RNS Number:0494I
NetServices PLC
20 November 2007
For Immediate Release 20 November 2007
PRELIMINARY RESULTS ANNOUNCEMENT
For the year ended 31 August 2007
NetServices plc, (AIM:NSV) the specialist provider of converged business
communications, announces its results for the year ended 31 August 2007.
Highlights
* Disposal of the wholesale consumer broadband business generating #0.4m
profit after charges
* Turnover reduced to #12.6m (2006: #16.2m),following the disposal of the
wholesale consumer broadband business
* Positive EBITDA of #0.2m (2006:#2.3m loss)
* Loss before tax of #0.6m (2006: #3.0m)
* Cash balances at period end #1.5m (net)
* Significant reductions in network and overhead costs
* QoS IPStream services launched June 2007
Commenting on outlook, Mark Vickers, Chief Executive Officer said:
"Our strategy remains focused on winning business in complex higher margin,
converged solutions - which increase returns and aid customer retention as
solutions prove more 'sticky'.
Our sales pipeline is at its healthiest position for over 18 months and we are
confident of converting these into contracted revenues during the year. I look
forward to updating the market and our shareholders on our progress during the
course of the year."
For further information, please contact:
NetServices Today on Tel No: 020 7466 5000
Mark Vickers, Chief Executive
Ian Winn, Finance Director Thereafter on Tel No: 0870 753 0900
Buchanan Communications Tel No: 020 7466 5000
Lisa Baderoon
Arbuthnot Securities Tel No: 020 7012 2000
Tom Griffiths/Alasdair Younie
CHAIRMAN'S STATEMENT
I am pleased to announce the results for NetServices for the year ended 31
August 2007. I am also pleased that the results reported are in line with
management's expectations for the full year, and demonstrate a substantial
improvement on the results for the preceding 12 months.
Turnover for the year was #12.6m (2006: #16.2m), due to the sale of our
wholesale consumer broadband business and the impact of v21.co.uk Limited
("V21"). However as a result of the profit on disposal of the wholesale consumer
broadband business, a re-assessment of the provision required against onerous
contracts and continued tight and effective management of both cost of sales and
overheads, we were able to generate a positive EBITDA this year of #0.2m (2006:
#2.3m loss) and a loss before tax of #0.6m (2006: #3.0m).
We indicated last year that we would continue to review the ways in which
shareholder value could be maximised. It became apparent to us during the
financial year that with changes in regulation implemented by OFCOM with regard
to the provision of Migration Access Codes ("MACs") and continued intense
competition - which was undermining our resellers - that shareholder interest
would be best served by a disposal of the wholesale consumer broadband business.
We achieved this in May 2007 through the sale of this business to the company
186k Limited ("186k"), from which we booked a net profit of #0.4m, after legal,
staff severance and decommissioning costs. Last year, we reported on a dispute
with V21, I can confirm that no further provisions were required during the
financial year against this former customer.
The remainder of the year has been characterised by three features which I will
report upon in more detail. First, we have focused on ensuring that we deliver
services in the most cost effective and efficient manner possible, whilst at the
same time maintaining the same level of high customer service, as evidenced by
the continued high scores in the surveys undertaken as part of our Continuous
Service Improvement Programme. This has enabled us to reduce networking costs,
which has benefited the company's gross margin, and ensures that ongoing
business activities contributed 40% gross margin. In addition we have ensured
that overheads have been tightly controlled, through a reassessment of the
property footprint and close control over staffing levels.
Secondly, the directors believe that innovation and development within our
networking product portfolio ideally positions us to deliver converged data and
voice networks. The development of Quality of Service ("QoS") over IPStream and
its product release means that the company can now cost effectively connect home
workers and remote offices with a service that will prioritise specific types of
network traffic at a fraction of the cost of traditional non-contended
connectivity technologies.
Thirdly we have begun to fully benefit from the corporate wide area networking
("WAN") customers acquired with Telefonica UK. This has been assisted by the
structural changes that we made to the sales team in the first part of the
current financial year. We have re-signed a number of the customers during the
year and sold additional services to them, culminating in a three year contract
worth #1.5m with a leading professional services client.
