Final Results

RNS Number : 2090U

Clarity Commerce Solutions PLC

22 June 2009

 



CCS.L

Clarity Commerce Solutions plc

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

Audited Preliminary Results for the year ended 31 March 2009

Clarity Commerce Solutions plc (AIM:CCS), a leading supplier of software solutions for the hospitality, retail, leisure and entertainment sectors , announces its Audited Preliminary Results for the year ended 31 March 2009.

Confident of continuing steady progress 

HIGHLIGHTS 

• Results ahead of market expectations 
  
  
• Continuing Revenue increased 15.1% to £17.7m
  
  
• Profit from continuing operations £1.1m (2008: loss £7.1m) before tax and amortisation of £0.65m (2008: £1.4m)
  
  
• Net debt eliminated 
  
  
• Significant contract wins secured during the period across the UK, Europe and USA
  
  
• Business now capable of assimilating core solutions to address new markets and clients  
  
  
• Management team strengthened with new Board appointments including new CFO post period end  
  
  
• Management is confident of continuing steady progress 

Ken Smith, CEO commented:

'This has been an exceptional year for Clarity and its staff who, together, have produced an excellent performance with profits ahead of market expectations despite a difficult trading environment. Throughout the year we have secured significant contract wins across all of our activities and across all territories including the UK, Europe and the USA. Such wins have created a solid platform in terms of client reference sites and these, combined with our cross selling capabilities, will underpin and drive future revenue growth. 

With a strong financial position and a cash generative business supported by growing revenue streams, we welcome Chris Ford, an experienced CFO, to our Board.

We are therefore well placed for the year ahead and I look forward to reporting further progress in due course.'

The Annual Report will be sent to shareholders on or around 1 July 2009. The Annual Report will be available from the Company's website at www.claritycommerce.com and additional copies will be made available to the public, free of charge, from the Company's registered office at Paterson House, Hatch Warren Farm, Hatch Warren Lane, Basingstoke RG22 4RA.

Enquiries:

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

Clarity Commerce Solutions plc

Chairman's Statement

I am pleased to report that, during the past year, Clarity has continued to deliver on its promises and has made good progress in building upon the solid foundations of the previous year. 

The Group achieved its planned return to profitability with an Operating Profit of £1.3m before amortisation of £0.6m. A strong year end, as seen in 2008, led to pre tax earnings slightly ahead of market expectations despite taking the prudent step of creating a number of one-off provisions. 

This outstanding result was achieved by delivering valuable products and services to our customers, a trend we plan to continue. 

For the first time in many years, we were pleased to finish the year end with a net cash position (excluding deferred consideration liabilities), as a result of profitable trading, strong cost containment and debtor management. 

Group debt has progressively reduced over the past two years and, whilst we will retain our term loan facilities, being cash positive was a very new and pleasing experience for the Group.

These results confirm the continuing progress we have made since reporting our half year results in November 2008. Our progress has seen not only solid ongoing and repeat business from our established customer base but also significant contributions from a number of high profile new customers gained during the year, including Universal Studios in Florida, the Peel and Oxford Hotel chains in the United Kingdom and a major US retail chain which we cannot name for commercial reasons but which has over 1,000 stores.

Despite the current economic climate our customers are continuing to invest in our products and services and, whilst we have seen some delays and increases in the length of sales cycles, we remain cautiously optimistic about the future.

Although Clarity's customer base is primarily composed of retailers and operators of various leisure venues, for the most part their revenue flows through our software and this enables them to make improvements to their profitability by investing in new products and services that we can offer.

By working with Clarity, our customers are also gaining benefits from being able to access functionality from similar industries to their own. For the future this approach offers exciting new features to our customers at relatively low cost and removes some of the expense and risk to us in developing new products.

Of course a technology group like Clarity is really only as good as the people we have within the Group and we are very fortunate to have a great team of over 160 passionate, motivated and focused people working for us. 

Under Ken Smith's excellent leadership morale has never been better and our staff have an air of confidence and enthusiasm that I have not seen previously. We are also seeing positive comments about the Group in the trade and financial press.

We are seeing the benefits of the strong financial controls that have been introduced in the past year and whilst there are several ongoing projects to further reduce costs where possible, for the future our primary focus is now on revenue generation.

