Final Results

RNS Number : 7565Z

Clarity Commerce Solutions PLC

24 July 2008

 



CCS.L

Clarity Commerce Solutions plc

('Clarity', the 'Company', or the 'Group')

Unaudited Preliminary Results for the year ended 31 March 2008

Clarity Commerce Solutions plc (AIM:CCS), a leading specialist in the delivery of mission critical transaction processing solutions for the Ticketing, Hospitality, Retail and Leisure sectors, announces its unaudited Preliminary Results for the year ended 31 March 2008.

HIGHLIGHTS FROM OPERATIONS

• Results in line with expectations as new management drives business turnaround.

• Operating profit from continuing operations before exceptional items, goodwill impairment and amortisation of acquired intangibles at £413,000 (2007: £276,000 loss)

• Successful Open Offer and Placing completed in February 2008, with strong shareholder support, raising £1.78m before expenses.

• Following a detailed review the carrying value of Goodwill has been impaired by £8.77m (2007: nil)

• Loss for the year after goodwill impairment was £10,629,000 (2007: loss £1,207,000)

• Significant post year end contract wins with Universal Studios and Amsterdam Waterways.

• Management optimistic of further progress over the longer term. 

Ken Smith, CEO commented:

'Coming out of a difficult 2007, and after a challenging first half of the 2008 financial year, I am pleased that the Group is able to report a significant turnaround in profitability in line with our expectation. That progress, in conjunction with the significant contract wins announced to the market over the latter part of the year and post year end, demonstrates that Clarity has managed to work through the problems of 2007 and establish a sound platform for the future. The success of the Open Offer and Placing at the end of February further underpins that Clarity's shareholders, as well as the Board and Clarity's personnel, are committed to the future of the business. I would like to thank Clarity's shareholders, customers, staff and advisors for their continued support, and look forward to continuing the progress that has been made.'

Enquiries:

Clarity Commerce Solutions plc
Ken Smith, CEO	01256 365 150
Arbuthnot Securities
Alasdair Younie/Ben Wells	020 7012 2000
Biddicks
Shane Dolan	020 7448 1000

  Chairman's statement

After a difficult start the past year has been a very positive one for Clarity and despite the challenging economic climate the Company is well placed for the coming year. 

The EGM held in May 2007 was a timely wake up call to the Company and led to a number of changes, not the least of which has been a continuing effort to improve communications with shareholders and to focus on improving the profitability of businesses within the Group. 

In comparison to our half year results our full year results demonstrate the significant progress we have made in the past six months. Despite the substantial loss reported in the first half of the year the Company has recovered as forecast in the second half of the year. Revenue, recurring revenue and gross profit have all been either maintained or increased as the year progressed, whilst many costs were significantly reduced. 

The Board sees further potential to make continuing improvements to the Group's businesses in the coming year and remains cautiously optimistic. Despite the difficult economic environment the Group is in a stronger position than it was a year ago and is well placed to take advantage of opportunities in the market as they arise.

In December 2007 our founder Graham York left the Company. Graham grew Clarity through a number of very good acquisitions and the Company is well positioned to reap the benefit of these acquisitions during the coming years. 

The Company's previous non-executive Chairman, Tim Bittleston, and long term Executive Director Peter Walker also left the Company during the year. Tim and Peter (along with Sir Colin Chandler) did an outstanding job preserving shareholder value during the difficult EGM process and I would like to extend to them the thanks of the Board. 

In June 2007, a new Board was appointed with myself as non-executive Chairman and with Ken Smith as a non-executive Director and also part time CFO, joining Sir Colin Chandler who was appointed non-executive Deputy Chairman. In September 2007, Ken Smith was appointed an Executive Director and CEO, and in January 2008 Steve Bellamy also joined the Board as a non-executive Director. The Board have worked well together throughout the year and the complementary range of business skills available has been invaluable in formulating future strategies. 

Software businesses like Clarity with a high proportion of recurring revenue offer greater opportunities to add shareholder value in difficult economic times than service businesses which can tend to be more volatile. The Board believes that the current software sector is poised to consolidate in the next few years and Clarity is well positioned to enhance shareholder value throughout this process as further opportunities arise.

The Board has focused primarily on building shareholder value in the software businesses within the Group as these are seen as offering the best opportunities for revenue and profitable growth and cash generation. During the year we decided to sell the two businesses within the Group that were not primarily software based, Cyntergy Services Limited ('Cyntergy') and Romulus Enterprises Limited ('Romulus') and these divestments were completed for cash after the year end. It was pleasing to see Cyntergy sold to a group led by Peter Walker and Tim Bittleston and we hope this will lead to a continuing association between Cyntergy and Clarity. 

Although the sale of these businesses will reduce revenue for the Group, the transactions are unlikely to materially affect Group profit.