Over the coming months, we intend to continue to invest in and develop our
product portfolio to ensure that we can be at the forefront of developments in
converged networking. We are currently engaged with two large IP carriers, which
enables us to carry voice traffic cost effectively over data networks supplied
by us. This allows our customers and resellers to benefit from the cost
reductions that can be obtained by transporting voice traffic over fixed cost
networks rather than volume based traditional telephony networks.
I would like to take this opportunity to thank Denise Diskin, who stepped down
as company secretary during the year, for her contribution to the company over a
number of years. I would also like to welcome to the board Alan Jarvis who has
accepted the position of chief technical officer with effect from 1 January
2008. Alan has extensive technical experience and know how from over 20 years in
the IT industry, most recently as chief information officer for Rotary
International and its Foundation in Chicago, USA.
Finally I would like to thank all the staff at NetServices for their efforts and
continuing professionalism in what has been a year of further change. The
progress in the business has been achieved through a sustained team effort from
the executives, senior management and staff alike.
The board is acutely aware of the need to deliver positive financial results.
Whilst these current results demonstrate progress, we now need to deliver
profitability and further cash generation. We believe the initiatives we are
pursuing and the execution of these plans will generate such results and we look
forward to a positive outlook for 2008.
Chris Townsend
Chairman
20 November 2007
BUSINESS REVIEW
Introduction
NetServices' focus is on bringing convergence to our customers, or as we like to
put it, bringing businesses alltogether. We aim to bring our customers more than
the promise of a converged business and concentrate on the delivery of tangible
business improvements through reliable and proven solutions allied with
technological innovation.
Our business proposition is based upon bringing simplicity and increased
business performance to our customers and reseller partners. This is achieved
through 'best in class' skill sets, a comprehensive product portfolio and an
enviable heritage in networking and convergence technologies.
Developments in the market - The need for convergence
Historically businesses fulfilled their voice and data requirements over two
separate infrastructures: the voice being provided over PSTN (Publicly Switched
Telephony Network) technology and the data over a WAN comprising various forms
of connectivity such as leased line, SDSL, ADSL etc. Corporates looked to manage
costs through the use of carrier pre-select ("CPS") on voice (to reduce call
costs) and through managing down the bandwidth requirements for data
connections. The advent of voice over IP ("VoIP") meant that voice traffic could
travel over a data network rather than down a traditional phone line and thus
began to open up the possibilities for both traffic types to run on the same
physical connection i.e. "convergence". However, for a business, the requirement
for voice traffic to be of a desirable quality has always been the limiting
factor - and for remote workers and small satellite offices it was not cost
effective to deliver the data connections which could guarantee business voice
quality.
Expertise gained from our heritage in broadband (DSL) technologies has led us to
being able to provide prioritisation over all DSL technologies. Because we can
offer QoS on even the cheapest of access technologies (the IPStream network) we
can utilise this within converged solutions and remain confident in the voice
quality delivered. Effectively this is what allows us to deliver converged
solutions cost effectively and flexibly even to the smallest of sites and to
remote and teleworkers.
It is generally agreed that voice traffic, in the future, will travel over IP
networks rather than the traditional PSTN breakout, potentially disengaging the
connection from the traditional carrier and empowering the IPCarrier ("IPC").
This 'disintermediation of the carrier', facilitated by IP Gateways (the method
by which the voice call is transferred from the IP network to the outside world)
will change the way operators in this market deliver their solutions. IP
networks become the common requirement for delivery of voice traffic, having one
network infrastructure for delivery. Call costs are reduced because increasing
amounts of voice traffic will travel over a fixed cost data network and will not
incur a per minute call cost. NetServices' expertise in networking becomes
important to voice integrators and PBX resellers as it allows them to provide
attractive solutions to their customers and allows all parties to capture and
secure additional revenues.
We are currently developing both an in-house solution with links to a
traditional carrier's IP Gateway and rolling out a "white label" product
provided by a third party provider. We believe this gives us access to
potentially significant opportunities where we can leverage both our networking
and IP Gateway expertise to generate new revenue streams.