During the year we were also pleased to have Tony Houldsworth join the Board as an Executive Director. Tony has moved from responsibility for our Retail division to a Group-wide role and has been instrumental in finding ways to leverage our experience across divisions and in finding new products to bring to our customers.

I look forward to meeting shareholders again at our Annual General Meeting which we expect to hold on Friday 24 July at our offices in Basingstoke. 

In addition to routine business at the meeting we will also be seeking shareholder approval for our proposed employee share option schemes, full details of which will be sent out with the Notice of Meeting. 

The Long Term Incentive Plan ('LTIP') and Share Incentive Plan ('SIP') schemes will be based on normal parameters allocating a maximum of 10 per cent. of the Company's shares over a 10 year period. I have canvassed many shareholders over the last year and all have been supportive of the idea of implementing such plans. We see this as a key way of retaining and rewarding those who can directly affect shareholder value by aligning their interests with those of shareholders.

Our Articles of Association require one third of the Board to retire by rotation each year. Accordingly, Ken Smith and I will both be standing down at the Annual General Meeting and are both available for re-election to the Board. We will also be seeking shareholder confirmation of Tony Houldsworth's appointment to the Board and that of Chris Ford, whom I am delighted to welcome as our new CFO.

We are also taking the opportunity at our AGM to revise our Articles of Association to take account of recent Companies Act legislation. Full details of these changes, and those pertaining to our option schemes, are included in the Notice of Meeting.

I would like to thank my fellow Board members for their hard work and wise counsel throughout the year. We have worked very well as a team and Board members have all made additional contributions outside of their normal roles. We are fortunate that Board members, having very different and complementary skill sets, have been able to bring a wide range of experiences to the Group. Prospects remain cautiously optimistic for the current year and, having returned to profitability, this provides an opportunity for us to make some changes to the structure of the Group's trading companies which are intended, inter alia, to facilitate the payment of dividends to shareholders in the future in accordance with a prudent distribution strategy. 

Finally I would like to again thank shareholders for their continuing patient support during the past year. Restoring shareholder value to the Group remains the fundamental objective for all of us.

John O'Hara
Group Chairman

22 June 2009

Chief Executive's Review 

Overview

I am pleased to report a solid set of results in which Clarity has exceeded its market expectations, which have been underpinned by multiple contract wins across its core divisions. 

When I joined Clarity in June 2007, the Group faced a series of management and operational challenges which were detracting from its significant long term potential. Post restructuring, the past two years have seen the Group transformed into a growing, profitable, cash-generative business. The key to delivering each of the components of this transition has been our ability to set realistic targets and achieve them and, in so doing, rebuild confidence across our stakeholder groups from customers through to shareholders. As a result, despite a difficult first year, we achieved a return to profitability underpinned by a strengthened financial position post a successful fund raising which demonstrated our shareholders' faith in the business. 

The year ended 31 March 2009 has seen the Group move from recovery to growth and, in turn, produce solid profits and cash flows. I am now looking forward to the current financial year, in which I believe Clarity can build on its unique combination of sector expertise, people, products and customers, and become known for its innovative, quality solutions and financial performance.

Financial highlights

During the year to 31 March 2009, profits were ahead of market expectations, despite a difficult economic environment. The Group's results may be summarised as follows: 

	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Continuing operations:
Revenue	17,683	15,364
Operating profit/(loss) before amortisation	1,298	(6,734)
Net finance cost	(187)	(413)
Profit/(loss) before tax and amortisation	1,111	(7,147)

These results are in line with our previously-stated objectives of building a steadily-improving performance on firm foundations. Moreover, and most welcome in present trading conditions, our cash position improved considerably, and a year end drive succeeded in eliminating net debt (excluding deferred earn out consideration) despite payments to a number of long-standing creditors.

Our aim is to grow the business, both organically and acquisitively, should opportunities arise, but we intend to make distributions to shareholders once our reserves, sustained profitability and cash balances prudently permit. 

Divestment/closure of non-core businesses

At the start of the year we divested two businesses which the Board identified as non-core. Cyntergy Services Limited and the trade of Romulus Enterprises Limited were sold for cash consideration. We also closed the unprofitable US ticketing business in December 2008.

