Interim Results
Mondas PLC
26 September 2006
Embargoed for release at 7.00 am on 26 September 2006
Mondas PLC
('Mondas' or 'the Company')
Interim Results for the six month period ended 30 June 2006
Mondas, the specialist provider of software solutions to the banking &
securities and education markets, announces its interim results for the six
month period ended 30 June 2006
• 75 per cent. increase in revenue to £2.69 million (2005: £1.54 million)
• Profit after interest payable and before amortisation and restructuring
costs, of £35,000 (31 October 2005: loss £605,000)
• All operating divisions now profitable
• Significant new name contracts from:
• J.M. Finn
• Panmure Gordon
• Brewin Dolphin Securities
• Significant increase in sales opportunities resulting in new name sales
and new business from the existing user base
• First US customer signed up - Ferris Baker Watts
• 2005 acquisitions now integrated resulting in increased revenues and
profits
• Business Systems division delivers more profit in the period than in the
year ended 30 April 2005
Period post July 2006
• Stronger financial market continues to drive Blue Curve's growth
• New contracts signed with:
• One of the largest UK based global investment banks
• Charles Stanley Securities
• MDM Bank (Russia)
• Convertible Unsecured Loan Stock ( 'CULS' ) renegotiated and additional
financing secured
• Significant project for rollout of CAPS to US and Asia from existing
customer
• Group continues to trade strongly and is well positioned to achieve full
year expectations
Peter Waller, Chairman, said:
'I am delighted with the progress of all businesses within Mondas which resulted
in this first half profit. The successes of our recent acquisitions demonstrate
our growing ability to create value for shareholders and I am optimistic for our
prospects for the remainder of the year.'
26 September 2006
Enquiries:
Mondas PLC Tel: 020 7392 1300
Jarlath McGee, Chief Executive
College Hill Tel: 020 7457 2020
Alex Walters
Chairman's Statement
Introduction
I am pleased to announce the interim results for the six month period ended 30
June 2006. Your company has made significant progress in the period under
review. With increasing sales activity across all divisions, we have achieved a
profit, after net interest payable and before amortisation and restructuring
costs of £35,000, compared with a loss of £605,000 for the comparative period.
Our recent acquisitions have been successfully integrated and we have
demonstrated their value by achieving higher than anticipated revenues, a
reduction in costs and product cross selling opportunities.
Financial Results
The group recorded a profit before amortisation, acquisition integration costs
and taxation of £35,000 (2005 loss £605,000). This major improvement was due to
all divisions generating profits in line with expectations. After adjusting for
amortisation and acquisition costs, our result for the period was a loss of
£213,000 (31 October 2005: £1,159,000 loss). Revenues increased by 75 per cent.
to £2,690,000 (2005: £1,539,000), of which £626,000 arose from Blue Curve, which
was acquired in January 2006. Significant increases were recorded across all
revenue categories, with a notable increase in support base revenues arising
from both increased sales, and from the acquisitions of Eclipse and Blue Curve.
We are pleased to note that Blue Curve has traded ahead of our initial
estimates, and additional equity consideration of £388,000 has been accrued
against goodwill.
Operating costs excluding goodwill and acquisition integration expenses were
£2,478,000. Certain cost reductions were made relating to the integration of
central overheads. These savings were reinvested in increased sales and delivery
staff. Acquisition integration costs were £67,000, the majority of which arose
from provisions arising from the closure of certain premises.
Net interest payable increased slightly to £128,000 (2005: £108,000), arising
from the increase of the Convertible Unsecured Loan Stock ('CULS') coupon rate
from 8 per cent to 8.75 per cent, which took place on 1 November 2005, and from
lower interest receipts from cash balances. Notional interest charges arose from
the change in accounting policy described in the notes to the accounts.
On 16 January 2006 the acquisition of Blue Curve was completed. Consideration of
£925,000 was paid by the issue of 5,606,060 10p ordinary shares which were
issued at 16.5 pence each. On acquisition, and following a provisional fair
value review, Blue Curve had net separable liabilities of £5,000 and, on that
basis, purchased goodwill (including capitalised contingent consideration) of
£1,318,000 arose on acquisition. Goodwill amortisation costs were £178,000
(2005: £472,000) and arose solely from Blue Curve and Eclipse, with the balance
of DSR Resource being fully amortised by October 2005.