In order to deliver this exciting, converged product set into the market, we
intend to focus primarily on key direct accounts and targeted, strategic
resellers. We will only consider opportunities which deliver both an adequate
return and which ensure that we are not exposed to material credit risk.
Results for the year
The past financial year has been one of change and is characterised by two
distinct periods: pre and post the disposal of our wholesale consumer broadband
base.
Turnover for the year was #12.6m (2006: #16.2m), due to the disposal of our
wholesale consumer broadband base and the closure of our CPS business. However
we booked a net profit on the disposal of the wholesale consumer broadband base
and ended the financial year EBITDA positive on a monthly basis.
We generated EBITDA of #0.2m (2006: #2.3m loss), which in turn produced a loss
before tax of #0.6m (2006: #3.0m). This was in line with management's
expectations and represented substantial progress on the preceding year. The
board does not recommend the payment of a final dividend.
We reported, in last year's results, that we had undertaken a review of our
wholesale broadband business and commented upon the uncertainty in that market
at that time. Unfortunately the level of uncertainty persisted during the
financial year. Following continued bad debt experience and the announcement by
OFCOM of regulatory changes to the provision of MAC codes, we decided that the
best option to realise value on this business was through a disposal. In May
2007 we announced the sale of the wholesale consumer business to 186k. The
purchase consideration payable was #0.8m in cash, on which we realised a profit,
after costs (which included legal, staff severance and decommissioning costs) of
#0.4m.
These are the last set of financial statements that will be issued under UK
GAAP. In future our accounts will be issued under IFRS, and we anticipate
releasing a transition balance sheet and schedule of adjustments in 2008. The
board believes that as a result of the transition to IFRS there are unlikely to
be any material adjustments required.
Ongoing activities
Our ongoing business activities, primarily converged voice and data business,
and hosting within our own datacentre in Manchester, targeted at direct
customers and strategic resellers contributed #7.4m of the annual turnover
referred to above. These activities generated gross margin of #3.0m. During the
second half of the financial year we made significant progress in reducing the
cost of sales through rationalisation of our network infrastructure used to
deliver our services. This has included increasing the expenditure under our
contract with Global Crossing (formerly Fibernet), where we have a ten year
commitment to purchase a minimum value of services from them. As a consequence
of this and following a management review post year end, we have been able to
reduce the provision on onerous contracts by #0.5m.
Ongoing activities generated EBITDA of #0.2m and a loss before tax of #0.5m.
Looking at the two halves of the year, the first half EBITDA loss was #0.3m,
with an EBITDA contribution of #0.5m in the second half. As with cost of sales,
we have made significant progress in managing the overhead base of the business,
which ensured that at the year end our normalised overhead cost base was #0.24m
per month in August 2007 compared with #0.36m per month in October 2006.
Ceased activities
During the financial year ended 31 August 2007 the company chose to exit from
two areas of business where it possessed neither the scale nor the resources to
compete and generate a satisfactory rate of return. This included both the
wholesale consumer broadband businesses referred to previously and the CPS
business over traditional PSTN technology. These parts of the business
contributed #5.2m of turnover and #0.4m of gross margin. Due to continuing bad
debt risk and write offs, they contributed #0.5m of the loss before tax in the
year. We believe that the level of credit risk within our debtor book has now
been substantially reduced as a result of the closure of these activities.
Last year we reported on the position with V21 and our expectations about the
outcome. In spite of much speculation in the industry press, our position was
vindicated as we secured judgement on our debt with the company. However this
proved something of a pyrrhic victory as V21 entered liquidation in May 2007,
and its holding company Biscit Internet Limited ceased trading during March
2007, and we anticipate receiving little or no proceeds from the liquidator.
Voice4IP Limited
At the start of the financial year, in tandem with our re-organisation of the
brand and salesforce, we transferred the trade of this subsidiary into the
business of NetServices. In line with the development in the convergence market,
the brand has now been incorporated under our NetServices brand. During the
financial year, the development phase of our telephony software application and
conferencing bridge was completed.