Board, management and staff

Over the past year, I have been rewarded with the contribution of many talented people. Indeed it has been one of my pleasures since joining the Group to work with and cultivate Clarity's strong team, both in the UK and abroad. I believe we have an excellent management group, led by some particularly able managers, including:

• Tony Houldsworth, founder of MATRA Systems and recently appointed to the Board, who provides visionary, innovative solutions to clients and prospects, and is a master of presenting complex technical matters at the highest level.

• Stuart Mitchell who, pending our appointment of a full-time successor, has held the post of Interim CFO. Stuart has done an excellent job and will remain with us for several months in order to provide a seamless handover to Chris Ford, who joined us in April 2009. I am delighted to welcome Chris, who comes with highly relevant experience of our sectors, to the Company.

• Dr Wolfgang Buscher, who leads our European Entertainment business, and provides consistently strong revenues and profits, coupled with strategic vision.

There are many other people in our Group worthy of mention, at all levels of the business. Morale is high and the Group now operates increasingly as a global team.

Cross-sector capability

In the second half of the year, we reorganised the Group's operations to maximise our opportunities and maintain an agile response to customers and prospects. Whilst retaining our divisional expertise in Retail, Hospitality, Leisure and Entertainment, we have sought to cross-fertilise our skill-base and technology to offer product solutions integrated across differing domains. Increasingly, in customer presentations, we are offering solutions which knit elements from our wealth of established divisional products to provide best of breed integrated solutions. This has the advantages of re-using existing, proven technology, and, unlike most competitors, offering across-the-board solutions to major prospects. Our integrated technology can, for example, provide a theme park with gate ticketing, entry to specific shows, complex and simple food and beverage operations, provide a corporate memory on individual consumers' behaviour, loyalty as well as reward programmes, and merchandising.

Product development

During the year we spent £3.57m (2008: £3.81m restated to include subsidiary costs) on research and development, and are committed to an ongoing programme of developing and enhancing our product portfolio to ensure that we continue to meet market requirements.

As explained previously, much of our focus is on providing integrated solutions to large and small customers alike. 

In our Hospitality Division, a recent example of our approach is Mar Hall, a fine Scottish spa and golf hotel. Providing this client with an integrated solution to their requirements afforded an opportunity to bring together a number of Clarity products to provide a functionally-rich integrated solution. Similar activities are underway on a larger scale with contract caterers, cinema operators and other prospects.

In our Leisure Division, great progress has been seen with the release of initial elements of our new product. Rather than a 'big bang' approach, this development is being conducted module by module, thereby retaining the rich features of the legacy solution, but with flexibility, modern look and feel, and minimal training requirements of an up-to-date technology which leapfrogs our competitors. Initial reactions from the user base are very positive.

Our Retail Division, both in Europe and in the US, has continued to add features to its point of sale solutions. Key additions offer stored value and customer loyalty packages, very important areas for customers during recessionary times, as well as added value services such as solution centre, a powerful add on for multi-site operators which extracts, cleanses and presents transactional data to management in order to provide near real-time business statistics. 

Entertainment developments have seen the integration of widget information extracted from the point of sale database and pushed automatically to senior management in cinema chains. For example, cinema managers, or regional management can receive near real-time data on tickets sold by film, site or region, on a laptop, PDA or mobile telephone.

Divisional performance

Clarity retains key expertise in a number of sectors - Retail, Leisure, Entertainment and Hospitality. During the latter part of the year, following a review, it was concluded that the 'Ticketing' Division could better described as providing solutions for the 'Entertainment' sector and this terminology will be used henceforth.

Our Entertainment and Retail Divisions had very good years, contributing strongly to the Group's result. Each of the other divisions, Hospitality and Leisure, was profitable and produced strong end of year performances, which should provide a good platform for future success.

Clarity's Entertainment Division operates primarily in the UK and France. Both areas saw new openings and product enhancements and, once again, our French operation won key orders for Automatic Ticketing Machines (ATMs) and data warehousing solutions. 

