Interim Results
Mondas PLC
22 December 2005
Mondas plc
Interim Results for the six months to 31 October 2005
Mondas PLC, the specialist provider of software solutions to the banking &
securities and education markets, announces its interim results for the six
months to 31 October 2005.
KEY POINTS
•Successful integration of Eclipse Learner Systems in the Resource
Division
•Proposed acquisition of Blue Curve to complement product set in banking &
securities
•Radica CAPS v4 launched and first international deployment of CAPS
installed
•Strengthened management team with appointment of Peter Waller as
Non-Executive Chairman and Mark Robertson as MD of the Banking and
Securities Division
•Proposed placing of 2,608,696 new ordinary shares at 11.5p per ordinary
share, to raise approximately £300,000 before expenses (see separate
announcement)
Results and Current Trading:
•Operating loss before goodwill amortisation and restructuring charges of
£455,031m (2004: loss £367,248))
•Pre-Tax loss of £1.16m (2004: £1.45m)
•Cash balances of £0.66m (2004: £1.03m)
•Deferred Income of £1.35m (2004: £0.87m)
Commenting on the results, Jarlath McGee, Chief Executive, said:
'We have made significant progress in building a broader suite of products in
both our operating divisions. Through this diversity of product we have the
opportunity to be able to cross market within the product type and build
critical mass of the group.'
22 December 2005
Enquiries:
Mondas plc Tel: 020 7392 1300
Jarlath McGee, Chief Executive
College Hill Tel: 07831 379122/
Matthew Smallwood/Clare Warren 020 7457 2020
Chairman's Statement
Introduction
I am pleased to present the interim results for the six month period ended 31
October 2005. During the period under review, Mondas has made significant
progress in building critical mass in both operating divisions. In October, we
announced the acquisition of Eclipse Learner Systems Limited ('Eclipse'), a
supplier of software systems to colleges of further education, which has been
successfully integrated into our Resource division. This was followed in
November by the acquisition, subject to shareholder approval at the forthcoming
EGM, of Blue Curve Limited, ('Blue Curve') a supplier of software solutions to
financial institutions, which will join our Banking and Securities division.
Trading conditions in the financial services sector have not improved as quickly
as had been anticipated, especially the market for new corporate actions
processing systems. The weakness in this particular sector, though expected to
be temporary, illustrates the need to widen our portfolio of product offerings
to our enlarged customer base and the pipeline of new business. Our recent
acquisitions help to achieve this, bringing established software products to
both divisions, and creating opportunities for cross-selling to existing
customers.
Results
Mondas recorded an operating loss, before goodwill amortisation, restructuring
and depreciation charges, for the six months ended 31 October 2005, of £455,031
(2004: loss £367,248) on turnover of £1.54m (2004: £1.82m). Revenues fell
primarily due to slippage against new business and existing contracts in the
Banking and Securities division. This fall was partially offset by growth within
the Resource division arising from an increased level of new name sales.
Operating costs were reduced by 10 per cent. to £2.03m (2004: £2.25m), due to
lower central overheads following last year's major restructuring. The
restructuring charge of £67,856 (2004: £426,938) arose from realignment of
product development resources following the release of version 4 of our
corporate actions processing system in the Banking and Securities division and
from the integration of Eclipse.
The amortisation charge of £472,000 (2004: £472,000) represents the final
element of goodwill arising from the October 2000 acquisition of DSR Resource.
Losses before taxation reduced to £1.03m (2004: £1.33m). At 31 October 2005,
cash balances amounted to £660,386 (2004: £1.048m).
Accruals and deferred income increased to £1.72m (2004: £1.34m). Of this £1.35m
(2004: £0.87m) was deferred income, with a large part of the increase in
deferred income arising from Eclipse annual customer support contracts which
were renewed in October. Accruals also include the final cash consideration
payment to the Eclipse vendors, of £100,000, which was paid on 15 December 2005.