Working capital
We have made good progress in the year, in the collection of overdue
receivables. We have been aggressive in pursuing non-payers and at the year end
there were a number of claims being pursued, where, although we have fully
provided against the debt, we would hope to make some recovery. The collection
of overdue debts, together with the control on costs and the unwinding of
the working capital position following the disposal of our wholesale consumer
broadband business meant that we generated a cash inflow from operating
activities of #0.3m (2006: #3.8m outflow).
At the year end, we were still in the process of migrating the technical
infrastructure relating to the wholesale consumer broadband business to 186k. As
a consequence, we were re-charging costs to 186k incurred on their behalf and,
at 31 August 2007, we held #0.4m of cash representing payment by 186k for such
supplier recharges.
Our total cash balances at 31 August 2007, including the amounts referred to
above, were #1.9m (2006: #1.4m).
Board changes
During the year, there were a number of changes to the board to reflect the
changing nature and scope of the business.
As reported in last year's annual results, Phil Wedgwood assumed the role of
sales director in September 2006.
In July 2007 Steven Hartley stepped down as finance director and became a
non-executive director, and was replaced by Ian Winn, who had joined the group
as Voice4IP finance director in April 2006.
Outlook
Our strategy remains focused on winning business in complex higher margin,
converged solutions - which increase returns and aid customer retention as
solutions prove more 'sticky'. The combination of our core infrastructure, our
comprehensive product portfolio and the in-house expertise gained through
managing voice networks means the company is ideally positioned to provide the
'value-add' in converged networking required by direct businesses and the PBX
and value added resellers.
In order to assist in the implementation of our strategy this financial year, we
will be investing approximately #0.3m in new hardware and monitoring software,
which will ensure we remain well positioned to deliver our expanding product
set.
We enter the year with annualised revenues of #8.0m from both existing and
recently secured new business. Our unaudited cash balances at 31 October 2007
were #1.5m. In addition, our sales pipeline is at its healthiest position for
over 18 months and we are confident of converting these into contracted revenues
during the year. I look forward to updating the market and our shareholders on
our progress during the course of the year.
Mark Vickers
Chief executive officer
Group Consolidated profit and loss account for the year ended 31 August 2007
Total
Year Year
ended ended
Continuing Discontinued 31 August 31 August
--------- --------- --------- ---------
operations Operations 2007 2006
# # # #
--------- --------- --------- ---------
Turnover 7,441,569 5,151,037 12,592,606 16,153,738
Cost of sales 4,450,154 4,736,414 9,186,568 12,774,148
----------------- --------- --------- --------- ---------
Gross profit 2,991,415 414,623 3,406,038 3,379,590
----------------- --------- --------- --------- ---------
Administrative expenses 3,178,222 898,197 4,076,419 5,349,093
Depreciation 605,221 54,167 659,388 588,384
Research and development 121,274 - 121,274 343,155
Amortisation 38,536 - 38,536 38,536
Exceptional items (523,375) - (523,375) -
----------------- --------- --------- --------- ---------
Total administrative
expenses 3,419,878 952,364 4,372,242 6,319,168
----------------- --------- --------- --------- ---------
Other operating income 11,500 - 11,500 8,283
----------------- --------- --------- --------- ---------
Operating (loss) (416,963) (537,741) (954,704) (2,931,295)
----------------- --------- --------- --------- ---------
Profit on sale of 409,175 -
discontinued operations
----------------- --------- --------- --------- ---------
(Loss) on ordinary
activities (545,529) (2,931,295)
before interest
----------------- --------- --------- --------- ---------
Net interest receivable 18,319 10,718
Net interest payable (79,969) (81,923)
----------------- --------- --------- --------- ---------
(Loss) on ordinary
activities (607,179) (3,002,500)
before taxation
----------------- --------- --------- --------- ---------
Taxation 42,112 101,508
----------------- --------- --------- --------- ---------
Retained (loss) for
financial year (565,067) (2,900,992)
after taxation
----------------- --------- --------- --------- ---------
(Loss) per share
- basic and diluted
(pence) (1.94) (11.65)
----------------- --------- --------- --------- ---------
No separate statement of total recognised gains and losses is presented as all
such gains and losses have been dealt with in the profit and loss account.
