Half-yearly Report

Half-yearly Report

Coms PLC

COMS PLC

08 October 2009

COMS PLC

(“Coms”, “the Company” or “the Group”)

HALF-YEARLY REPORT TO 31 JULY 2009

Coms plc, a provider of internet voice and video services to business customers, announces its unaudited half-yearly report for the six months ended 31 July 2009.

Period Highlights

  • Revenue growth of 32% to £1.55m (H1 2008: £1.17m)
  • Gross profit of £0.40m (H1 2008: £0.32m)
  • Gross margin remains consistent at around 26%
  • Significant reduction in overheads – benefits being realised in H2

Post Period Highlights:

  • Launch of Video Conferencing Service with Microsoft and Polycom
  • Contract win with HelpAge to provide Coms’ systems across 23 countries
  • Issue of equity to raise £0.66m – subscribed to by management and experienced technology investors
  • Change of Nomad and Broker to Astaire Securities plc

Jason Drummond, Chairman of Coms, said: “The economic downturn has proved beneficial to the Group as companies look to reduce capital expenditure and lower their call costs. Coms continues to grow as customers switch to lower-cost and feature-rich hosted services provided by the Coms internet telephony and unified communications platform.”

“Our recent restructuring means that we have our costs under control and with these benefits coming into effect in H2 this year, the business aims to be cash flow positive at an operating level by the financial year-end. The Group continues to generate top-line revenue growth which makes the rest of the Board and me confident about the future of Coms plc”.

For further information please see the Company’s web site, www.coms.com or contact:

Coms plc

Jason Drummond

Richard Bennett

  020 7148 3000
Astaire Securities plc

Jo Turner

Aaron Smyth

020 7448 4400
Threadneedle Communications

Graham Herring

Alex White

020 7653 9850

About Coms:

Coms plc

Coms was founded by Jason Drummond in 2000 with the vision of enabling businesses to communicate by voice and video over the internet. Voice over IP (VoIP) is changing the way consumers and businesses communicate.

Coms offers a low-cost hosted communications service delivered over broadband. Coms customers can make high quality voice and video calls over the internet wherever a high-speed internet connection is available, including wireless hotspots, as they are allocated their own location-free unique user telephone number. Subscription is available in a range of packages.

Coms is an Ofcom authorised Public Electronic Communications Network (PECN) and a member of the Internet Telephony Service Providers Association (ITSPA).

Coms is listed on the London Stock Exchange AIM Market (LSE:COMS)

Chairman’s Statement

The economic downturn has proved beneficial to the Group as companies look to reduce capital expenditure and lower their call costs. Coms not only reduces its customers’ costs but also helps streamline their communications.

I am pleased to report Coms continues to grow and our top-line revenues have increased by 32% over the same period last year.

As I outlined in recent shareholder communications, at the beginning of this year the Board agreed significant cost reductions. The Group has now achieved annualised cost savings in excess of £0.45m, the benefits of which are being realised in current trading in H2. Furthermore, as a result of our recent strategic review of the business, we have merged the management teams of our subsidiary operating companies to achieve greater efficiencies and focus.

Based on our continued growth and lower operating costs, my objective is for the Company to become cash flow positive at an operating level by the financial year-end.

We continue to make steady progress selling our core internet telephony products and services in the SME sector, where we save our customers money and also provide valuable additional functionality such as remote working and the ability to easily scale up or down. This is clearly demonstrated in our recent HelpAge customer case study, which shows that we have saved the charity in excess of 25% of its call costs as well as providing increased functionality for its overseas operatives.

The internet telephony market continues to expand and evolve and increasingly puts traditional telecoms companies under pressure as call minutes migrate to internet telephony service providers such as Coms. The market is again becoming vibrant and we note that Skype has been sold to a private equity house for $2billion, Apple continues to see growth of the internet enabled iPhone and Google is increasing its efforts to promote its mobile phone. This supports our view that internet telephony and unified communications’ will become a mainstream market creating both growth and exit opportunities for Coms plc.

