Interim Results
Mondas PLC
28 January 2005
Mondas plc
Interim Results for the six months to 31 October 2004
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 2004.
KEY POINTS
Actions:
• Progress made on a number of fronts:
• Convertible Unsecured Loan Stock ('CULS') - Agreement reached for a 2 year
extension at the same conversion price, strengthening the company's balance
sheet
• Agreement with Rhyme Systems Ltd. for a development licence for the
Fund Manager Enquiry System, 'FES'
• Outsourced certain software development offshore
Trading:
• Banking & Securities Division:
• Progressing the delivery of systems to CSFB & HSBC
• Receiving growing interest from North America and private client
stockbrokers
• Discussions with global financial institutions continue
• Resource Division
• First orders from our relationship with Pearson
• Emphasis on customer management has increased sales of new product
Results and Current Trading:
• Operating loss before goodwill amortisation and restructuring charges
of £0.43m (2003: loss £0.50m)
• Pre-Tax loss of £1.45m (2003: £1.09m) exacerbated by one off
exceptional items of £0.42m
• Encouraged by an improving trend in our results excluding exceptional
items
• Cash balances of £1.05m (2003: £1.88m)
Commenting on the results, Jarlath McGee, Chief Executive, said:
'These results reflect a challenging period for the Company. However, there are
now clear signs that we are moving away from the problems of the past. The
strategic review, the results of which we announced in October 2004, is being
vigorously implemented although there is still work to be done. We are now
focused on delivering asset servicing solutions to the investment banking and
fund management markets. The education market remains a high priority, as there
are considerable opportunities for growth.'
27 January 2005
Enquiries:
Mondas PLC Tel: 020 7392 1300
Jarlath McGee, Chief Executive
College Hill Tel: 020 7457 2020
Matthew Smallwood/Clare Warren
CHAIRMAN'S STATEMENT
In August last year, your Board carried out a top-level reorganisation to
restore the confidence of our customers, our shareholders and our staff in the
future of the Company. At the subsequent Annual General Meeting on 29 October
2004, our actions received the clear support of shareholders. These interim
results cover this difficult period, which, of necessity, includes a substantial
reorganisation charge.
I am pleased to report today that the holders of 89.42% of the Convertible
Unsecured Loan Stock ('CULS'), which was due to be repaid on 31 October 2005,
have irrevocably undertaken to vote in favour of a special resolution to be
proposed at an Extraordinary General Meeting of the holders of CULS to extend
the redemption date by two years to 31 October 2007. The Company proposes to
increase the annual coupon, with effect from 1 November 2005, by 0.75% from 8%
to 8.75%. There is no change in the conversion terms, which remain two ordinary
shares for each £1 of loan stock.
Financial Results
Mondas recorded an operating loss, before goodwill amortisation and
restructuring charges, for the six months ended 31 October 2004, of £429,859
(2003: loss £496,244) on turnover of £1.82 million (2003: £1.85 million). These
losses arose in the first quarter but were partially reversed by a small profit
in the second quarter. The restructuring charge was £426,938 (2003: £nil) and
amortisation of goodwill was £472,698 (2003: £472,698). Loss per share was 5.5p
(2003: 4.1p).
We have realigned our cost base to eliminate some central costs and to focus our
efforts on our key markets. As a result our headcount has fallen from 56 at 1
May 2004 to 49 as of today. This, combined with the change in management at
the start of the second quarter, has given rise to a restructuring charge of
£426,938, of which £285,355 arose from the board changes in August 2004, £28,767
from the Annual General Meeting in October 2004, and £112,816 from the business
restructuring. These amounts include salary costs, severance payments, legal
and professional fees and cancellations of certain marketing programs.
At 31 October 2004 the Company's cash balances amounted to £1.048 million (2004:
£1.884 million). Within creditors falling due within one year is an amount of
£2.98 million arising from reclassification of the CULS to a short term
liability as at the balance sheet date. As stated above holders of CULS holding
in excess of the required 75 per cent have irrevocably undertaken to vote in
favour of the special resolution to extend the redemption date to 31 October
2007. Accruals and deferred income has increased by £192,000 due to provisions
arising from the restructuring.
Banking and Securities Division
Mondas continues to maintain its position as a market leader of corporate
actions processing systems. Our success at Credit Suisse First Boston (Europe)
Limited in delivering the orders announced in our second quarter has further
underlined its confidence in Mondas as a major supplier. This has subsequently
led to the identification of further opportunities over the next two years, to
include progressive development of functionality and international adoption of
the system. We continue to receive growing interest from the North American
market from existing and prospective customers and from partners. We remain
confident of the successful implementation of the system sold to HSBC plc, in
the second half of the current financial year.
As part of our business review, we stated our intent to maximise the value of
certain non core applications. I am pleased to report that we have entered
into an agreement (subject to final contract) with Rhyme Systems Limited ('Rhyme
Systems') to grant it a development licence for our fund manager enquiry system,
'FES', currently deployed at Brewin Dolphin Securities Limited. This
agreement includes a royalty payable to Mondas by Rhyme Systems for certain
future revenues from this product. Rhyme Systems is a major supplier of back
office systems to the UK asset management market. Rhyme Systems will also be a
distributor of our flagship product, Radica CAPS, to its significant user base.