Group Consolidated balance sheet as at 31 August 2007
2007 2006
# #
--------- ---------
Fixed assets
Intangible assets 371,885 453,623
Tangible assets 1,541,379 2,092,853
Investments 58,667 59,357
---------------------- --------- ---------
1,971,931 2,605,833
Current assets
Debtors 843,066 3,604,183
Cash at bank and in hand 1,883,120 1,350,649
---------------------- --------- ---------
2,726,186 4,954,832
Creditors
Amounts falling due within one year 1,973,322 3,659,278
---------------------- --------- ---------
Net current assets 752,864 1,295,554
---------------------- --------- ---------
Total assets less current liabilities 2,724,795 3,901,387
Creditors
Amounts falling due after more than one year 486,618 566,676
Provisions for liabilities and charges 1,601,678 2,148,219
---------------------- --------- ---------
636,499 1,186,492
---------------------- --------- ---------
Capital and reserves
Called-up equity share capital 73,962 72,573
Share premium account 4,293,126 4,287,725
Share-based payment reserve 8,284 -
Profit and loss account (3,738,873) (3,173,806)
---------------------- --------- ---------
Equity shareholders' funds 636,499 1,186,492
---------------------- --------- ---------
Group Consolidated cash flow statement for the year ended 31 August 2007
Year to Year to
31 August 31 August
2007 2006
# #
--------- ---------
Net cash inflow/(outflow) from operating activities 305,645 (3,765,911)
Returns on investments and servicing of finance
Interest received 18,319 10,718
Interest paid (58,615) (64,846)
Interest element of hire purchase (21,355) (17,077)
----------------------------- --------- ---------
Net cash (outflow) from returns on investments and
servicing (61,651) (71,205)
of finance
Taxation - 31,216
Capital expenditure
Payments to acquire intangible fixed assets - (119,640)
Payments to acquire tangible fixed assets (147,889) (222,162)
Receipts from sale of tangible fixed assets 34,500 -
----------------------------- --------- ---------
Net cash (outflow) from capital expenditure (113,389) (341,802)
Acquisitions and disposals
Disposal of business unit 531,671 -
----------------------------- --------- ---------
Cash inflow/(outflow) before financing 662,276 (4,147,702)
Financing
Issue of share capital 6,790 4,185,198
Capital element of hire purchase (99,554) (92,853)
Bank loans repaid (37,041) (49,695)
----------------------------- --------- ---------
Net cash (outflow)/inflow from financing (129,805) 4,042,650
----------------------------- --------- ---------
Increase/(decrease) in cash in the year 532,471 (105,052)
----------------------------- --------- ---------
Notes:
1.Accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards.
Going concern
On the basis of the financial projections and facilities currently available to
the group the directors consider it appropriate to prepare the financial
statements on a going concern basis.
Basis of consolidation
The consolidated accounts incorporate the accounts of the company and all group
undertakings. These are adjusted, where appropriate, to conform to group
accounting policies. Acquisitions are accounted for under the acquisition method
and goodwill on consolidation is capitalised and written off over its useful
economic life from the year of acquisition. The results of companies acquired or
disposed of are included in the profit and loss account after or up to the date
that control passes respectively. As a consolidated profit and loss account is
published, a separate profit and loss account for the parent company is omitted
from the group accounts by virtue of Section 230 of the Companies Act 1985.
The group share of the profits of Datascape Online Ltd, an associate company,
has not been included in the consolidation on the grounds that the group has no
significant influence over the company.
Change of accounting policy
The group has consistently applied all relevant accounting standards except for
the changes in accounting standards as detailed below.
FRS 20 "Share-based Payment" is effective for unlisted companies (including AIM
companies) for accounting periods beginning on or after 1 January 2006. In
accordance with the standard, the cost of share options awarded to employees
measured by reference to their fair value at the date of grant is recognised
over the vesting period of the options based on the number of options which in
the opinion of the directors will ultimately vest. An analysis of the impact of
FRS 20 is shown in note 20. The directors have not made a prior year adjustment
in respect of the cost of share options arising in prior years in view of the
immateriality of the charge to these financial statements.