Our Retail Division had an excellent year, especially in Europe. By concluding the earn out arrangement pursuant to its acquisition, MATRA Systems management have been able to focus on broader Group issues as well as winning and delivering a strong stream of business from new and existing customers including Flytoget, Schuitema, Amsterdam Harbour, Universal Studios and several other key wins. Our operation in Raleigh, North Carolina, is performing well, both in terms of IBM 4690 enhancements and also in providing an upgrade path for users wishing to migrate to MATRA's point of sale and related solutions.

Leisure activities included the sale of new product modules for a number of customers, widget solutions for a health club client and considerable product enhancement activity in connection with PCI compliance, a hot topic for many of our customers. Plans to release further modules of the new product over the coming year are well-advanced, and the user group is very positive about our approach. 

Hospitality, revitalised under a new management structure, is showing increasing promise, having concluded several key orders from existing and new customers, and developed a good pipeline of interesting prospects. The hotel and resort product solutions have been integrated and are being sold as a package and, despite the market, activity in the hotel sector is fairly active. With key orders from Peel Hotels and Oxford Hotels and Inns, the Division is now firmly on the radar in its industry.

Contract wins

During the course of the year the Group has won a series of significant contracts across all of its core divisions and territories, which includes the UK, Europe and the USA. Examples of these contract wins include:

• Oxford Hotels & Inns, a leading British hotel group with 43 sites across the UK; 

• EuroPalaces, the owner of Pathé and Gaumont cinemas in France, and a leading cinema circuit and multiplex site operator in Europe;

• PriceSmart, a cash and carry chain based in San Diego with warehouses throughout Central America and the Caribbean; 

• A major US bedding and speciality store with around 1,000 stores in the USA, Puerto Rico and Canada;

• Peel Hotels, a major UK-wide hotel chain;

• Dienst Binnenwaterbeheer Amsterdam ('BBA'), which is responsible for the commercial management of Amsterdam's waterways; and

• Universal Studios, Florida, to supply their Orlando theme park with all of their Point of Sale solutions for food and beverages. 

Operations

Our people are the core of our business, and their productive deployment is key to our ability to provide our customers with cost-efficient, timely solutions. During the year, we took a close look at the way we conducted our business and the implications of this on our customers and cost-base. Each of our costs was scrutinised and a number of cost-reduction activities implemented, saving a significant sum.

As a result, we have reshaped the Group during the year, with the business now being centred on Business Development and Solutions Delivery. As the name implies, the Business Development group comprises our sales and account management activities to win, and retain, customer orders. Within the Group we retain the domain expertise of the Retail, Entertainment, Hospitality and Leisure Divisions, but overlay a group-wide level of management capability to ensure we maximise our potential revenue opportunities. Results since the reorganisation last autumn have been most encouraging, especially given the inevitable overlap between many businesses acquired and built over a number of years.

Having secured business from a customer, responsibility for its delivery, installation and post sale support is provided by our Solutions Delivery group. This includes solution specification, software development and test, configuration and installation, together with its support once live. Our mission is to win many more customers, and then provide support and help at a level such that they remain loyal to Clarity for their future technology requirements.

Over time the Group has acquired and developed a great deal of software and our focus is on deploying as much of this as possible in our product development rather than rewriting these components. The new management structure facilitates the cross sector use of our software which reduces time to market and development cost, and offers customers an opportunity to employ new elements of Clarity's software.

Current trading and activities

In line with earlier periods, trading towards the year end was extremely busy. Each of our divisions delivered good results and, as already mentioned, we exceeded our targets. We have entered the new financial year with a continuing brisk level of implementation activity with hotel roll outs and other deliveries in the first quarter of the current financial year. Our year is cyclical, however, and I would anticipate 2009/10 demonstrating a typical weighting towards the second half of the year.

Prospecting activities remain strong and our reputation is increasingly placing us on high-profile tender lists. Nevertheless, like most businesses at present, we are experiencing longer sales cycles, with some orders being delayed or cancelled in exceptional cases, hence our aim is to fill our order hopper with enough opportunities to withstand some fallout. Our customer base, new-found reputation and cross-sector capabilities certainly help this process, but with the poor macro-economic environment we have to continue to work harder to secure quality business.