We are at the forefront of the migration to internet telephony and unified communications as our recent initiative with Polycom demonstrates. Coms will profit by providing recurring revenue- generating telephony and video services to customers using the Polycom CX5000 video conferencing phone, which we intend to make as iconic in boardrooms as the triangle-shaped conference phone. We are also further developing our unified communications functionality and have joined both the iPhone and Google application development communities.

Post period we completed a placing to provide additional working capital for the business. I personally contributed £300,000 to the placing and remain both positive and committed to the future of Coms plc. In addition we have appointed Astaire Securities plc as Nomad and Broker and look forward to reinvigorating our corporate development activities and shareholder communications.

Jason Drummond

Chairman

Consolidated Comprehensive Income Statement

For the Six Months Ended 31 July 2009

  Six months to 31 July 2009 Unaudited   Six months 31 July 2008 Unaudited   Year ended

31 January 2009

Audited

£'000s £'000s £'000s
 
 
 
Revenue 1,545 1,170 2,429
 
Cost of sales (1,145) (849) (1,794)
 
Gross profit 400 321 635
 
Administrative expenses (752) (834) (1,632)
     
 
Operating loss (352) (513) (997)
 
Finance income - 1 1
 
Finance costs (8) (4) (10)
 
Loss before tax (360) (516) (1,006)
 
Income tax charges - - (12)
 
Loss for the period from continuing

operations attributable to shareholders

(360) (516) (1,018)
 
Loss per share
 
From continuing operations:
 
Basic and diluted (2.6p) (4.5p) (8.5p)

The Company’s revenue and operating loss arose from continuing operations.

There were no recognised gains or losses other than those recognised in the income statement above.

Consolidated Balance Sheet

As at 31 July 2009

  As at 31 July 2009

Unaudited

  As at 31 July 2008

Unaudited

  As at 31 January 2009

Audited

£'000s £'000s £'000s
 
Assets
 
Non-current assets
Goodwill 2,318 2,308 2,318
Other intangibles 85 55 80
Property, plant and equipment 61 52 59
     
2,464 2,415 2,457
 
Current assets
Inventories 242 212 253
Trade and other receivables 588 547 524
Cash and cash equivalents 18 63 57
     
848 822 834
     
Total assets 3,312 3,237 3,291
 
Equity and liabilities
 
Capital and reserves
Share capital 1,413 1,221 1,413
Share premium 7,576 7,657 7,576
Reverse acquisition reserve (4,236) (4,236) (4,236)
Accumulated deficit (2,922) (2,060) (2,562)
     
Total equity 1,831 2,582 2,191
 
Current liabilities
Trade and other payables 1,205 589 1,020
Bank overdrafts - 5 -
Bank loans 24 37 37
1,229 631 1,057
 
Non current liabilities
Bank loans - 24 6
Convertible loan notes 252 - 37
252 24 43
     
Total equity and liabilities 3,312 3,237 3,291

Consolidated Statement of Cash Flow

For the Six Months Ended 31 July 2009

Six months to 31 July 2009 Unaudited   Six months to 31 July 2008 Unaudited  

Year ended 31 January 2009

Audited

 
Note £’000s £’000s £’000s
 
Operating activities 5 (197) (376) (439)
 
Investing activities
 
Purchases of plant and equipment

(12)

(23)

(40)

Purchase of other intangibles (18) (15) (49)
 
Financing activities
Proceeds from issue of shares - 474 575
Proceeds from issue of convertible loan notes

215

-

37

Repayment of bank loans (19) (19) (37)
Finance income - 1 1
Finance expense (8) (4) (11)
     
Net cash inflow/(outflow) (39) 38 37
 
Cash and cash equivalents at the beginning of the period

57

20

20

     
Bank balances and cash 18 58 57

Consolidated Statement of Changes in Equity

As at 31 July 2009

  As at

31 July 2009

  As at

31 July 2008

  As at

31 January 2009

£'000s £'000s £'000s
 
As at beginning of period 2,191 2,624 2,624
 
Deficit for the period (360) (516) (1,018)
 
Issue of share capital net of expenses

-

474

585

     
As at end of period 1,831 2,582 2,191

Notes to the Half-yearly Financial Information

1. Basis of preparation

The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards and on the historical cost basis, using generally recognised accounting principles consistent with those used in the annual report and accounts for the year ended 31 January 2009 and expected to be used for the year ended 31 January 2010.