Turnover
Turnover from the sales of equipment is recognised upon delivery to the
customer. Installation revenue is recognised upon connection of the customer to
the network. Other contracted income, including customer rental, is recognised
over the contract period in proportion to the value of the service provided.
Deferred income represents that portion of rental fees paid by customers but
relating to a future period.
Amortisation
Amortisation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Goodwill - over ten years
Research and development - over life of associated product
The directors review the carrying value of development costs and goodwill on a
regular basis and, if appropriate, impair the value of development cost and
goodwill as required.
Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Freehold property - 2% on cost
Long leasehold property - 2% on cost
Plant and machinery - 20% on cost
Fixtures and fittings - 20% on cost
Motor vehicles - 20% on cost
Computer equipment - 20% on cost
The carrying values of tangible fixed assets are reviewed for impairment in
periods if events or changes in circumstances indicate the carrying value may
not be recoverable.
Leasing and hire purchase commitments
Assets held under finance leases, which are leases where substantially all the
risks and rewards of ownership of the asset have passed to the company, and hire
purchase contracts, are capitalised in the balance sheet and are depreciated
over their useful lives. The capital elements of future obligations under the
leases and hire purchase contracts are included as liabilities in the balance
sheet.
The interest elements of the rental obligations are charged in the profit and
loss account over the periods of the leases and hire purchase contracts and
represent a constant proportion of the balance of capital repayments
outstanding.
Operating lease arrangements
Rentals applicable to operating leases, where substantially all of the benefits
and risks of ownership remain with the lessor, are charged against profits on a
straight line basis over the period of the lease.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the group's taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax assessments in periods different from those in which they are
recognised in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currencies are translated into sterling at the rate of exchange ruling at the
date of the transaction. Exchange differences are taken into account in arriving
at the operating profit.
Financial instruments
Financial instruments are classified and accounted for, according to the
substance of the contractual arrangement, as either financial assets, financial
liabilities or equity instruments. An equity instrument is any contract that
evidences a residual interest in the assets of the company after deducting all
of its liabilities. Interest associated with financial assets and liabilities is
recognised in the profit and loss account on an accruals basis.
Research and development
Research expenditure is written off to the profit and loss account in the year
in which it is incurred.
Development expenditure is carried forward when its future recoverability can be
foreseen with reasonable assurance and is amortised in line with sales from the
related product. All other development costs are written off as incurred.
Share-based compensation
The group operates an equity-settled, share-based compensation plan. The fair
value of the employee services received in exchange for the grant of options is
recognised as an expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the options granted,
excluding the impact of any non-market vesting conditions (for example,
profitability and growth targets). Non-market vesting conditions are included in
the assumptions about the number of options that are expected to become
exercisable. At each balance sheet date, the group revises its estimates of the
number of options that are expected to become exercisable. It recognises the
impact of the revision of original estimates, if any, in the profit and loss
account, and a corresponding adjustment to reserves over the remaining vesting
period.
2. Turnover
The group's turnover and loss before taxation were all derived from its
principal activity which is the provision of voice and data services. 96.5% of
the turnover (2006: 97.1%) was attributable to the United Kingdom. As the level
of trade outside the United Kingdom was immaterial an analysis of the income,
result and net assets by geographical area has not been disclosed.
3. Operating loss
Operating loss is stated after charging:
2007 2006
# #
--------- ---------
Amortisation of goodwill 38,536 38,536
Depreciation of owned fixed assets 613,336 550,048
Depreciation of assets held under hire purchase agreements 46,052 38,336
Loss on disposal of fixed assets 5,474 -
Auditors' remuneration
- as auditors 28,258 38,000
- interim review 8,600 9,000
- corporation tax compliance 7,150 6,500
- other 7,818 -
Operating lease costs
- land and buildings 142,183 163,053
Research and development 121,274 343,155
Amortisation of research and development 43,202 -
FRS 20 share options charge 8,284 -
Exceptional item - reduction in provision on onerous
contracts (523,375) -
--------- ---------
4. (Loss) per share
Year ended Year ended
31 August 31 August
2007 2006
-------- ---------
Basic and diluted per share (pence) (1.94) (11.65)
-------- ---------
The calculation of diluted loss per ordinary share is identical to that used for
the basic loss per ordinary share for the year ended 31 August 2007 and the year
ended 31 August 2006. This is because the exercise of the options would have the
effect of reducing the loss per ordinary share and is, therefore, not dilutive
under the terms of FRS 22.