In the past, one of our weaknesses has been the lack of Clarity brand awareness due to our size, low product integration and limited marketing. Over recent months we have been working to improve our marketing and PR and, in particular, on a rebranding project designed to launch Clarity as a provider of leading edge, quality, well-supported solutions across multiple sectors. The new Clarity look is based around not only a changed logo, but also some key messages:

• our extensive experience and understanding of the consumer interface;

• our cross-sector ability to help our customers better engage with their own customers;

• our fresh approach to technology - innovative and people oriented.

By drawing on a small group of highly-experienced professionals, we have achieved our rebrand at a fraction of the normal cost for a business of our size and complexity. This, in itself, demonstrates a more agile approach to the way in which we conduct ourselves.

Outlook

The economic environment for many businesses across the world is poor. Clarity is not immune to these pressures and the fight to win and retain customers is tough. Nevertheless, with problems come opportunities, and we have seen some valuable successes due to competitors' misreading of the need to provide agile, cost-efficient solutions and to support and help the customer once the sale is secured. We have had to step up a gear in customer communication, cost control and the way in which we offer solutions to our customers. Our staff have stepped up to the mark and we are doing better than many as a result.

Nevertheless, we remain vigilant about risks as well as driving opportunities and we must stay on the front foot to address the changing market. Provided we continue to listen to customers' needs and concerns, we can flourish in this market and hence I remain cautiously optimistic that we can continue our good progress in the coming year.

Our market reputation is a function of our delivering to expectations. We set expectations with, and make promises to, customers and we must honour these, sometimes in difficult circumstances. Because we do this, we enjoy an expanding, prestigious customer base of which we are very proud.

Prospects are therefore encouraging and we have started the current financial year with enthusiasm and energy.

K R Smith BA CA
Chief Executive Officer

22 June 2009

Consolidated Income Statement

for the year ended 31 March 2009 

	Notes	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Continuing operations:
Revenue	3	17,683	15,364
Cost of sales		(3,136)	(3,041)
Gross profit		14,547	12,323
Operating costs:
Operating expenses		(13,249)	(11,910)
Exceptional expenses		-	(252)
Amortisation and impairment of acquired intangible assets		(646)	(1,426)
Impairment of goodwill		-	(6,895)
Total operating costs		(13,895)	(20,483)
Operating profit/(loss) from continuing operations		652	(8,160)
Operating profit/(loss) from continuing operations is analysed between:
Operating profit from continuing operations		1,298	413
Exceptional expenses		-	(252)
Amortisation of acquired intangible assets		(646)	(1,426)
Impairment of goodwill		-	(6,895)
		652	(8,160)
Finance income		617	721
Finance costs		(804)	(1,134)
Profit/(loss) before taxation from continuing operations		465	(8,573)
Taxation credit/(expense)	4	6	(385)
Profit/(loss) for the year from continuing operations		471	(8,958)
Loss for the year from discontinued operations	7	(586)	(1,671)
Profit on disposal of discontinued operations	8	333	-
Profit/(loss) for the year attributable to the equity shareholders of the parent company		218	(10,629)
Earnings/(loss) per share:	5
Basic and diluted - continuing operations		1.47p	(35.84)p
Basic and diluted - discontinued operations		(0.79)p	(6.69)p
		0.68p	(42.53)p

  Consolidated Statement of Recognised Income and Expense

for the year ended 31 March 2009 

	Notes	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Profit/(loss) for the year		218	(10,629)
Exchange differences on translation of foreign operations recognised directly in equity		(39)	290
Total recognised income/(expense) for the year attributable to the equity shareholders of the parent company		179	(10,339)