With effect from 1 January 2006, the Company will change its year end to 31
December, to better align it with its customers' year ends, and to reduce the
costs of integration with Blue Curve. We will therefore report in due course on
the 8 month period ending 31 December 2005 and annually thereafter.
Resource Division
I am pleased to report that this division's revenues have grown compared to the
same period last year. We added two further new clients (North Trafford College
and Newham Sixth Form College), and our relationship with Pearson Education
continues to generate new sales into schools. We have also seen a steady growth
in revenue from our existing client base, particularly for our web-based
applications.
The acquisition of Eclipse in October 2005 has further enhanced our position as
a leading supplier within the education sector, with the addition of 26
colleges, including 9 existing common customers. We now have an educational user
base of approximately 140 establishments, including 120 colleges. Eclipse has
been successfully integrated into our Resource division, and opportunities for
cross selling have been identified.
Banking and Securities
During the period under review, Mondas expanded its product offerings to clients
in the banking and securities sector. Our New Issues and Placing System
('NIPS'), which was launched towards the end of our last financial year, is
attracting interest from organisations involved in the issuing of securities. We
believe that this early-stage market could produce significant returns to Mondas
over the next few years.
Mondas continues to be a leading provider of corporate actions processing
systems ('CAPS') to the banking and securities sector. New name sales for
corporate actions vendors have been elusive, but we have continued to invest in
our product, most notably with the release of version 4 of Radica CAPS. Our
existing customers continue to purchase further products, including add-on
modules and upgrades, and we have recently announced our first international
deployment of CAPS, with the installation of a system in Zurich.
We continue to believe in the long-term market opportunity for CAPS, especially
with the ever-increasing need for banks and other financial institutions to
guard against operational risk. However, with long sales cycles affecting our
results, and to reduce our dependence on our corporate actions product, we are
building a portfolio of software products for the wider banking and securities
market. Although some of these products will be developed internally, such as
NIPS, we intend to acquire companies with complementary financial sector
products.
The acquisition of Blue Curve, announced on 24 November 2005, and subject to
approval at an EGM to be held on or before 30 January 2006 is an important step
in this 'buy and build' strategy. Blue Curve's customers include leading
financial firms in the UK and Europe. The Blue Curve solution is complementary
to Radica CAPS and NIPS and, since there is no overlap in the respective
customer bases, we believe that opportunities exist for cross-selling both
solutions across an enlarged international customer and prospect bases, where
Blue Curve's existing sales agreements in Holland and the United States should
provide a channel to markets previously unaddressed by Mondas.
Placing
This morning your company announced the placing of 2,608,696 new ordinary shares
at 11.5 pence each raising approximately £275,000 net of expenses for the
company. The proceeds of this placing will be used for working capital and for
the integration of our recent acquisitions. The shares were placed by our
broker, Teather & Greenwood Limited, with institutional shareholders.
Dividend
The Directors are not recommending the payment of a dividend in respect of the
period under review (2004: nil).
Management Changes
I am pleased to announce that Mr Peter Waller (57), the Chairman of Blue Curve,
will be joining the board of Mondas as non-executive Chairman following the EGM.
Peter brings to Mondas a wealth of experience at a senior executive level, from
a 30 year career in the software and services sector. He is currently
non-executive chairman of two unlisted UK software companies and a non-executive
director of LSE-listed Biotrace plc. Prior to this he held a succession of other
non-executive positions, most recently at AIM-listed Xpertise plc. His executive
career in the IT sector includes Director of Marketing Operations for IBM
Europe, Managing Director of Hitachi Data Systems UK, and Chief Operating
Officer of Hitachi Data Systems Europe. Peter is a graduate of Cambridge
University and is member of the Worshipful Company of Information Technologists
and Freeman of the City of London.
Mark Robertson (38), the Chief Executive and founder of Blue Curve, will join
the board of Mondas IT (the group's trading subsidiary) and will become managing
director of the enlarged Banking and Securities Division. Mark founded Blue
Curve in 1995, following six years in financial IT related roles at Swiss Bank
Corporation, Price Waterhouse Management Consultants and First Interstate Bank.