Earnings and the number of shares used in the calculations of loss per share are
set out below:
Year ended Year ended
31 August 31 August
2007 2006
# #
--------- ---------
(Loss) for the year (565,067) (2,900,992)
--------- ---------
Weighted average number of shares used in the calculations of loss per share are
set out below:
Year ended Year ended
31 August 31 August
2007 2006
No. No.
--------- ---------
For basic and diluted loss per share 29,186,285 24,905,142
------------------ --------- ---------
The (loss) per share attributable to continued and discontinued operations has
been calculated on the following basis, and using the weighted average number of
shares above.
Continued Discontinued
--------- ---------
Operating loss (#) (416,963) (537,741)
(Loss) per share - basic and diluted (pence) (1.43) (1.84)
------------------------ --------- ---------
5. Reconciliation of movements in shareholders' funds
2007 2006
# #
--------- ---------
(Loss) for the financial period (565,067) (2,900,992)
FRS 20 charge 8,284 -
Share issue net of expenses 6,790 4,185,198
------------------------ --------- ---------
Net (reduction)/addition to funds (549,993) 1,284,206
Opening shareholders' equity funds/(deficit) 1,186,492 (97,714)
------------------------ --------- ---------
Closing shareholders' equity funds 636,499 1,186,492
------------------------ --------- ---------
6. Notes to the cash flow statement
Reconciliation of operating loss to net cash inflow/(outflow) from operating
activities
2007 2006
# #
- --------- ---------
Operating (loss) (954,704) (2,931,295)
Amortisation of goodwill 38,536 38,536
Depreciation 659,388 588,384
Amortisation of research and development 43,202 -
Loss on disposal of fixed assets 5,474 -
Decrease in debtors 2,638,623 166,981
(Decrease) in creditors (1,584,783) (1,313,044)
(Decrease) in provisions (548,375) (315,473)
Increase in reserves - FRS 20 charge 8,284 -
------------------------- --------- ---------
Net cash inflow/(outflow) from operating
activities 305,645 (3,765,911)
------------------------- --------- ---------
Reconciliation of net cash flow to movement in net funds
2007 2006
# #
--------- ---------
Increase/(decrease) in cash in the year 532,471 (105,052)
Cash flow in respect of hire purchase and loans 136,594 142,548
------------------------ --------- ---------
Change in net funds resulting from cash flow 669,065 37,496
New hire purchase agreements - (235,401)
Opening net funds 629,399 827,304
------------------------ --------- ---------
Closing net funds 1,298,464 629,399
------------------------ --------- ---------
Analysis of changes in net funds
At At
1 September Cash 31 August
2006 flows 2007
# # #
---------------------- --------- --------- ---------
Net cash
Cash in hand and at bank 1,350,649 532,471 1,883,120
Debt
Hire purchase agreements (193,609) 99,553 (94,056)
Bank loans (527,641) 37,041 (490,600)
---------------------- --------- --------- ---------
Net funds 629,399 669,065 1,298,464
---------------------- --------- --------- ---------
7. Basis of Preparation
The board of directors of NetServices plc approved the Preliminary Results on 20
November 2007.
Information in the Preliminary Results does not constitute statutory accounts of
the Group within the meaning of Section 240 of the Companies Act 1985. The
figures for the year ended 31 August 2007 are audited.
Statutory accounts for the year ended 31 August 2006, which were prepared under
accounting practices generally accepted in the UK, have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under Section 237 (2) or (3) of the Companies
Act 1985.
The annual report will be sent to shareholders on 26 November 2007. Additional
copies will be available to the public free of charge, from the Company's
registered office at Waters Edge Business Park, 30 Modwen Road, Salford,
Manchester M5 3EZ and from the Company's website at www.netservices.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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