The heart of Clarity is the provision of mission critical transaction processing software to a blue chip customer base reliant on the Company to provide essential services to its customers. The Group's products can be found in a wide range of retail, leisure, hospitality and ticketing customers throughout the United Kingdom, Europe, United States and Australasian markets. 

These are typically very demanding environments where customers expect a very high level of reliability and availability and Clarity consistently delivers in both respects. Continuing new business wins from well known companies demonstrate the faith a wide variety of customers have in the Group's products and services. 

The Board is indebted to CEO Ken Smith who originally joined the Company as a non-executive Director and was subsequently appointed CEO. He has stepped up and led the Company through a difficult time, building a solid foundation for future growth. 

His previous background as CFO has been perfect for consolidating and carefully managing the companies Clarity has previously acquired and Ken has kept a keen accountant's eye on operating expenses. With the recent appointment of an interim CFO, Ken is now able to look at new opportunities that the Company's financial situation did not previously allow. 

I would also like to express the Board's appreciation to the Group's employees who operate the Group's businesses and have performed so well despite its earlier difficulties. Like all software companies all of our most valuable assets walk out the door each evening and we are fortunate to have a team of highly professional and competent staff who are well respected by customers in the markets the Company serves. The Board intends to provide management with an incentive programme that aligns their interests to those of shareholders as soon as practicably possible.

The Company successfully completed a fundraising in February 2008 raising £1.78m before expenses. This provided management and employees with the confidence to move forward and focus on meeting customer needs and enhancing shareholder returns. 

On behalf of the Board I would like to thank shareholders for their patience and support during the past year. I have had the opportunity of meeting many of you over recent months and look forward to meeting you again at our AGM which we expect to hold on Thursday 18th September at our offices in Basingstoke.

John O'Hara

24 July 2008

  Chief Executive's statement

Overview

Following a very difficult trading period in 2007, and across the first half of 2008, Clarity has recovered strongly, achieving most of its objectives by the year end. Operating Profit from continuing operations before exceptional expenses, amortisation, and impairment of goodwill was £413,000 (2007: loss £276,000). The Group saw a return to profitable trading in the second half of 2007/8, and in February 2008 successfully raised £1.78m following the issuance of new equity capital to strengthen the Group's balance sheet and provide additional working capital.

The overall Group's financial performance is in line with management expectations, with revenues ahead of prior year and increased gross profit.

Following the year end, in pursuit of the Board's strategy of focusing on core businesses, two businesses were divested for cash consideration, thus enabling management to concentrate on maximising the Group's expertise in providing mission critical transaction processing solutions to its highly prestigious customer base. A number of recent contract wins further underpin this strategy.

Financial highlights

Revenue from continuing operations increased slightly to £15.4m (2007 - £15.3m). The previous year's revenue also included a significant one-off hardware sale, at low margin, which distorted year on year comparison. If the effect of this transaction is excluded, the increase in revenue year on year would be approximately £600,000, representing a satisfying performance in difficult circumstances, and providing comfort that Clarity can succeed in its chosen markets. 

Operating expenses from continuing operations rose to £11.9m from £11.2m, partly as a result of the acquisition of Total Hospitality Solutions in the early part of the year, and a full year of MATRA trading (2007: 11 months), and partly due to the take on of a group of software specialists in Raleigh, North Carolina to complement the Retail Division's operation in Atlanta, Georgia.

Following a first half loss of £1,076,000 before amortisation and tax, the Group returned to profitability in the second half, producing profit before goodwill impairment, amortisation and tax of £1,002,000 such that the overall result for the year on this basis was approximately breakeven. Inclusive of exceptional costs, goodwill impairment, amortisation, taxation and losses of the discontinued operations the overall reported result is a loss of £10.63m. The following table summarises the position:

	Six months to 30 September 2007	Six months to 31 March 2008	Year ended 31 March 2008	Year ended 31 March 2007
	£'000	£'000	£'000	£'000
Revenue continuing	6,776	8,588	15,364	15,316
Revenue discontinuing	2,949	3,353	6,302	5,487
Revenue total	9,725	11,941	21,666	20,803
Operating loss continuing	(1,139)	(7,021)	(8,160)	(633)
Operating loss discontinued	(37)	(1,662)	(1,699)	206
Operating loss total	(1,176)	(8,683)	(9,859)	(427)
Finance charges	(179)	(234)	(413)	(448)
Add :
Goodwill impairment	-	8,772	8,772	-
Amortisation	279	1,147	1,426	357
Total	(1,076)	1,002	(74)	(518)

Following a detailed review by the Board, the carrying value of goodwill has been impaired by £8.8m, leaving the remaining goodwill carried in the balance sheet at £9.3m. Although the write down is material, the Board, after careful consideration and appropriate professional advice, believes that the carrying values of goodwill previously recorded in the Group balance sheet can no longer be justified given the current economic climate. The treatment applied has no cash impact.