Mark holds a first class honours degree in Electrical & Electronic Engineering
from Heriot-Watt University.
I will be standing down from the chairmanship of Mondas following the EGM, but
will remain on the board as a non-executive director. I welcome Peter and Mark
to the management team and look forward to working with them on the next phase
of building a successful software company.
Acquisitions
Whilst significant progress has already been made in building critical mass in
both operating divisions, we believe this strategy has much further to go.
Mondas is now an acquisitive software solutions provider focussed on the
financial services and education markets.
We will continue to seek acquisitions :
•where there is a strategic fit with either our Banking and Securities
division or our Resource division;
•that are earnings enhancing, readily identifiable cost savings, and
recurring revenues;
•that provide intellectual property which will complement our existing
product offerings;
•which expand our customer base, and provide access to further
geographical markets; and
•where the consideration is predominantly share-based, with a significant
earn-out element.
We believe that this 'buy and build' strategy, where organic growth is
supplemented by acquisitions, will create a more stable earnings profile,
leading to greater shareholder value.
Current Trading and Outlook
The dynamics of Mondas' business mean that its ability to meet market
expectations will depend largely on its ability to win significant licence deals
from new and existing customers within the Banking and Securities division.
Mondas has historically had a significantly better second half compared to the
first half. As a result of the change in the Company's year-end, we now
anticipate that this expected improvement will fall into the new financial year
which will commence on 1 January 2006.
With the acquisition of both Blue Curve and Eclipse, Mondas is at last achieving
the critical mass necessary to enable it to produce consistently better results
and I look forward to a positive outcome for 2006.
Colin Peters
Chairman
22 December 2005
Interim Consolidated Profit and Loss Account
for the six months ending 31 October 2005
Six months Six months Six months Six months 12 months
ended 31 ended 31 ended 31 ended 31 ended 30
October 2005 October 2005 October 2005 October 2004 April 2005
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
Acquisitions Continuing Total
Operations
£ £ £ £ £
Turnover 59,838 1,479,122 1,538,960 1,816,653 4,592,675
Cost of
sales (5,116) (77,179) (82,295) (115,497) (155,655)
-------- --------- --------- ---------- ----------
Gross profit 54,722 1,401,943 1,456,665 1,701,156 4,437,020
Restructuring
charge - (67,856) (67,856) (426,938) (489,618)
Other
administrative
expenses (20,276) (2,406,493) (2,426,769) (2,603,713) (5,079,060)
--------- ------------ ------------ ------------ ------------
Total
administrative
expenses (20,276) (2,474,349) (2,494,625) (3,030,651) (5,568,678)
Analysis of
group
operating
losses ---------------------------------------------------------------------
Operating | |
profit/(loss) | |
before | |
goodwill | |
amortisation, | |
restructuring | |
and | |
depreciation | 34,446 (489,477) (455,031) (367,248) (406,178)|
Amortisation | |
of goodwill | - (472,691) (472,691) (472,698) (945,396)|
Depreciation | |
of tangible | |
fixed assets | - (42,382) (42,382) (62,611) (102,822)|
Restructuring | |
charge | - (67,856) (67,856) (426,938) (489,618)|
| |
---------------------------------------------------------------------
Operating
profit/(loss) 34,446 (1,072,406) (1,037,960) (1,329,495) (1,131,658)
Net interest
payable (121,783) (124,863) (252,423)
-------------------------------------------
Amortisation | |
of Convertible | |
Loan Stock | |
issue costs | |
charged to net | |
interest | (13,900) (27,800) (27,800)|
| ---------- ---------- ---------|
Profit/(loss) | |
before | |
amortisation | |
of goodwill | |
and loan stock | |
issue costs, | |
restructuring | |
and taxation | (605,296) (526,922) 78,733 |
| ---------- ---------- ---------|
-------------------------------------------
Profit/(Loss)
on ordinary
activities
before
taxation (1,159,743) (1,454,358) (1,384,081)
Taxation - (918) (265)
------------ ------------ ------------
Profit/Loss
for the period (1,159,743) (1,445,276) (1,383,816)
------------ ------------ ------------
Basic loss per
share (4.4p) (5.5p) (5.3p)
------------ ------------ ------------
There are no recognised gains or losses for the above periods other than those
stated above.