This interim report for the six months to 31 July 2009 which complies with IAS 34 ‘Interim Financial Reporting’ was approved by the Board on 06 October 2009.

The summary accounts set out above do not constitute statutory accounts as defined by Section 434 of the UK Companies Act 2006. The consolidated balance sheet at 31 December 2008, the consolidated income statement and consolidated cash flow statement for the period then ended have been extracted from the Group’s 2008 statutory financial statements upon which the auditors’ opinion is unqualified.

2. Significant accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 January 2009, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 February 2009.

IAS 1 (revised), ‘Presentation of financial statements’. The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity. All ‘non-owner changes in equity’ are required to be shown in a performance statement.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

The Group has elected to present one statement: a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.

IFRS 8, ‘Operating segments’. IFRS 8 replaces IAS 14, ‘Segment reporting’. It requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

Goodwill is allocated by management to Groups of cash-generating units on a segment level.

The change in reportable segments has not resulted in any additional goodwill impairment. There has been no further impact on the measurement of the Group’s assets and liabilities. Comparatives for 2008 have not been restated.

IFRS 2 (amendment), ‘Share-based payment’ (effective from 1 January 2009). It deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations , whether by the entity or by other parties, should receive the same accounting treatment. The Group will apply IFRS 2 (amendment) from 1 January 2009, subject to endorsement by the EU. It is not expected to have a material impact on the Group’s financial statements.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:

IFRS 3 (revised), ‘Business combinations’ and consequential amendments to IAS 27, ‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’ and IAS 31, ‘Interests in joint ventures’, effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group. The Group does not have any joint ventures.

The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group will apply IFRS 3 (revised) to all business combinations from 1 January 2010.

IFRIC 17, ‘Distributions of non-cash assets to owners’, effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.

IFRIC 18, ‘Transfers of assets from customers’, effective for transfers of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant for the Group.

IAS 23 (amendment), ‘Borrowing costs’.

IAS 32 (amendment), ‘Financial instruments: Presentation’.

IFRIC 13, ‘Customer loyalty programmes’.

IFRIC 15, ‘Agreements for the construction of real estate’.

IFRIC 16, ‘Hedges of a net investment in a foreign operation’.

IAS 39 (amendment), ‘Financial instruments: Recognition and measurement’.

3. Segmental Analysis

In the opinion of the directors, the Group’s core activities comprise two material business segments which reflect the profiles of the risks, rewards and internal reporting structures within the Group. These are as follows:

- Provision of IP telephony and video services

- Supply and distribution of IP telephony equipment and related services.

All activities were conducted within the United Kingdom and it is the opinion of the directors that this represents one geographical segment.

Revenue   Six months to 31 July 2009   Six months to 31 July 2008   Year ended

31 January 2009

£’000s £’000s £’000s
 
IP telephony and video services 376 389 659
IP telephony equipment and related services - external 1,169 781 1,770
IP telephony equipment and related services - internal 16 - 42
Elimination (16) - (42)
     
Consolidated 1,545 1,170 2,429

 

Profit / (Loss) Six months to 31 July 2009 Six months to 31 July 2008 Year ended

31 January 2009

 

£,000s £,000s £,000s
IP telephony and video services (247) (319) (618)
IP telephony equipment and related services (23) (94) (187)
Group Activities (82) (100) (192)
Finance income - 1 1
Finance costs (8) (4) (10)
Income tax (charge)/ credit - - (12)
     
Consolidated (360) (516) (1,018)

Assets

    As at 31 July 2009   As at 31 July 2008   As at 31 January 2009

Audited

£’000s £’000s £’000s
IP telephony and video services 2,253 2,223 2,237
IP telephony equipment and related services 1,041 847 1,029
Group activities 18 167 25
       
3,312 3,237 3,291

Liabilities

    As at 31 July 2009   As at 31 July 2008   As at 31 January 2009

Audited

£’000s £’000s £’000s
IP telephony and video services (300) (207) (250)
IP telephony equipment and related services (761) (373) (750)
Group activities (420) (75) (100)
       