Consolidated Balance Sheet

as at 31 March 2009 

	Notes	As at  31/03/09  £'000	As at  31/03/08  £'000
Assets:
Non current assets:
Property, plant and equipment		248	351
Goodwill		8,890	8,806
Other intangible assets		812	1,458
Total non current assets		9,950	10,615
Current assets:
Inventories		260	626
Trade and other receivables		4,370	4,969
Cash and cash equivalents		1,951	-
Blocked cash collateral account		-	93
Assets held for resale		-	1,440
Total current assets		6,581	7,128
Total assets		16,531	17,743
Liabilities:
Non current liabilities:
Bank loans		1,085	1,048
Deferred consideration		3,136	4,066
Obligations under finance leases		14	50
Total non current liabilities		4,235	5,164
Current liabilities:
Trade payables		2,264	1,497
Other payables		2,797	3,146
Income tax		184	426
Bank loans and overdrafts		400	574
Loan notes		129	90
Obligations under finance leases		8	25
Deferred consideration		570	-
Liabilities linked to current assets held for resale		-	1,056
Total current liabilities		6,352	6,814
Total liabilities		10,587	11,978
Net assets		5,944	5,765
Equity:
Shareholders' equity:
Share capital		8,007	8,007
Share premium		7,576	7,576
Retained earnings		(11,039)	(11,257)
Translation reserve		(296)	(257)
Other reserve		1,696	1,696
Total equity attributable to the equity shareholders of the parent company		5,944	5,765

  Consolidated Cash Flow Statement

for the year ended 31 March 2009 

		Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Operating activities:
Profit before tax and finance costs		399	(9,832)
Depreciation		107	174
Amortisation:
Intellectual property rights		640	1,399
Software		6	34
Goodwill		-	8,772
Interest paid		(705)	(1,036)
Taxation		(267)	(175)
Operating cash flows before movements in working capital		180	(664)
Decrease in inventories		366	85
Decrease in trade and other receivables		433	42
Increase/(decrease) in trade and other payables		450	(1,162)
Cash generated from/(used in) operating activities		1,249	(1,035)
Investing activities:
Proceeds on disposal of property, plant and equipment		31	298
Proceeds on disposal of businesses (net of expenses)		748	-
Purchase of property, plant and equipment		(61)	(113)
Interest received		524	722
Payment of deferred consideration		-	(10)
Purchase of subsidiary undertakings net of cash acquired		(19)	(321)
Cash from investing activities		1,223	576
Financing activities:
Proceeds from the issue of share capital		-	1,613
Repayment of loan notes		(386)	-
New bank loans		1,485	-
Repayment of bank loans		(1,576)	(485)
Capital element of finance leases		(53)	(15)
Interest element of finance leases		(8)	(4)
Cash generated/(absorbed) from financing activities		(538)	1,109
Net increase/(decrease) in cash and cash equivalents		2,114	(14)
Cash and cash equivalents at the beginning of the year		(89)	(365)
Foreign exchange rate adjustments		(74)	290
Cash and cash equivalents at the end of the year		1,951	(89)

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 Paterson 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 Group for the year ended 31 March 2009 comprise the Company and its subsidiaries.

Across the year the Group was primarily involved in the provision of software solutions for entertainment, leisure, hospitality and retail sectors with offices in the United Kingdom, United States, France and New Zealand.

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

The Annual General Meeting will be held on 24 July 2009. 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, Paterson House, Hatch Warren Farm, Hatch Warren Lane, Hatch Warren, Basingstoke RG22 4RA.

This Preliminary Announcement was approved by the Board on 22 June 2009.

The figures for the year ended 31 March 2009 and 2008 do not constitute statutory accounts within the meaning of S.240 of the Companies Act 1985.

The figures for the year ended 31 March 2009 have been extracted from the statutory accounts for that year on which the auditor has issued an unqualified audit report which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 March 2008 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report, having been restated under International Financial Reporting Standards. No statement has been made by the auditor under Section 237(2) or (3) of the Companies Act 1985 in respect of either of these sets of accounts.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International

Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 March 2009 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with IFRS.

The directors do not recommend the payment of a final dividend (2008: £nil).

2    Critical judgements and estimation uncertainty 

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are based on management's best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which circumstances change. Where necessary, the comparatives have been reclassified or extended from the previously reported results to take into account presentational changes.

Impairment of goodwill, intangible assets and investments 

Where there is an indication that the carrying value of items in goodwill, intangible assets and investments may have been impaired through events or changes in circumstances a review will be undertaken of the recoverable amount of those assets based on a value in use calculation which will involve estimates and assumptions to be made by management. 

Tax losses

A deferred tax asset has not been recognised in the Consolidated Financial Statements due to the uncertainty of the timing and country of origin of future trading profits.

3    Business segments 

For management reporting purposes, the Group is organised into four separate divisions, each with income streams that can carry different risks and rewards. This is the basis on which the Group reports its primary segment information.

