued liabilities and deferred income

50


101


 

711

 

 

 

845

Other payables comprise:





£'000


£'000

Social security and other taxes

138


29

Other

263


320


 

401

 

 

 

349

Presented as:




-     Current

-


805

-     Non-current

711


40

 

 

Accrued liabilities and deferred income represents miscellaneous contractual liabilities that relate to expenses that were incurred, but not paid for at the year-end and income received during the period, for which the Group had not supplied the goods or services at the end of the year.

 

The Directors consider that the book value of trade payables, accrued liabilities and deferred income approximates to their fair value at the balance sheet date.

 

The average credit period taken for trade purchases is 113 days (2012 : 95 days).

 

 

 

 

 

 

 

 

 

21. Financial instruments: information on financial risks

 

Financial risks are discussed in the Directors' Report and below.

 

Capital risk management

 

The Group manages its capital to ensure that the Group as a whole will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 18, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 23 to 24.

 

Gearing ratio

 

As at 31 July 2012 the Group gearing ratio was 8.4%. As at 31 July 2013 the gearing ratio is as follows:

 


£'000

Debt

(301)

Cash and cash equivalents

256

Net Debt

(45)

 

Equity

 

283

 

Net debt to equity ratio

 

15.9%

 

 

Debt is defined as long and short-term borrowings.

 

Equity includes all capital and reserves of the Group attributable to equity holders of the parent.

 

Financial risk management objectives

 

The main market risks to which the Group is exposed are interest rates. There is also exposure to credit risk and liquidity risk. The Group monitors these risks and will take appropriate action to minimize any exposure.

 

Credit risk

 

The Group's exposure to credit risk is minimal due to turnover being in the main recognised upon cash receipt, hence the amount of trade receivables is negligible.

 

 

 

 

 

 

 

 

21. Financial instruments: information on financial risks (continued)

 

Liquidity risk

 

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

 

Regulatory compliance risk

 

Regulatory compliance risk is the risk of material adverse impact resulting from failure to comply with laws, regulations, codes of conduct or standards of good practice governing the sector in which the Group operates. The Group is monitored by the financial director who is responsible for meeting regulatory and compliance obligations.

 

Interest rate risk

 

The Group's exposure to interest rate risk mainly concerns financial assets and liabilities, which are subject to floating rates in the Group. At presents the Group's loans are on fixed rate interest rates and hence it is not exposed to risk on these should rates move.

 

22. Deferred taxation

 

A deferred tax asset has not been recognised in the years ended 31 July 2013 nor 31 July

2012 in respect of taxable losses carried forward of approximately £1,187,000 (2012 £1,166,000) as there is insufficient historic evidence that it will be recoverable in full against taxable profits during the next 12 months.

 

There are not considered to be any material temporary differences associated with investments in subsidiaries for which deferred tax liabilities have not been recognised.

 

23. Equity share capital

 


2013


2012


£'000


£'000

Allotted, called up and fully paid




 

795,433,397 (2012: 441,627,159) Ordinary Shares of 0.1p each

 

795


 

442

 

 

During the year the Company issued 0.1p Ordinary shares as follows:

 

·      236,656,580 shares issued at 0.1479p each on 30 May 2013 to J Rose in exchange for the entire share capital of Poseve Limited;

·      74,149,659 shares issued at 0.1479p each on 30 May 2013 to Allenby Capital Limited, A J A Flitcroft, J M Botros, Lord E T Razzall and J Williams to pay outstanding creditors.

·      42,999,999 shares issued at 0.1479p each on 30 May 2013 to new individual investors.

 

 

24. Other reserves


Share premium

 

 

Profit and loss

account


£'000


£'000

At 1 August 2012

1,321


(1,537)

Shares issued less costs

142


-

 

Result for the period

 

-


 

(438)

 

At 31 July 2013

 

1,463


 

(1,975)

 

 

25. Share-based payments

 

Certain Directors and key management were issued with share options on 8 June 2010, exercisable immediately at a price fixed at the date of issue. If the options remain unexercised after a period of seven years from the date of grant the options expire.

 

Details of options granted to date and still outstanding at the end of the year are as follows:

 

Date of Grant

2013

Exercise price

Exercise period


No.

£'000

 

 

 

 

 

8 June 2010

2,700,000

0.75p

8 June 2010 to 2 June 2017

8 June 2010

2,700,000

1.0p

8 June 2010 to 2 June 2017

8 June 2010

2,700,000

1.25p

8 June 2010 to 2 June 2017

 

 

All of the above options were outstanding at the year end. The options had a weighted average exercise price of 1p and a remaining contractual life of 4.8 years. The Directors consider that the estimated fair values of the options at grant date was £nil due to the prevailing market price being lower than the exercise price. As the fair value is currently considered to be £nil, no amount has been recognised in either the income statement or in equity in respect of these options.

 

As detailed in note 23, during the year shares were issued to third parties as settlement for certain liabilities to the value of £109,000.