As a result of the goodwill impairment the basic loss per share for continuing operations was 35.84p (2007: 7.09p), and for discontinued operations was a loss of 6.69p (2007: earnings 1.05p).

This is the first year the Group's results have been prepared under IFRS, and this gives rise to a considerable amount of analyses and additional information. Further details are included within the Preliminary Announcement and the Annual Report which will be posted to shareholders shortly.

No dividend is proposed at this time (2007: nil).

Board and Adviser changes

Since the last year end, there have been a number of changes to both the Board and the Company's advisers. 

Tim Bittleston and Peter Walker retired as non-executive Chairman and Executive Director respectively during the first half of the year. Sir Colin Chandler was appointed a non-executive Director on 26 April 2007. Sir Colin's role was changed to non-executive Deputy Chairman on 26 June 2007.

John O'Hara and I were appointed to the Board on 26 June 2007 as non-executive Chairman and part-time CFO respectively. I subsequently became full-time Group Managing Director on 27 September 2007.

At the same time, Company founder Graham York, who had been Chief Executive Officer, changed his role to concentrate on strategic and M&A activities. Subsequently, in November 2007, Graham stepped down from his Executive duties, and on 23 December 2007, was removed as a Director by the remaining members of the Board. I became CEO at this juncture.

Steve Bellamy joined the Board as a non-executive Director on 16 January 2008.

Recently the Board has secured the services of an Interim CFO, a highly experienced Chartered Accountant who brings a wealth of experience to further strengthen the management team.

Complementing the new Board, recent professional appointments have included Arbuthnot Securities Ltd as Nomad and Stockbroker and Biddicks have also been appointed as financial public relations consultants. 

Implementation of recovery plan

Following a very difficult period of trading in 2007, and the effects of an EGM in May 2007 which caused several problems for the Group, we set about implementing a recovery strategy designed to restore profitability, growth and cash generation.

Four separate divisions, ticketing, retail, leisure and hospitality, were established, costs reduced and management focused on key performance criteria. Business planning and monitoring was improved, and management information produced more accurately and regularly. Software development was brought under clear control and direction, and a great many problems, mainly relating to deliveries failing to meet customer expectations, addressed.

Staff morale, which had suffered during and after the Company's difficulties improved considerably and continues to do so.

Having increased revenues and introduced cost efficiencies, profitable trading was restored in September 2007 after five months of substantial losses in the first half of 2007/8. With support from most of our key institutional shareholders, an underwritten Placing and Open Offer was concluded in February 2008, raising £1.8m before expenses. 

A strategic review was carried out during the latter part of the financial year, and concluded on 7 April 2008. We resolved to retain and enhance our focus on selling software into the Leisure, Retail, Hospitality and Ticketing markets and to divest two other non-core businesses within the Group. We decided to focus on maximising cross-selling opportunities, presenting ourselves as a leading provider of mission-critical transaction processing solutions. For example, the Ticketing Division supplies ticketing software to cinemas whilst the Retail Division supplies ticketing software to a number of theme parks. Opportunities to coordinate product and commercial opportunities afforded by these similar businesses have are being actively pursued.

Clarity also undertook a small restructuring with the creation of a Group-wide Solutions Delivery Group and a plan to enhance its sales and marketing function, and look for further cost efficiencies.

Following the year end, in line with declared strategy, Cyntergy the Group's services and training subsidiary, and Romulus a provider of business intelligence solutions, were sold for cash consideration. Details of these transactions are included in the Notes to the Preliminary Announcement. The relationship with Cyntergy, which was sold to a group led by Peter Walker, which continues to provide key support for many of the Group's products, remains excellent, and the two management teams are working together to enhance business opportunities.

The Solutions Delivery Group was established in April 2008 with a brief to seek opportunities for cross-divisional products and services. The group achieved its first success in July 2008 with an order worth approximately 586,000 Euros plus annual maintenance from Dienst Binnenwaterbeheer Amsterdam ('BBA'), which is responsible for the commercial management of Amsterdam's waterways. A key feature of this order was its utilisation of technology components from both Clarity's Leisure and Retail Divisions.

With profitable trading re-established, and proceeds from the Placing and Open Offer received along with those from recent divestments, the Group's financial position has strengthened with gearing significantly reduced. In the current economic climate the Board is firmly of the view that cash generation, and the reduction of net debt are key to the Group's continuing success. Firm actions are under way to deliver this result.

Divisional performance

Of the Group's Divisions, newly formed during the year, strong performances were registered in the Retail, Leisure and Ticketing operations, with Hospitality suffering from a number of historical problems and continuing difficult market conditions. 

The Retail Division, comprising MATRA's UK and US operations, had a particularly strong year reflecting the strength of its management and product portfolio. Building on its existing customer portfolio, the Group added several significant clients during and after the year end.

The division also took the opportunity to add to its capabilities by taking on, from a competitor, a group of retail specialists based in Raleigh, North Carolina. In addition to their experience in sales and technical matters, this group brought a number of customers which ensured its contribution to the Group's results from the outset. This is viewed as a significant opportunity.