The four income streams are:

• revenue from Retail operations;

• revenue from Entertainment operations;

• revenue from Leisure operations; and

• revenue from Hospitality operations.

Segmental information for continuing operations with regard to these four income streams is presented herewith.

The allocation of Group costs has been updated in the current year. To ensure consistency, the comparative analysis has been amended on the same basis.

For the year ended 31 March 2009 

	Retail  2009  £'000	Entertainment 2009  £'000	Leisure 2009  £'000	Hospitality 2009  £'000	Group 2009  £'000	Consolidated 2009  £'000
Revenue	9,178	4,624	1,232	2,649	-	17,683
Operating profit/(loss)	1,777	1,723	569	196	(2,567)	1,698
Group development costs	-	-	-	-	(620)	(620)
Allocation of Group costs	(594)	(303)	(100)	32	965	-
Non recurring reorganisation costs	-	-	-	-	(426)	(426)
Amortisation of software rights	(390)	(6)	-	(250)	646	-
Operating profit/(loss) before exceptional items	793	1,414	469	(22)	(2,002)	652
Exceptional items	-	-	-	-	-	-
Operating profit/(loss)	793	1,414	469	(22)	(2,002)	652
Net financial expense						(187)
Taxation credit						6
Profit for the year from continuing operations						471
Segment assets	3,683	6,560	2,850	1,078	2,360	16,531
Segment liabilities	(1,710)	(1,480)	(433)	(3,536)	(3,428)	(10,587)
Other segment items:
Capital expenditure	49	3	1	8	-	61
Depreciation	(26)	(12)	(1)	(54)	-	(93)

For the year ended 31 March 2008 

	Retail  2008  £'000	Entertainment 2008  £'000	Leisure 2008  £'000	Hospitality 2008  £'000	Group 2008  £'000	Consolidated 2008  £'000
Revenue	5,546	5,657	1,478	2,683	-	15,364
Operating profit/(loss)	813	1,529	915	(527)	(2,542)	188
Group development costs	-	-	-	-	(1,201)	(1,201)
Allocation of Group costs	(333)	(338)	(121)	24	768	-
Impairment of Goodwill	-	-	-	-	(6,895)	(6,895)
Amortisation of software rights	(391)	-	-	(1,007)	1,398	-
Operating profit/(loss) before exceptional items	89	1,191	794	(1,510)	(8,472)	(7,908)
Exceptional items	-	-	-	-	(252)	(252)
Operating profit/(loss)	89	1,191	794	(1,510)	(8,724)	(8,160)
Net financial expense						(413)
Taxation expense						(385)
Loss for the year from continuing operations						(8,958)
Segment assets	5,097	11,452	2,130	2,226	(4,602)	16,303
Segment liabilities	(1,931)	(11,193)	(699)	(9,683)	12,584	(10,922)
Other segment items:
Capital expenditure	42	9	2	68	-	121
Depreciation	(18)	(13)	(3)	(58)	-	(92)

Geographic segments

Below is an analysis by geographic location.

	Revenue 2009  £'000	Revenue 2008  £'000	Segment assets  2009  £'000	Segment assets  2008  £'000	Capital expenditure 2009  £'000	Capital expenditure 2008  £'000
United Kingdom	9,792	8,830	7,831	6,750	20	81
Europe  (excluding United Kingdom)	2,566	2,359	6,078	7,987	-	9
United States of America	5,083	3,943	2,565	1,478	36	31
Rest of World	242	232	57	88	5	-
	17,683	15,364	16,531	16,303	61	121

4    Taxation 

Current tax (credit)/expense

	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
UK corporation tax on profit in year	(304)	-
Overseas taxation	298	385
Total tax (credit)/charge for the year	(6)	385

Reconciliation of effective tax rate

for the year ended 31 March 2009 

	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Profit/(loss) on ordinary activities before taxation	212	(10,244)
Profit/(loss) on ordinary activities before taxation multiplied by the standard rate of corporation tax in the UK of 28% (2007: 30%)	59	(3,073)
Effects of:
Difference between depreciation and capital allowances	15	52
Non deductible items	348	(83)
Foreign tax rates	46	30
Enhanced relief for research and development	(360)	-
Losses carried forward	25	441
Amortisation	(17)	3,051
Chargeable gains adjustment	(122)	(33)
Total taxation reported in the consolidated financial statements	(6)	385
Effective tax rate	(2.8)%	(3.8)%

The effective tax rate is lower than the basic rate as the Group has tax losses available for offset against future profits of £4,106,000 (2008: £5,087,000) that have not been recognised due to the uncertainty of timing of future profits.