Cash outflows were reversed, allowing cash balances to increase to £534,000 from
£397,000 at 31 December 2005. On 30 August 2006 our balance sheet was
strengthened by the changes announced to the CULS, with the redemption date
being extended to 31 October 2011, the coupon reduced to 8 per cent. and the
conversion price adjusted to 25p. In addition a placing of £1,000,000 nominal of
new CULS was completed at par, together with a small placing of 405,250 new
ordinary shares at 16p per share, raising £65,000, to provide funds for
incremental investment opportunities and working capital.
Debtors increased to £1,308,000 (2005: £952,000). This increase arose from an
increase in sales volumes at the end of the respective periods, and a change in
the timings of certain prepayments. Days sales outstanding, based on average
billings for the final month of the period were 33 (2005: 34). Accruals and
deferred revenue decreased, due to a change in the relative timing of certain
significant support renewals and payments made against cash consideration for
the acquisition of Eclipse.
Financial Markets Division Review
Positive trading conditions in financial markets have resulted in increased
opportunities for your company. During the period, we have won significant new
contracts for our key products with Brewin Dolphin, Panmure Gordon and JM Finn.
We have also added our first US customer, Ferris Baker Watts with our Blue Curve
product. This momentum has continued into the second half with recent sales to
Charles Stanley and MDM Bank (a Russian investment bank). These follow on from
our contract win from a global investment bank announced in July. Our existing
users, including Evolution Group plc, Credit Suisse and Investec continue to
extend the use of our solutions, through licences and additional projects. Such
a key additional project is the global roll out of our CAPS product to the US
and Asia.
We have experienced an increase of confidence in our banking and securities
customers as they seek to reduce their exposure to operational risk. This has
increased the size and quality of our sales pipeline and appears to have reduced
the sales cycles in some areas. In order to meet this increase in demand we have
expanded our sales force, and invested in additional professional services
staff.
Business Systems Division Review
Divisional sales have increased compared to 2005, with profits for the six month
period being greater than those for the twelve month period ended 30 April 2005.
In the period we signed four new college users, Norwich School of Art & Design,
Stroud College of Gloucestershire, Oaklands College and Peterborough College of
Adult Education. In addition, through our partnership with Pearson plc, we also
contracted with 11 new schools and city academies. Demand was strong from the
existing user base, particularly for additional modules developed for the
Eclipse system, which was acquired at the end of 2005. Support revenues are now
approximately £1.4m with a low level of attrition. We have opened a small office
in Birmingham which will become the centre for our learner management solutions.
Outlook
A noticeable increase in sales activity and the reduction of sales cycles in
some areas of financial markets coupled with a solid performance from the
Business Systems Division gives the board increasing confidence in our ability
to show the potential of the business. We have demonstrated our ability to
acquire businesses and to integrate them, resulting in a significant improvement
in their trading performance. We are encouraged by the sale of Blue Curve to our
first US customer and have increasing global opportunities for both CAPS and
Blue Curve products. We expect to rollout CAPS to our largest customer in both
the US and Asia later in the second half.
Our overall visibility of business has improved significantly and the committed
order book has strengthened throughout the year. Full year results will depend
upon the timely delivery of projects and the successful closure of identified
business. However, the board believes that the company will trade in line with
market expectations and the directors view the future with optimism.
Peter Waller
Chairman
26 September 2006
INTERIM CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ending 30 June 2006
Six months Six months Six months Six months 8 months ended
ended 30 June ended 30 June ended 30 June ended 31 31 December
2006 2006 2006 October 2005 2005
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
Acquisitions Continuing Total Total Total
Operations
£ £ £ £ £
Turnover 625,965 2,064,318 2,690,283 1,538,960 2,091,456
Cost of (10,000) (38,795) (48,795) (82,295) (90,949)
sales --------- --------- --------- ---------- --------
Gross profit 615,965 2,025,523 2,641,488 1,456,665 2,000,507
--------- --------- --------- ---------- --------
Amortisation
of Goodwill (124,922) (53,118) (178,040) (472,691) (494,826)
Non Goodwill
administration
costs (429,324) (2,049,082) (2,478,406) (1,954,078) (2,622,062)
Restructuring