Products and services

Historically, Clarity has encountered problems with product development. Although many of the concepts were sound, execution and delivery had often been areas of under-performance. 

These historical problems fell to the new Board to address, and over the past year significant progress has been made in developing products which meet market requirements and customer expectations. The development group is now headed up by highly able, experienced professionals who consider issues from the customer's perspective. Although much has been achieved, a number of areas remain to be concluded, particularly in the Leisure and Ticketing Divisions where new product has taken longer to develop than had been expected. Nevertheless, with the patience of customers, Clarity will deliver on its commitments and provide comprehensive solutions to constantly changing market demands.

A key strength of the development team is its ability to provide agility and flexibility, as demonstrated in the recent order from Universal Studios (announced on 4 July 2008) where the Group, despite stiff competition, secured this important business, which leaves Clarity as the market leader in US theme parks solutions provision. 

Acquisition of Total Hospitality Solutions ('THS')

THS was acquired on 22 May 2007 for an initial consideration of £2.2m, satisfied by the issue of Clarity shares. Since acquisition, this unit has not performed in line with expectations and has had a relatively difficult period of trading. The distractions of the acquisition process itself and the wider Group issues resulted in a climate of uncertainty which served to slow the signing of new orders. These problems were further compounded by the requirement to integrate the company's products and services with those already existing in Clarity. 

With a highly regarded product THS has recently added sales resource and is in discussions with a number of interesting prospects. THS management is working hard to obtain benefits from the obvious synergies between itself and other product offerings throughout the Group. A number of key orders have been secured over recent weeks despite a slowdown in the market.

Current trading and activities

Recent divisional performance has been reasonably good for the time of year and given the economic conditions. Traditionally Clarity sales are slower in the first half of the year than the second. With current market uncertainty some volatility has occurred but management initiatives are currently under way to monitor and control costs with uncertain activity levels, in order to ensure continuing profitability.

Sales resources have been added to take advantage of identified opportunities in the market and we will maintain a close watch on progress.

Marketing has historically been an area of weakness in the Group. This is currently being addressed and a strategy formulated.

As alluded to earlier, although costs were addressed during the past year, the Board is conducting an exercise to identify further areas where the Group could be more efficient. 

Recent contract wins

Clarity announced, in its interim report, that it had won new contracts during the financial year, including:

Schuitema - Supply of a complete point of sale (POS) solution for one of the largest grocery chains in Holland. The FREEDOM solution will be deployed to over 3000 lanes in all 400 supermarkets during 2008 and 2009 in a deal worth over €1m. The solution will leverage FREEDOM's strong multi-channel capability to support the front lane POS and mobile and self checkout sales channels.

Co-op Denmark - successful deployment of the FREEDOM solution to 800 grocery stores. FREEDOM is operating their many different formats, ranging from small convenience stores through to their very large supermarkets and runs complex promotion schemes for their customer groups. MATRA and Coop Denmark are now working together on a major new initiative due for deployment early next year.

Flytoget - Flytoget operates the express rail service from Oslo airport to the city centre and for a number of years have used the FREEDOM solution to handle ticket sales from counters and kiosks and to operate their innovative ticketless travel concept. In a deal worth over £600k, Clarity is delivering a complete refresh to that system using the latest version of FREEDOM and providing new innovations to their business processes.

Warren Theatres - Contract win for Clarity's ticketing and reservations software suites in a 20 screen cinema complex.

Europalaces - signing of $1m contract to supply ATMs across the estate.

  Following the year end, Clarity announced significant further business wins:

Universal Studios - contract provides for Clarity to service over 200 locations and 700 terminals across the Universal Orlando Resort, including Universal Studios theme park, the Islands of Adventure theme park, and the 30-acre CityWalk entertainment complex. The initial value of this contract is approximately £420,000 plus annual maintenance. The roll out is scheduled between September and November this year. 

BBA - significant contract with Dienst Binnenwaterbeheer Amsterdam ('BBA'), which is responsible for the commercial management of Amsterdam's waterways. Clarity will supply all of BBA's sites with a central administration and Point of Sale ('POS') solution, which will underpin the business processes associated with administering Amsterdam's waterways and the collection of associated revenues from both commercial and leisure craft. The initial value of this contract is approximately €586,000 Euros plus annual maintenance with the roll out scheduled for the second quarter of 2009. 

Outlook

Despite the current uncertainty in the UK and abroad, caused by the Global economic downturn, Clarity is well-placed to continue with its recent progress. The Group enjoys a high level of recurrent revenue, and a blue-chip, loyal customer base. The Board will continue to monitor market conditions very closely over the coming months but remains confident that the Group can succeed in these conditions. Clarity has already demonstrated its ability to adapt to changing conditions and has the experience to compete with less agile competitors.