5    Earnings/(loss) per share 

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

	Year ended 31/03/09 Number	Year ended 31/03/08 Number
Weighted average number of shares:
For basic profit/(loss) per share	32,029,305	24,989,858
For diluted profit/(loss) per share	32,029,305	24,989,858

	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Earnings/(loss) for the year from continuing operations	471	(8,958)
Loss for the year from discontinued operations	(253)	(1,671)
Earnings/(loss) for the year attributable to shareholders of the parent company	218	(10,629)
Earnings/(loss) per share:
Basic and diluted - continuing operations	1.47p	(35.84)p
Basic and diluted - discontinued operations	(0.79)p	(6.69)p
	0.68p	(42.53)p

The share options are non dilutive due to the exercise price being significantly higher than the current share price.

6    Consolidated statement of changes in equity 

	Share Capital £'000	Share Premium Account £'000	Retained Earnings £'000	Other Reserve £'000	Translation Reserve £'000	Total  £'000
At 31 March 2007 and 1 April 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 and 1 April 2008	8,007	7,576	(11,257)	1,696	(257)	5,765
Consolidated profit for the year	-	-	218	-	-	218
Exchange differences on translation of foreign operations	-	-	-	-	(39)	(39)
At 31 March 2009	8,007	7,576	(11,039)	1,696	(296)	5,944

7    Discontinued operations 

The Group 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 and will be recognised upon settlement.

Net assets at completion were £54,000 which is due and payable to the Group along with deferred consideration of £100,000. 

Peter Walker, a previous Executive Director of Clarity, owns 27.5% of Lumos and is a Director of that company, and Tim Bittleston, a previous non executive Director of Clarity, owns 4.5% of Lumos. As Messrs Walker and Bittleston had both been directors of Clarity within the previous 12 months, and together control more than 30% of Lumos, this transaction was deemed, for the purposes of the AIM Rules, to be one with a related party. In accordance with the AIM Rules the Directors considered, having consulted with the Group'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 (now Clarity Scotland Limited), 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, 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. 

Plant and equipment totalling £15,500 were sold as part of the transaction.

Robbie Crawford and Paul Lemon, who were both Directors of Romulus in the previous 12 months, became Directors of Linegem. This transaction was 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 Group's Nominated Advisor, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned. 

Clarity used the funds raised from both disposals, after settlement of related costs, to support both its working capital and to reduce its term debt.

Closure of Clarity Commerce Solutions Inc 

During the year a decision was taken to withdraw from the US cinema ticketing market where the Group had a weak market position. This resulted in the closure of the Denver office in December and the redundancy of 10 staff. Losses of £242,766, including trading losses and closure costs, are recognised in the Income Statement within loss from discontinued operations.

The results of the discontinued operations, which have been included in the consolidated income statement, are as follows:

	Year ended 31/03/09  £'000	Year ended 31/03/08  £'000
Revenue	881	6,687
Expenses	(1,249)	(6,481)
Balance sheet write off	(218)	-
Impairment of goodwill	-	(1,877)
Loss before taxation	(586)	(1,671)
Attributable tax expense	-	-
Total loss for the year	(586)	(1,671)

Revenue includes inter-company trading of £43,000 (2008: 385,000).

8    Profit on disposal of discontinued operations 

	Year ended 31/03/09  £'000
Consideration received	997
Less net assets at dates of completion	(515)
Less transaction costs and other increases in provisions	(149)
Gain on sale before taxation	333
Attributable tax expense	-
Gain on sale	333
Consideration:
Satisfied in cash in consolidated cash flow statement	897
Deferred payment to be satisfied in cash	100
Consideration at dates of completion	997
Net assets at completion:
Goodwill	500
Property, plant and equipment	15
Net assets at date of completion	515

 

END

 

 

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