charge (51,121) (15,649) (66,770) (67,856) (90,070)
--------- --------- --------- ---------- --------
Total
administrative
expenses (605,367) (2,117,849) (2,723,216) (2,494,625) (3,206,958)
--------- --------- --------- ---------- --------
Operating
profit /
(loss) 10,598 (92,326) (81,728) (1,037,960) (1,206,451)
--------- --------- --------- ---------- --------
Net interest
payable (128,250) (107,883) (150,700)
Amortisation
of Convertible
Loan Stock
issue costs
charged to net
interest - (13,900) -
Notional CULS
interest (41,565) - (89,428)
--------- --------- --------- ---------- --------
Net Interest (169,815) (121,783) (240,128)
--------- --------- --------- ---------- --------
Profit /
(loss) after
interest
payable,
before
amortisation
of goodwill
and
restructuring. 34,832 (605,296) (772,255)
--------- --------- --------- ---------- --------
Loss on
ordinary
activities
before
taxation (251,543) (1,159,743) (1,446,579)
Taxation on
loss on
ordinary
activities 38,240 - -
--------- --------- --------- ---------- --------
Loss for the
period (213,303) (1,159,743) (1,446,579)
--------- --------- --------- ---------- --------
Basic and
diluted loss
per share (0.5p) (4.4p) (5.4p)
--------- --------- --------- ---------- --------
CONSOLIDATED INTERIM BALANCE SHEET
At 30 June 2006
30 June 31 October 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
£ £ £
Fixed assets
Intangible assets 1,693,849 518,039 509,102
Tangible assets 96,805 123,503 109,577
--------- --------- ----------
1,790,654 641,542 618,679
Current assets
Debtors 1,308,029 952,466 840,911
Cash at bank and in hand 534,280 660,386 397,405
--------- --------- ----------
1,842,309 1,612,852 1,238,316
Creditors: Amounts
falling due within one
year (937,917) (377,810) (392,081)
--------- --------- ----------
Net current assets 904,392 1,235,042 846,235
Total assets less current
liabilities 2,695,046 1,876,584 1,464,914
Creditors: Amounts falling due in
more than one year
Convertible 8.75 per
cent. Unsecured loan
stock 2007 (2,864,633) (2,959,908) (2,823,067)
Accruals and deferred
income (1,295,439) (1,721,887) (1,392,196)
--------- --------- ----------
Net (liabilities) (1,465,026) (2,805,211) (2,750,349)
--------- --------- ----------
Capital and reserves
Contingent equity
consideration 388,000 - -
Called up share capital 3,644,250 2,822,775 2,822,775
Share premium account 6,717,498 6,428,346 6,428,347
Profit and loss account (12,214,774) (12,056,332) (12,001,471)
--------- --------- ----------
Equity shareholders'
deficit (1,465,026) (2,805,211) (2,750,349)
--------- --------- ----------
INTERIM CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2006
Six months Six months Eight months
ended 30 ended 31 ended 31
June 2006 October 2005 December 2005
£ £ £
Net cash
outflow from
operating
activities (14,405) (81,569) (381,850)
Returns on
investments
and servicing
of finance (129,329) (107,884) (150,700)
Taxation 38,240 - -
Net Capital
expenditure (16,879) (13,660) (10,610)
Acquisition of
subsidiary 73,619 (159,550) (159,550)
--------- --------- ----------
Cash outflow
before use of
liquid
resources and
financing (48,754) (362,663) (702,710)
Management of
liquid
resources (16,721) (38,907) 94,249
Financing
Issue of
ordinary
capital
including
premium net of
costs 185,629 69,250 69,250
Increase/(decr
ease) in cash 120,154 (401,570) (608,461)
--------- --------- ----------
Notes to the interim results
1. Interim Report
This interim report was approved by the Board on 25 September 2006. It has been
prepared using accounting policies that are consistent with those adopted in the
statutory accounts for the eight month period ended 31 December 2005.
The figures for the eight month period ended 31 December 2005 were derived from
the statutory accounts for that period. The statutory accounts for the eight
month period to 31 December 2005 have been delivered to the Registrar of
Companies and received and audit report which was unqualified and did not
contain statements under s273(2) or (3) of the Companies Act 1985
The accounts have been prepared on a going concern basis as the Directors
believe that the 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. Change in accounting policy
Financial Reporting Standard (FRS) 25 Financial Instruments: Disclosure and
Presentation requires a company to recognise separately the components of a
financial instrument that a) creates a financial liability of the entity and b)
grants an option to the holder of the instrument to convert it into an equity
instrument of the entity. As a result of this the company's CULS were restated
for the eight month period ended 31 December 2005. The liability element of the
CULS has been calculated based upon future cash flows discounted at an interest
rate that would have been payable on a loan without a conversion option. The
impact of this instrument is that non cash interest and loan amortisation costs
for that period have been increased by £78,138 and net assets and shareholders'
funds at 31 December 2005 increased by £263,588.