The Board has placed a high degree of focus on investor relations and shareholder communication over the past year and would like to thank Clarity's owners for their patience and support during a difficult period. The Board firmly believes that the Group has delivered on its promises, and that this progress can be maintained in 2009. 

Ken R Smith

CEO

24 July 2008

Unaudited consolidated income statement

for the year ended 31 March 2008 

				Year ended 31 March 2008		Year ended 31 March 2007
		Notes		£'000		£'000
Continuing operations
Revenue		5		15,364		15,316
Cost of sales				(3,041)		(4,358)
Gross profit				12,323		10,958
Operating costs
Operating expenses				(11,910)		(11,234)
Exceptional expenses		6		(252)		-
Amortisation and impairment of acquired intangible assets				(1,426)		(357)
Impairment of goodwill				(6,895)		-
Total operating costs				(20,483)		(11,591)
Operating loss from continuing operations				(8,160)		(633)
Operating loss from continuing operation is analysed between:
Operating profit/(loss) from continuing operations				413		(276)
Exceptional expenses				(252)		-
Amortisation of acquired intangible assets				(1,426)		(357)
Impairment of goodwill				(6,895)		-
				(8,160)		(633)
Finance income				721		419
Finance costs				(1,134)		(866)
Loss before taxation from continuing operations				(8,573)		(1,080)
Taxation expense				(385)		(337)
Loss for the year from continuing operations				(8,958)		(1,417)
(Loss)/profit for the year from discontinued operations		12		(1,671)		210
Loss for the year attributable to the equity shareholders of the parent company				(10,629)		(1,207)
(Loss)/earnings per share (pence)		7
Basic and diluted - continuing operations				(35.84)		(7.09)
Basic and diluted - discontinued operations				(6.69)		1.05
				(42.53)		(6.04)

Unaudited consolidated statement of changes in equity

		Share capital		Share premium account		Profit and loss account		OTHER RESERVE		Translation reserve		Total
		£'000		£'000		£'000		£'000		£'000		£'000
At 1 April 2006		4,084		5,974		579		-		(317)		10,320
Issue of shares		1,187		1,768								2,955
Consolidated loss for the year						(1,207)						(1,207)
Exchange differences on translation of foreign operations										(230)		(230)
At 31 March 2007		5,271		7,742		(628)		-		(547)		11,838
Issue of shares		2,736		(166)								2,570
Reserve arising on acquisitions in the year								1,696				1,696
Consolidated loss for the year						(10,629)						(10,629)
Exchange differences on translation of foreign operations										290		290
At 31 March 2008		8,007		7,576		(11,257)		1,696		(257)		5,765

Unaudited consolidated balance sheet

as at 31 March 2008

				As at  31 March 2008		As at  31 March 2007
		Notes		£'000		£'000
ASSETS
Non current assets
Property, plant and equipment				351		556
Goodwill		14		8,806		14,506
Other intangible assets				1,458		1,660
Trade and other receivables				-		24
Total non current assets				10,615		16,746
Current assets
Inventories				626		711
Trade and other receivables				4,969		5,707
Cash and cash equivalents				-		416
Blocked cash collateral accounts				93		716
Assets held for resale		13		1,440		-
Total current assets				7,128		7,550
Total assets				17,743		24,296
LIABILITIES
Non current liabilities
Bank loans				1,048		1,519
Loan notes				-		326
Deferred consideration				4,066		1,800
Obligations under finance lease				50		29
Provisions				-		41
Total non current liabilities				5,164		3,715
Current liabilities
Trade payables				1,497		2,238
Other payables				3,146		3,938
Corporation tax				426		484
Bank loans and overdrafts				574		1,266
Loan notes				90		300
Obligations under finance lease				25		14
Deferred consideration				-		503
Liabilities linked to current assets held for resale		13		1,056		-
Total current liabilities				6,814		8,743
Total liabilities				11,978		12,458
Net assets				5,765		11,838
EQUITY
Shareholders equity
Share capital		9		8,007		5,271
Share premium				7,576		7,742
Retained earnings				(11,257)		(628)
Translation reserve				(257)		(547)
Other reserve				1,696		-
Total equity attributable to the equity shareholders of the parent company				5,765		11,838