In order to increase margins we have outsourced certain software development
projects offshore. We continuously evaluate our internal working practices to
ensure minimisation of cost.
Resource Division
We continue to build on our existing commitment to the education sector and are
now seeing the first orders from our relationship with Pearson plc's education
division for our existing Resource 32000 range. In addition to the UK market,
this relationship has generated international opportunities for the Resource
division, which we are currently pursuing.
An increased emphasis on customer management has resulted in a recent
significant increase in sales of new products to our user base.
Acquisitions and Alliances
In October 2004 we described our strategy to acquire intellectual property
within the asset servicing market that will give the company customer base,
product and geographic reach. We are in active dialogue and negotiations with a
number of businesses which meet our criteria.
Current Trading and Outlook
Against a background of some previous internal turmoil and difficult market
conditions, we are encouraged by an improving trend in our results. Although
our ability to achieve market expectations is dependent on closing some new
licence business, we are seeing a firming of the pipeline from private client
stockbrokers and discussions with global financial institutions are progressing.
The agreement reached with the holders of the CULS for a two year extension to
the CULS, with no change in the conversion price of 50p per share, is an
encouraging indication of support for the new management team. The internal
restructuring, together with our order delivery and pipeline, allows your
directors to look to the future with cautious optimism.
Independent Review Report to Mondas PLC
For the six months ended 31 October 2004
Introduction
We have been instructed by the company to review the financial information which
comprises the profit and loss account, balance sheet, cash flow statement and
related notes 1 to 7. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information. This report is made
solely to the company having regard to guidance contained in Bulletin 1999/4 '
Review of interim financial information' issued by the Auditing Practices Board.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report,
or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the AIM
rules. The directors are also responsible for ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review having regard to guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied, unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Convertible Unsecured Loan Stock redemption
In arriving at our review conclusion we have considered the adequacy of the
disclosures made in note 1 to the Interim Report concerning the possible outcome
of negotiations for the extension of the repayment date of the Convertible
Unsecured Loan Stock of £3,000,000, currently repayable on 31 October 2005. The
Interim Report has been prepared on a going concern basis, the validity of which
depends upon the repayment date being extended. The financial statements do not
include any adjustments that would result from a failure to obtain an extension
to the repayment date. Details of the circumstances relating to this fundamental
uncertainty are described in the Chairman's Statement. Our opinion is not
qualified in this respect.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2004.
RSM Robson Rhodes LLP
Chartered Accountants
London, England
27 January 2005
Interim Consolidated Profit and Loss Account
for the six months ended 31 October 2004
Six months ended Six months 12 months ended
31 October ended 31 October 30 April
2004 2003 2004
(unaudited) (unaudited) (audited)
£ £ £
Turnover 1,816,653 1,847,452 3,974,732
Cost of sales (115,497) (71,556) (156,384)
Gross profit 1,701,156 1,775,896 3,818,348
Restructuring charge (426,938) - -
Other administrative expenses (2,603,713) (2,744,838) (5,362,889)
Total administrative expenses (3,030,651) (2,744,838) (5,362,889)
Analysis of group operating losses
Operating loss before goodwill amortisation
and depreciation (794,186) (454,993) (501,206)
Amortisation of goodwill (472,698) (472,698) (945,396)
Depreciation of tangible fixed assets (62,611) (41,251) (97,939)
Operating loss (1,329,495) (968,942) (1,544,541)
Net interest payable (124,863) (121,626) (235,013)
Loss on ordinary activities before taxation (1,454,358) (1,090,568) (1,779,554)
Taxation (918) 147,748 147,748
Loss for the period (1,454,276) (942,820) (1,631,806)
Basic and diluted loss per share (5.5p) (4.1p) (6.6p)
There are no recognised gains or losses for the above periods other than those
stated above.