Interim Balance Sheet at 31 October 2005
As at As at As at
31 October 31 October 30 April
2005 2004 2005
(unaudited) (unaudited) (audited)
£ £ £
Fixed assets
Intangible assets 518,039 945,389 472,691
Tangible assets 123,503 174,225 152,225
-------- -------- --------
641,542 1,119,614 624,916
-------- ---------- --------
Current assets
Debtors 952,466 460,749 1,433,221
Cash at bank and in hand 660,386 1,048,770 1,030,865
-------- ---------- ----------
1,612,852 1,509,519 2,464,086
Creditors: Amounts falling due
within one year
Other Current Liabilities (377,810) (378,734) (690,786)
Convertible 8% Unsecured Loan
Stock 2005 - (2,978,185) -
---------- ------------ ----------
(377,810) (3,356,919) (690,786)
Net current (liabilities)/assets 1,235,042 (1,847,400) 1,773,300
---------- ------------ ----------
Total assets less current
liabilities 1,876,584 (727,786) 2,398,216
Creditors: Amounts falling due in
more than one year
Convertible 8% Unsecured loan
stock 2005 (2,959,908) - (2,951,585)
Accruals and deferred income (1,721,887) (1,335,391) (1,448,348)
------------ ------------ ------------
Net (liabilities) (2,805,211) (2,063,177) (2,001,717)
============ ============ ============
Capital and reserves
Called up share capital 2,822,775 2,614,164 2,614,164
Share premium account 6,428,346 6,280,707 6,280,707
Profit and loss account (12,056,332) (10,958,048) (10,896,588)
------------ ------------ ------------
Equity shareholders' (deficit) (2,805,211) (2,063,177) (2,001,717)
============ ============ ============
The interim accounts were approved by the Board of Directors on 22 December 2005
and signed on its behalf by:
Colin Peters
Chairman
Interim Consolidated Cash Flow Statement
for the six months ended 31 October 2005
Six months Six months 12 months
ended ended Year ended
31 October 31 October 30 April
2005 2004 2005
£ £ £
Net cash outflow from operating activities (81,569) (324,551) (171,268)
Returns on investments and servicing of
finance (107,884) (110,964) (224,623)
Taxation paid/(received) - (918) 265
Capital expenditure and financial
investment (531,699) (7,541) (25,753)
---------- -------- ---------
Cash outflow before financing and liquid
resources (721,152) (443,974) (421,379)
Management of liquid resources (38,907) 333,210 766,688
Cash inflow from financing 350,673 - -
---------- -------- ---------
Decrease in cash (409,386) (110,764) (304,809)
========== ========== ==========
1. Interim report
This interim report was approved by the Board on 22 December 2005. It has been
prepared using accounting policies that are consistent with those adopted in the
statutory accounts for the year ended 30 April 2005.
The figures for the year to 30 April 2005 were derived from the statutory
accounts for that year. The statutory accounts for the year ended 30 April 2005
have been delivered to the Registrar of Companies and received an audit report
which was unqualified and did not contain statements under s237(2) or (3) of the
Companies Act 1985.
The above financial information does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985.
The accounts have been prepared on a going concern basis as the Directors
believe that current sales prospects combined with existing working capital
resources should ensure that Mondas has adequate working capital to service its
existing business for the foreseeable future.
2. Dividends
The directors are not declaring a dividend for the six month period ended 31
October 2005.
3. Loss per share
Basic loss per share is based on the loss attributed to the members of Mondas
Plc and on the weighted average number of shares outstanding throughout the six
months ended 31 October 2005 of 26,286,763 (2004: 26,141,634). Diluted loss per
share is the same as the basic loss per share because the options and
convertible unsecured loan stock have no dilutive effect.