Unaudited consolidated cash flow statement

for the year ended 31 March 2008

		Year ended 31 March 2008		Year ended 31 March 2007
		£'000		£'000
Operating activities
Operating loss		(9,832)		(565)
Depreciation		174		194
Amortisation
Intellectual property rights		1,399		400
Software		34		-
Goodwill		8,772		-
Interest paid		(1,036)		(772)
Income tax paid		(175)		(51)
Operating cash flows before movements in working capital		(664)		(794)
Decrease /(Increase) in inventories		85		(75)
Decrease in trade and other receivables		42		1,984
Decrease in trade and other payables		(1,162)		(1,200)
Cash used in operating activities		(1,699)		(85)
Investing activities
Proceeds on disposal of property, plant and equipment		298		8
Purchase of software		-		(27)
Purchase of property, plant and equipment		(113)		(111)
Interest received		722		528
Payment of deferred consideration		(10)		-
Purchase of subsidiary undertakings		(321)		(2,777)
Cash from/(used in) from investing activities		576		(2,379)
Financing activities
Proceeds from issue of share capital		1,613		1,817
Repayment of loan notes		-		(117)
New bank loans		-		2,425
Repayment of bank loans		(485)		(1,339)
Capital element of finance leases		(15)		(7)
Interest element of finance leases		(4)		(4)
Cash from financing activities		1,109		2,775
Net (decrease)/increase in cash and cash equivalents		(14)		311
Cash and cash equivalents at the beginning of the year		(365)		(446)
Foreign exchange rate adjustments		290		(230)
Cash and cash equivalents at the end of the year		(89)		(365)

Notes to the consolidated financial statements

1    Reporting entity

Clarity Commerce Solutions plc is a public limited company incorporated and domiciled in England and Wales (registration number 3914814). The Company's registered address is Hooper House, Hatch Warren Farm, Hatch Warren Lane, Hatch Warren, Basingstoke, Hampshire, RG22 4RA.

The Company's ordinary shares are traded on the AIM market of the London Stock Exchange plc. The consolidated financial statements of the Company for the year ended 31 March 2008 comprise the Company and its subsidiaries.

Across the year the Group was primarily involved in the provision of software solutions for ticketing, leisure, hospitality, retail, business intelligence and support services with offices in the United Kingdom, United States, France and, as a result of an acquisition in the year, New Zealand.

The results are presented in GBP (£) being the functional currency of the ultimate parent company.

2    Compliance with accounting standards

While the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS.

At the date of authorisation of this preliminary announcement the following Standards and Interpretations which have not been applied in this preliminary announcement were in issue but not yet effective:

IFRS 3        Business Combinations

IFRS 8        Operating Segments

IFRIC 12    Service Concession Arrangements

IFRIC 13    Customer Loyalty Programmes

IFRIC 14    IAS 19 The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction

IFRIC 15    Agreements for the Construction of Real Estate

IFRIC 16    Hedges of a Net Investment in a Foreign Operation

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group when the relevant Standards and Interpretations come into effect.

3      Going concern

Having increased revenues and introduced cost efficiencies, profitable trading was restored in September 2007 after five months of substantial losses in the first half of 2007/8. With support from most of our key institutional shareholders, an underwritten Placing and Open Offer was concluded in February 2008, raising £1.8m before expenses. 

The Directors have reviewed the projections for the forthcoming 12 month period from the date of approval of the financial information and based on the level of existing cash, projected income and expenditure. The Directors are satisfied that the Company and Group have adequate resources to continue in business for the foreseeable future. Accordingly the going concern basis has been used in preparing the Preliminary Announcement.

4    Basis of preparation

The Preliminary Announcement of unaudited results for the year ended 31 March 2008 is an extract from the forthcoming 2008 Annual Report and Accounts, on which the Auditor has yet to express an opinion, and does not constitute the Group's statutory accounts of 2008 nor 2007 within the meaning of s.240 of the Companies Act 1985. Statutory accounts for 2007 have been delivered to the Registrar of Companies, and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on the 2007 accounts; their report was unqualified and did not contain statements under Sections 237(2) or (3) of the Companies Act 1985.

The Annual General Meeting will be held on 18 September 2008. Notice of the meeting will be enclosed with the audited statutory financial statements.

The Annual Report and Accounts will be posted to shareholders shortly. Further copies will be available on request from the Company's Registered Office: Clarity Commerce Solutions plc, Hooper House, Hatch Warren Farm, Hatch Warren Lane, Hatch Warren, Basingstoke RG22 4RA.

The financial information set out above does not comprise the Company's full statutory accounts within the meaning of Section 240 of the Companies Act 1985.

This Preliminary Announcement was approved by the Board on 23 July 2008.

The Group's date of transition under International Financial Reporting Standards (IFRS) was 1 April 2006. 

The Group has taken advantage of an exemption available under IFRS 1 First-time Adoption of International Financial Reporting Standards, and has elected not to apply IFRS 3 Business Combinations to the business combinations that took place before the date of transition. As a result, the carrying value of goodwill at 31 March 2006 is frozen, subject to impairment reviews thereafter in accordance with IFRS 3.

The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS, including reconciled opening balance sheet as at 1 April 2006 and comparative balance sheet as at 31 March 2007, an IFRS reconciliation of the Group's results for the year ended 31 March 2007, and the Group's accounting policies, will be included in the following statutory financial statements of the Company for the year ended 31 March 2008. This information was included in the Company's Interim Report for the 6 months ended 30 September 2007. 