The six month period ended 31 October 2005 comparatives have not been restated
as advantage has been taken of the exemption granted under FRS 25, and were
prepared under the group's previous accounting policy with the CULS accounted
for in accordance with FRS 4
Had the prior period comparatives been restated it would have resulted in a
lower CULS balance in the balance sheet, an improved retained loss position and
a higher interest charge in the profit and loss account.
3. Dividend
The directors do not recommend paying a dividend for the six months ended 30
June 2006
4. Loss per share
Basic and Diluted loss per share for the 6 month period is based on a weighted
average number of shares outstanding throughout the six months ended 30 June
2006 of 35,757,937 (2005: 26,286,763) and loss after taxation of the £213,303
(2005: £1,159,743). The CULS and share options were non-dilutive for both
periods and thus the diluted loss per share is the same as the basic amount.
5. Contingent Equity Consideration
The consideration for the acquisition of Blue Curve announced in November 2005,
and completed on 16 January 2006 includes an element of deferred consideration
which is payable as set out below.
Additional consideration of up to £2,075,000 is payable based on Blue Curve's
revenues for the year ending 31 December 2006, after deducting for 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 payable 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 per cent. 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.
The Board has estimated the current value of this additional consideration as
£388,000 which has been accounted for as an adjustment to goodwill arising on
acquisition, and as a potential equity reserve. The value of this consideration
will be determined post the audit for the year ended 31 December 2006.
7. Tax on loss on ordinary activities
The amount represents a tax refund regarding Research and Development tax
credits received during the period.
8. Reconciliation of net cash flow to movement in net debt
Six months Six months Eight months
ended 30 June ended 31 ended 31
2006 October 2005 December 2005
£ £ £
Opening net
debt - as
previously
stated (2,425,662) (1,920,720) (1,920,720)
FRS 25
Restatement - - 217,946
------------ ------------ -------------
Opening net
debt (2,425,662) (1,920,720) (1,702,774)
Change in cash 120,154 (409,385) (539,211)
Cash outflow
from
increase/(decr
ease) in
liquid
resources 16,721 38,907 (94,249)
------------ ------------ -------------
Change in net
debt from cash
flows 136,875 (370,478) (633,460)
Amortisation
of CULS - (13,900) -
Notional CULS
interest (41,565) - (89,428)
------------ ------------ -------------
Closing net
debt (2,330,352) (2,291,198) (2,425,662)
------------ ------------ -------------
9. Reconciliation of movements in shareholders funds
Six months Six months Eight months
ended ended ended
30 June 31 October 31 December
2006 2005 2005
£ £ £
Loss for the
financial
period (213,303) (1,159,743) (1,446,579)
Issue of
ordinary
shares at par 821,475 208,611 208,611
Contingent
equity
consideration 388,000 - -
Premium on new
share issued
(net of
expenses) 289,152 147,638 147,639
------------ ------------ -------------
Net
addition/(reduction) to
shareholders'
funds 1,285,324 (803,494) (1,090,329)
--------- ------------ -----------
Opening shareholders deficit
:- as previously stated (2,750,350) (2,001,717) (2,001,717)
FRS 25 restatement - - 341,696
------------ ------------ -------------
Opening
shareholders'
deficit after
restatement (2,750,350) (2,001,717) (1,660,021)
------------ ------------ -------------
Closing
shareholders
deficit (1,465,026) (2,805,211) (2,750,350)
------------ ------------ -------------
10. Post Balance Sheet Events
On 30 August 2006 an extraordinary general meeting of the company and the CULS
holders approved certain variations to the CULS. Key changes are summarised
below:
1. the amendment of the redemption date of the CULS from 31 October 2007 to 31
October 2011;
2. the amendment, with effect from, but not including, 31 August 2006, of the
rate of the interest from 8.75 per cent. to 8 per cent.;
3. the enhancement of the conversion rights from two ordinary shares for every
£1 nominal of CULS to four ordinary shares for every £1 nominal of CULS and
the inclusion of appropriate adjustments to the conversion rights in the
event of a bonus issue or rights issue.
The Company raised £1,000,000 (before expenses) by the issue of the additional
CULS at a price of 100p per £1 nominal. Additionally, the company placed 406,250
new 10 pence ordinary shares at 16p per share, raising £65,000 for the Company
before expenses. These were issued to certain subscribers of additional CULS to
enable their subscriptions to qualify under the Venture Capital Trust Scheme.
11. Sundry Information
This interim statement was approved by the Board on 25 September 2006. 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 Limited, Crystal Gate,
28-30 Worship Street, London EC2A 2AH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VELFLQKBZBBK
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