4. Reconcilation of net cash flow to movement in net debt
Six months Six months 12 months
ended ended ended
31 October 31 October 30 April
2005 2004 2005
£ £ £
Change in cash (409,385) (110,764) 304,809
Cash outflow from increase/
(decrease) in liquid resources 38,907 (333,210) (766,688)
---------- ---------- ----------
Change in net debt from cash flows (370,478) (443,974) (461,879)
Amortisation of Convertible
Unsecured Loan Stock (13,900) (13,900) (27,800)
Opening net (debt)/funds (1,961,220) (1,471,541) (1,471,541)
------------ ------------ ------------
Closing net funds (2,345,598) (1,929,415) (1,961,220)
============ ============ ============
5. Reconciliation of movements in shareholders' funds
Six months Six months 12 months
ended ended ended
31 October 31 October 30 April
2005 2004 2005
£ £ £
Losses for the financial year (1,159,743) (1,445,276) (1,383,816)
Issue of ordinary shares at par 208,611 - -
Costs of Issue (6,750) - -
Premium on new shares issued 154,388 - -
---------- ---------- ----------
Increase/(Decrease) in shareholders'
funds (803,494) (1,445,276) (1,383,816)
Opening shareholders' funds (2,001,717) (617,901) (617,901)
------------ ---------- ----------
Closing shareholders' funds (2,805,211) (2,063,177) (2,001,717)
============ ============ ============
6. Restructuring Charge as per Profit and Loss
Six months
ended
31 October
2005
£
Costs relating to redundancies 62,106
Taxation and legal fees relating to restructure of group
companies 5,750
------
67,856
======
7. Acquisition of subsidiary
Mondas PLC acquired the entire share capital of Eclipse Learner Systems Limited
on 11 October 2005. The consideration was £550,000 and net assets amounted to
£31,962. The Directors have conducted a provisional fair value exercise and on
that basis purchased goodwill of £518,038 arose on acquisition. The fair values
will be finalised when the statutory financial statements for the year ending 31
December 2005 are prepared.
8. Copies of the interim report
Copies of the interim report are being sent to all shareholders of the Company
and are available to the public from the Company's registered office: 17-29 Sun
Street, London, EC2M 2PT and the offices of John East & Partners Ltd, Crystal
Gate, 28-30 Worship Street, London EC2A 2AH.
9. Post balance sheet events
Mondas has exchanged contracts in relation to the acquisition of the entire
share capital of Blue Curve Limited ('Blue Curve'), for a maximum consideration
of £3 million, to be satisfied by the issue of Mondas ordinary shares.
The maximum consideration of £3 million comprises:
a) an initial consideration of £925,000, satisfied by the issue of 5,606,060
new Mondas ordinary shares at a price of 16.5p per share; and
b) deferred consideration of up to £2,075,000, based on Blue Curve's revenues
for the year ending 31 December 2006, after deducting any shortfall
adjustment, at the rate of twice the excess above a minimum revenue of £1.15
million. The shortfall adjustment is defined as 1.5 times the amount by
which Blue Curve's revenues for the year ending 31 December 2005 fall below
£925,000. The deferred consideration is to be satisfied by the issue of up
to a further 12,205,882 new Mondas ordinary shares, issued at the higher of
17p per share and a discount of 10 percent to the mid market price of a
Mondas ordinary share on the date of the announcement of preliminary results
for the year ending 31 December 2006.
An EGM will be convened on or before 31 January 2006 in order to obtain the
required shareholder approvals. The acquisition is therefore conditional upon
the appropriate resolutions being passed and admission to trading on the AIM
Market of 5,606,060 new Mondas ordinary shares.
On 22 December 2005, Mondas announced the placing of 2,608,696 new ordinary
shares at 11.5p, raising approximately £150,000, net of the costs of the Blue
Curve acquisition and of the placing. These shares will be issued subject to
approval of the Blue Curve acquisition at the EGM.
This information is provided by RNS
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