Interim Balance Sheet
at 31 October 2004
As at As at As at
31 October 31 October 30 April
2004 2003 2004
(unaudited) (unaudited) (audited)
(restated-note 1)(restated-note 1)
£ £ £
Fixed assets
Intangible assets 945,389 1,890,784 1,418,087
Tangible assets 174,225 223,662 229,294
1,119,614 2,114,446 1,647,381
Current assets
Debtors 460,749 709,907 934,331
Cash at bank and in hand 1,048,770 1,884,733 1,492,744
1,509,519 2,594,640 2,427,075
Creditors: Amounts falling due within one year
Other Current Liabilities (378,734) (319,671) (585,071)
Convertible 8% Unsecured Loan Stock 2005 (2,978,185) - -
(3,356,919) (319,671) (585,071)
Net current (liabilities)/assets (1,847,400) 2,274,969 1,842,004
Total assets less current liabilities (727,786) 4,389,415 3,489,385
Creditors: Amounts falling due in more than one year - - -
Convertible 8% Unsecured loan stock 2005 - (2,950,385) (2,964,285)
Accruals and deferred income (1,335,391) (1,366,695) (1,143,001)
Net (liabilities)/assets (2,063,177) 72,335 (617,901)
Capital and reserves
Called up share capital 2,614,164 2,614,164 2,614,164
Share premium account 6,280,707 6,281,957 6,280,707
Profit and loss account (10,958,048) (8,823,786) (9,512,772)
Equity shareholders' (deficit)/funds (2,063,177) 72,335 (617,901)
The interim accounts were approved by the Board of Directors on 27 January 2005
and signed on its behalf by:
Colin Peters
Chairman
Interim Consolidated Cash Flow Statement
for the six months ended 31 October 2004
Six months Six months 12 months
ended ended Year ended
31 October 31 October 30 April
2004 2003 2004
£ £ £
Net cash outflow from operating activities (324,551) (498,668) (727,600)
Returns on investments and servicing of finance (110,964) (107,726) (207,213)
Taxation paid/(received) (918) 147,748 147,748
Capital expenditure and financial investment (7,541) (71,068) (133,388)
Cash outflow before financing and liquid resources
(443,974) (529,714) (920,453)
Management of liquid resources 333,210 (1,209,207) (848,852)
Financing
- issue of ordinary shares - 1,513,304 1,513,304
- expenses paid in connection with share
issue - (76,800) (78,050)
Cash inflow from financing - 1,436,504 1,435,254
Decrease in cash (110,764) (302,417) (334,051)
Notes to the Interim Consolidated Cash Flow Statement
Six months Six months 12 months
ended ended Year ended
31 October 31 October 30 April
2004 2003 2004
£ £ £
Reconciliation of operating loss to net cash
outflow
Operating loss (1,329,495) (968,942) (1,544,541)
Amortisation of goodwill 472,698 472,698 945,396
Depreciation of tangible fixed assets 62,611 41,251 97,939
Decrease in debtors 473,582 39,365 (185,059)
Decrease in creditors (3,947) (83,040) (41,335)
Net cash outflow from operating activities (324,551) (498,668) (727,600)
Notes to the Financial Statements
1. Interim report
This interim report was approved by the Board on 27 January 2005. It has been
prepared using accounting policies that are consistent with those adopted in the
statutory accounts for the year ended 30 April 2004.
The figures for the year to 30 April 2004 were derived from the statutory
accounts for that year. The statutory accounts for the year ended 30 April 2004
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 will ensure that Mondas has adequate working capital to service its
existing business for the foreseeable future. The holders of 89.42% of the
Convertible Unsecured Loan Stock ('CULS'), which was due to be repaid on 31
October 2005, have irrevocably undertaken to vote in favour of a special
resolution to be proposed at an Extraordinary General Meeting of the holders of
the CULS to extend the redemption date by two years to 31 October 2007. Under
the terms of the CULS instrument a majority of 75% voting in favour of the
proposal at the meeting is sufficient for such a change to be effective.
The comparative periods have been restated to reclassify Accruals and Deferred
Income as a separate item on the face of the balance sheet, as permitted under
Schedule 4 of Companies Act 1985. The reclassification had no effect on net
assets in either comparative period.
2. Dividends
The directors are not declaring a dividend for the six months ended 31 October
2004.
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 2004 of 26,141,634 (2003: 22,988,717). 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.
Notes to the financial statements
4. Reconciliation of net cash flow to movement in net debt
Six months Six months 12 months
ended ended ended
31 October 31 October 30 April
2004 2003 2004
£ £ £
Change in cash (110,764) (302,417) (334,051)
Cash (outflow)/inflow from (decrease)/increase in (333,210) 1,209,207 848,852
liquid resources
Change in net debt from cash flows (443,974) 906,790 514,801
Amortisation of Convertible Unsecured Loan Stock (13,900) (13,900) (27,800)
Opening net (debt)/funds (1,471,541) (1,958,542) (1,958,542)
Closing net funds (1,929,415) (1,065,652) (1,471,541)
5. Reconciliation of movements in shareholders' funds
Six months Six months 12 months
ended ended ended
31 October 31 October 30 April
2004 2002 2004
£ £ £
Losses for the financial year (1,445,276) (942,820) (1,631,806)
Issue of ordinary shares at par - 504,188 504,188
Costs of Issue - (76,800) -
Premium on new shares issued - 1,009,116 931,066
(Decrease)/Increase in shareholders' funds (1,445,276) 493,684 (196,552)
Opening shareholders' funds (617,901) (421,349) (421,349)
Closing shareholders' funds (2,063,177) 72,335 (617,901)
6. Restructuring Charge as per Profit and Loss
Six months
ended
31 October
2004
£
Board Restructuring (including provisions for salaries, legal and other professional fees) 285,355
Annual General Meeting 28,767
Other restructuring including severances, professional fees, and cancellation of certain
marketing programs.
112,816
426,938
7. 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 Limited, Crystal
Gate, 28-30 Worship Street, London EC2A 2AH.
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