 

 

 

26. Business combinations

 

Subsidiaries acquired

 


Principal activity

Date of acquisition

Proportion of voting interests acquired

Consideration transferred £'000






Poseve Limited

Non trading holding company

22 May 2013

100%

350











Consideration transferred

 

 


Poseve Limited £'000



Shares issued as consideration

350


350

 

Assets acquired and liabilities recognised at the date of acquisition

 


Poseve Limited

£'000

Total

£'000

Current assets



Cash and cash equivalents

8

8

Trade and other receivables

78

78




Non-current assets



Goodwill

16

16




Current liabilities



Trade and other payables

(82)

(82)





20

20

 

27. Goodwill arising on acquisition

 


Poseve

Limited

 £'000

 

Total

£'000




Consideration Transferred

350

350

Less: fair value of identifiable net assets acquired

 

20

 

20




Goodwill arising on acquisition

330

330

 

Net cash inflow on acquisition

 


Year ended 31 July 2013


£'000

Consideration paid in cash

-

Less: cash and cash equivalent balances acquired

(8)


(8)

 

28. Transactions with related parties

 

The transactions set out below took place between the Group and certain related parties.

 

Lord E T Razzall

 

Lord E T Razzall, a director, charged the Group £19,500 (2012 £13,750) in the year, for directorship services provided, via an entity trading as R T Associates. At the year end R T Associates was owed £2,400 (2012 £1,600).

 

J M Botros

 

J M Botros, the Company Secretary, charged the Group £42,677 (2012 £80,000) in the year, for Company Secretarial and legal services provided. At the year end there was no balance outstanding (2012: £35,000).

 

A J A Flitcroft

 

A J A Flitcroft, a director charged the group £30,000 in the year for accountancy services. At the year end a balance of £26,530 was outstanding.

 

28. Transactions with related parties (continued)

 

J S Williams

 

J S Williams, a former director of the group, charged the Group £36,250 (2012: £51,250) in the year for his services provided, via FCBid Limited and interest of £7,200 on a loan he provided to the company. A balance of £60,000 was owed to the company (2012: (£13,023)) at the year end.

 

Issue of Equity

 

On 30 May 2013 the Company issued the following ordinary 0.1p shares ("Shares") in part settlement of fees due to Company personnel.

 

·      The Right Honourable Lord E T Razzall CBE, Non-Executive Chairman, 14,965,986 Shares in settlement of £22,000 fees due.

·      J M Botros, Company Secretary and Legal Adviser, 23,809,524 Shares in settlement of £35,000 fees due.

·      J S Williams, General Manager, 14,965,986 Shares in settlement of £22,000 fees due.

·      A Flitcroft, a director of the company 13,605,442 Shares in settlement of £20,000 fees due.

 

The new shares were issued at 0.147p per share, which was the 5 day average of the closing mid market price to 16 May 2013.

 

As referred to in Note 25, share options were granted in 2010 to Directors and key management, all of which were outstanding at the year end. The following options were held by the Directors and key management at the year end:

 


Options No.

Option details

Lord E T Razzall

3,200,000

See A below




J M Botros

4,800,000

See B below




 

A - 1,100,000 at 0.75p, 1,100,000 at 1p and 1,000,000 at 1.25p

 

B - 1,600,000 at 0.75p, 1,600,000 at 1p and 1,600,000 at 1.25p

 

All of the options are exercisable by 2 June 2017.

 

 

Remuneration of key management personnel

 

The remuneration of the Directors, who are the key management personnel of the Group, is as referred to above, on page 8 within the Directors Report and in Note 7.


29. Operating lease commitments

 

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:

 


2013


2012


£'000


£'000

Land and buildings:




Within one year

-


-

In the second to fifth years inclusive

16


16

After five years

-


-

Other:

-


-

Within one year

-


-

In the second to fifth years inclusive

-


-

After five years

16


16

 

 

Operating lease payments represent rentals payable by the Group for office premises.  Leases are negotiated over the term considered most relevant to the individual subsidiary and rentals are fixed where possible for that term.

 

30. Controlling Party

 

No single individual has sole control of the company.

 

31. Events after the balance sheet date

 

Following the year end the company issued 324,895,331 0.1p ordinary shares to acquire the entire share capital of Sormelle Limited.

 

During September 2013 the company sold Devil Fish Poker Limited to a former director J S Williams.

 

32. Going Concern

 

 

The Group made a loss for the year of £438,000 (2012: £291,000) and an EBITDA profit of £1,000 (2012: (£231,000)). The significant trading loss is a result of an impairment charge of £382,000 from the impairment of goodwill and the value of a leasehold on the football pitches business. 

 

The management are continuing to control costs as well as pursue acquisitions of profitable cash generative companies, which has been seen with the acquisitions of Poseve Limited and Sormelle Limited. The group is forecasting turnover growth as a result of the acquisitions, with turnover of £4m expected and cash reserves being built up.

 

Given these changes made to the Group's ongoing operations, together with the additional capital available from the supporting shareholders, the Directors consider that the Group continues to be a going concern and they forecast that that there is sufficient funding in place to enable the continuance of the Group.


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