(1,481) (655) (1,100)

Capital additions

    As at 31 July 2009   As at 31 July 2008   As at 31 January 2009

Audited

£’000s £’000s £’000s
IP telephony and video services 24 31 73
IP telephony equipment and related services 6 7 17
Group activities - - -
       
30 38 90

Depreciation and amortisation

      As at 31 July 2009   As at 31 July 2008   As at 31 January 2009

Audited

£’000s £’000s £’000s
IP telephony and video services 18 12 28
IP telephony equipment and related services 5 2 6
Group activities - - -
       
23 14 34

4. Loss per share

Six months to 31 July 2009   Six months 31 July 2008   Year ended

31 January 2009

 
Earnings per ordinary shares
Basic and diluted (2.6p) (4.5p) (8.5p)

The loss per ordinary share is based on the Company’s loss for the period of £360,179 (31 July 2008: £516,333; 31 January 2009: £1,018,126) and a basic weighted average number of shares of 14,127,116 (31 July 2008: 11,522,917; 31 January 2009: 11,909,522). The comparative figures for the period ended 31 July 2008 have been restated to reflect the share consolidation on 22 August 2008.

In order to calculate diluted earnings per share, the weighted average number of ordinary shares in issue would be adjusted to assume conversion of all dilutive potential ordinary shares according to IAS 33. In each of the periods ended 31 July 2009, 31 July 2008 and 31 January 2009 the Group has made a loss after taxation and the effect of the potential ordinary shares is anti-dilutive and therefore the diluted earnings per share is the same as basic earnings per share. The weighted average number of potential dilutive shares for the period ended 31 July 2009 was 2,620,000 (31 July 2008: 442,582; 31 January 2009: 846,973)

5. Reconciliation of operating loss to net cash outflow from operating activities.

  Six months to 31 July 2009   Six months 31 July 2008   Year ended

31 January 2009

£’000s £’000s £’000s
 
Loss for the period (360) (516) (1,006)
Adjustments for :
Finance income - (1) (1)
Finance expense 8 4 11
Depreciation and amortisation 23 14 34
Decrease/(Increase) in inventories 11 (25) (65)
(Increase)/Decrease in receivables (64) 211 222
(Decrease)/Increase in payables 185 (63) 366
     
Net cash from operating activities (197) (376) (439)

6. Called up share capital

The issued share capital as at 31 July 2009 was 14,127,116 Ordinary Shares of 10p each (31 July 2008: 12,219,615; 31 January 2009: 14,127,116).

7. The unaudited results for period ended 31 July 2009 do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 31 January 2009 are extracted from the statutory financial statements which have been filed with the Registrar of Companies and which contain an unqualified audit report and did not contain statements under Section 498 to 502 of the Companies Act 2006.

8. Copies of this half-yearly report are available from the Company at its registered office at 5-7 Cranwood Street, London, EC1V 9EE. The interim statement will also be available on the Company’s website http://ir.coms.com/

9. Events subsequent to 31 July 2009

On 3 September 2009 the Company enacted a share capital reorganisation whereby each Ordinary share of 10p was subdivided into one Ordinary share of 1p and nine deferred shares of 1p each.

On 9 September the Company issued 100,000 new ordinary shares of 1p each at a price of 10 pence per share as a result of a conversion into equity of a £10,000 loan made to the Company.

On 14 September 2009 the Company issued 22,166,666 new ordinary shares of 1p each representing approximately 60.91 per cent. of the enlarged issued share capital of the Company at a price of 3p per share raising £665,000 (before expenses) which is made up of £427,500 pursuant to a placing for cash and £237,500 pursuant to the conversion of outstanding loan notes into new ordinary shares at the placing price of 3p per share. The net placing proceeds will be used for additional working capital purposes.

On 14 September 2009 the Company granted warrants to certain Directors over 1,088,813 ordinary shares (representing approximately 3 per cent. of the enlarged issued share capital of the Company immediately following the placing announced on the same day) with an exercise price of 5p per share, under the Company's unapproved share option scheme.

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