 Intangible assets

On transition the Group has reclassified separately identifiable computer software assets from tangible to intangible assets following the provisions of IAS 38 Intangible Assets.

Expenditure on development activities resulting in new or substantially improved products which will generate future economic benefit is now capitalised and amortised over the products' useful life. Previously under UK GAAP all such development costs were expensed.

Holiday pay accruals and provisions

Under UK GAAP the Group did not recognise any accruals or provisions made for holiday pay owed to its employees in overseas subsidiaries which are required to make such accruals and provisions under local/national GAAP.

In the transition from UK GAAP to IFRS the Group has recognised these accruals and provisions in the financial statements and the adjustments are set out under the relevant income statement reconciliations.

The Group has never recognised the need to make provisions for holiday pay owed to its UK employees. From time to time, holiday pay is paid to employees when they leave a subsidiary company. The amounts are small and are not considered materially sufficient to require a provision during or at the end of an accounting period, therefore no provision has been made in the financial statements.

5    Segmental information

The Group has varied activities and makes sales to a variety of global destinations. An analysis of revenues generated by revenue division and by geographical region is given below:

Revenues by division

		Year ended 31 March 2008		Year ended 31 March 2007
		£'000		£'000
Ticketing		5,657		6,342
Hospitality		2,683		3,220
Retail		5,546		4,403
Leisure		1,478		1,351
Revenue from continuing operations		15,364		15,316
Discontinued operations		6,302		5,487
		21,666		20,803

Revenues by geographic region

		Year ended 31 March 2008		Year ended 31 March 2007
		£'000		£'000
United Kingdom		8,830		8,460
Europe excluding United kingdom		2,339		3,898
United States of America		3,943		2,620
Rest of World		252		338
Revenue from continuing operations		15,364		15,316
Discontinued operations - United Kingdom		6,302		5,487
		21,666		20,803

The management of the Group do not analyse net assets by revenue type.

6    Exceptional expenses

Exceptional expenses of £252,000 were incurred during the year and are recognised in the consolidated income statement. These expenses relate to the Extraordinary General Meeting held on 31 May 2007, as well as costs involved in the fundamental reorganisation of the Board during the year.

7    (Loss)/earnings per share

The calculations of (Loss)/earnings per share are based on the loss after tax for the financial year and the following numbers of shares:

		Year ended 31 March 2008		Year ended 31 March 2007
		Number of shares		Number of shares
Weighted average number of shares:
For basic loss per share		24,989,858		19,955,595
For diluted loss per share		24,989,858		19,995,595

		Year ended 31 March 2008		Year ended 31 March 2007
		£'000		£'000
Loss for year from continuing operations		(8,958)		(1,417)
(Loss)/Profit for the year from discontinued operations		(1,671)		210
Loss for the year attributable to shareholders of the parent company		(10,629)		(1,207)
(Loss)/earnings per share:
Basic and diluted - continuing operations		(35.84)p		(7.09)p
Basic and diluted - discontinued operations		(6.69)p		1.05p

As a result of the loss for the year there is no difference between the basic and diluted loss per share, or for the year ended 31 March 2007.

8    Income tax

UK Corporation Tax has been provided on the results for the year at 30% and overseas tax at applicable rates.

9    Share capital

		As at 31 March 2008		As at 31 March 2007
		£'000		£'000
Authorised share capital:
Ordinary shares of £0.25 each		8,200		6,250
Allotted, called up and fully paid:
At beginning of year		5,271		4,084
Issue of ordinary shares		2,736		1,187
At the end of the year		8,007		5,271

During the year, a total of 10,947,461 ordinary shares were issued, representing a nominal value of £2,736,865. Of these shares, 655,038 ordinary shares representing a nominal share value of £163,760 were issued on 22 May 2007 in respect of final deferred consideration on the Romulus acquisition at a consideration of £453,876 (69.29p per ordinary share); 3,174,800 ordinary shares representing a nominal share value of £793,700 were issued in relation to the acquisition of Total Hospitality Solutions Ltd and Total Hospitality Solutions (NZ) Ltd at a consideration of £2,199,819 (69.29p per ordinary share); and a total of 7,117,623 ordinary shares representing a nominal share value of £1,779,406 were issued in a Placing and Open Offer on 29 February 2008 for which consideration of £1,779,406 (25p per ordinary share) was raised before fees.

10    Acquisitions

On 22 May 2007 the company acquired the entire share capital of Total Hospitality Solutions Limited and Total Hospitality Solutions (NZ) Limited. The consideration payable at completion of £2.2m was entirely satisfied by the issue of ordinary shares in the Company.

The following table sets out the book values of the identifiable assets and liabilities acquired and their values to the group:

		Book value		Fair value adjustments		Provisional fair value to the group
		£'000		£'000		£'000
ASSETS
Property, plant and equipment		14				14
Other intangible assets				1,258		1,258
Trade and other receivables		123				123
		137		1,258		1,395
LIABILITIES
Trade and other payables		(178)				(178)
Bank overdraft		(10)				(10)
Deferred income		(6)				(6)
Other taxes		(26)				(26)
		(220)				(220)
Net assets		(83)		1,258		1,175
Goodwill						1,266
Costs of acquisition						(241)
Consideration						2,200
Satisfied by shares issued						2,200

The intangible asset recognised in the fair value adjustments relates to software rights.

The goodwill was attributable to the significant synergies which were expected to arise from the integration of the business with hospitality and other divisions of the Group and those intangibles such as the workforce which are not recognised separately.

11    Post balance sheet events 

The Company announced the results of its strategic review on 7 April 2008, where it indicated it would undertake a small operational restructuring, as well as seek to divest itself of two non-core service businesses.

Disposal of Cyntergy Services Limited

Cyntergy Services Limited ('Cyntergy'), which provides help desk and training services to a wide variety of retail, leisure and software companies throughout the UK and mainland Europe, was sold to Lumos Services Limited ('Lumos') on 2 May 2008.

The maximum consideration receivable by the Company for the disposal is £1,000,000 payable entirely in cash. Of this sum, £400,000 was paid on completion with a further £100,000 payable within twelve months. The balancing consideration, of up to £500,000, arises in respect of training or help desk business introduced by Clarity to Cyntergy in the three year period following completion. The exact sum payable will be calculated annually as a proportion of agreed gross profits generated on business introduced to Cyntergy for the succeeding twelve months of any such new contract introduced. Such additional sums would be payable to Clarity shortly after each anniversary of completion.

Peter Walker, a previous Executive Director of Clarity, owns 27.5% of Lumos and is a Director of that company. Further Tim Bittleston, a previous non-executive Director of Clarity, owns 4.5% of Lumos. As Messrs Walker and Bittleston have both been directors of Clarity within the last 12 months, and together control more than 30% of Lumos, this transaction is deemed, for the purposes of the AIM Rules, to be one with a related party. In accordance with the AIM Rules the Directors consider, having consulted with the Company's Nominated Advisor, that the terms of the transaction are fair and reasonable insofar as shareholders are concerned.

Disposal of trade and some assets of Romulus Enterprises Limited

The trade and assets of Romulus Enterprises Limited ('Romulus'), a business intelligence consultancy specialising in management reporting and IT support, was sold to Linegem Limited ('Linegem') on 1 July 2008.

Clarity received cash of £497,000 for the disposal of Romulus, payable on completion, and retained the cash benefit of contracts paid in advance of £130,000. In addition, Clarity will continue to benefit from free-of-charge support over the coming three years. Furthermore, should Linegem sell Romulus within 18 months following the disposal, Clarity will receive 25% of any increase over the initial consideration.

Robbie Crawford and Paul Lemon, who were both former Directors of Romulus within the last 12 months, will become Directors of Linegem. This transaction is deemed therefore, for the purposes of the AIM Rules, to be one with a related party. In accordance with the AIM Rules the Directors of Clarity consider, having consulted with the Company's Nominated Advisor, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned. 

Clarity has used the funds raised from both disposals, after settlement of related costs, to support both its working capital, to reduce its term debt, and thereby allow the Company to investigate further acquisition opportunities in its core marketplace. Again, this is in line with the Board's stated strategy.

  12    Discontinued operations

Discontinued operations represent disposals described in note 11 (post balance sheet events). The results of the discontinued operations, which have been included in the consolidated income statement, are as follows:

				Year ended 31 March 2008		Year ended 31 March 2007
				£'000		£'000
Revenue				6,687		5,867
Expenses				(6,481)		(5,661)
Impairment of goodwill				(1,877)		-
(Loss)/profit before taxation				(1,671)		206
Attributable tax expense				-		4
Total (loss)/profit for the year				(1,671)		210

Revenue includes inter-company trading of £385,000 (2007: 380,000).

13    Assets held for resale

The major classes of assets and liabilities comprising the operations classified as assets held for resale relate to discontinued operations disclosed in note 11, and are as follows:

				As at  31 March 2008
				£'000
Intangible assets				500
Property, plant and equipment				107
Trade and other receivables				739
Prepayments and accrued income				94
Assets classified as held for resale				1,440
Trade and other payables				1,056
Liabilities classified as held for resale				1,056

14    Goodwill

Following the acquisition in the year, the carrying value of goodwill increased by £1,266,000. Furthermore, the deferred consideration provision in respect of the acquisition of MATRA Systems (Holdings) Limited has been reviewed, resulting in increases to value of deferred consideration on the consolidated balance sheet, by £2,266,000.

The Board has reviewed the total carrying value of goodwill, and has subsequently effected an impairment at the balance sheet date. A total impairment of £8,772,000 for the year (2007: £nil) has been recognised in the consolidated income statement.

 

END

 

 

FR EAXXDADEPEFE