Interim Results
Infoserve Group PLC
13 December 2007
Infoserve Group plc
('Infoserve' or 'the Group')
Interim Results
Infoserve Group plc (AIM: INFS), a leading online local search marketing
specialist, today announces its interim results for the six months ended 30
September 2007.
Highlights
• Turnover increased by 36% to £2.4 million for the period
• Exclusive contract with leading search engine Yahoo! Local has started well
• Strategic review of costs successfully completed, which will benefit future
trading and reduce cash outflow
• Expected to achieve operating profitability on a monthly basis in the next
financial year
• Operating losses before amortisation were £1.53 million (2006: losses of
£1.40 million)
• Losses before tax of £1.79 million (2006: losses of £1.54 million)
• Discussions with a number of potential new partners well advanced
Chairman James Newman said 'The market for on-line local search continues to
grow and the Group now has almost 3 million businesses listed on its own
business directories across a network of 130 websites. The new contract with
Yahoo! is doing well with month by month increases in revenue.
The recent restructuring of the cost base will give the Group an efficient
platform from which it can continue to grow in the future. Future market
opportunities will provide the potential for substantial growth and enable the
Group to maintain its position as one of the leading players in this industry
sector'
For further information please contact:
Infoserve Group plc
Steve Barnes, Chief Executive Officer Tel: +44 (0)113 238 6200
Steve.barnes@infoserve.com www.infoserve.com
David Balbi, Finance Director Tel: +44 (0)113 238 6200
David.balbi@infoserve.com www.infoserve.com
Nominated Adviser
WH Ireland
Richard Lindley Tel: +44 (0) 113 394 6628
richard.lindley@wh-ireland.co.uk
Media enquiries:
Source Marketing Communications
Peter Downey Tel +44 (0) 113 380 1644
peter@sourcemc.co.uk
Chairman's statement
I can report that the Group has made some good progress towards achieving its
strategic aims, albeit at a slower rate than had been anticipated at the time of
flotation on AIM in 2006.
Results
Turnover in the six month period to 30 September 2007 increased to £2.40
million, a 36% increase over the same period in 2006. This growth has been
achieved mainly through the gaining of the exclusive contract to sell fixed
space on Yahoo! Local and the development of our other high traffic on-line
business search sites.
However, as we stated in our trading statement in October 2007, whilst the core
telesales team has performed well, with productivity per person continuing to
rise, the scale and speed of revenue growth has been lower than the Board's
expectations. This is mainly due to the difficulties in increasing the telesales
headcount as quickly as had been hoped.
Whilst revenues have increased, so have costs, as the Group has continued to
invest for the future, both in the recruitment and training of telesales
staff and the technical infrastructure and data required to manage the
substantial increase in activity anticipated over the next few years. The move
to the new state of the art call centre in Darlington to house the increased
telesales staff has also increased overheads over the period.
The combination of a lower than expected improvement in sales and increased
costs have led to an operating loss before amortisation of £1.53 million,
compared to £1.40 million in the corresponding period last year. After taking
into account the increased amortisation charge and net interest payable, there
was a loss before taxation of £1.79 million (2006 - £1.54 million).
The loss per share was 10.39p compared to 11.08p in 2006.
Strategic Cost Review
In October, the Group announced that it was undertaking a strategic cost review
in order to bring overheads in line with revenues. I am glad to report that this
review has now been completed and substantial costs have been taken out of the
business, primarily in non-core areas. This has had little effect on the day to
day operations of the Group and will result in much reduced trading cash
outflows and eventually lead to monthly operating profitability in the next
financial year.
As part of this review, changes have been made to the way we recruit, train and
manage the sales team, which is already starting to have a positive effect on
sales, productivity and retention of staff.
Dividend
The Board is not recommending a dividend as all funds are required for the
development of the business.
Share Placing
In June, the Company raised £2.00 million by way of a placing of 4,444,445
ordinary shares at a price of 45p per share. This was to enable the expansion of
the Group's sales and marketing activities by recruiting and training additional
sales executives in order to capitalise on the recent contract wins from Yahoo!
and the Football League.
Business developments
The new contracts with Yahoo! and the Football League started in the period and
have added significantly to the range of products offered by the Group to its
customer base. The sales experience and technical knowledge gained in operating
these and other partnership contracts, has made the Group one of the leading
exponents of the local search market in the UK.
This profile has attracted a number of other potential partners to enter into
discussions to utilise the Group's unique data base and sales team. It is hoped
to be able to make further announcements regarding new partnership arrangements
in due course.
Board role changes
In order that the Executive Directors could better utilise their time and
skills, David Balbi has been given responsibility for the telesales operations
in Darlington and Leeds. This has allowed Steve Barnes to focus on developing
the strategic partnerships with major media and on-line businesses, which are so
vital for the future of the Group.
David retains his responsibilities as Finance Director but has relinquished the
role of Company Secretary to Mike Deakin, who also becomes Group Commercial
Manager.
IFRS
These financial results are reported under IFRS for the first time. The
principal impact relates to the treatment of amortisation of business
combinations.
Taxation
The Group has recognised a deferred tax asset of £0.89 million based only on
post acquisition losses.
Outlook
The market for on-line local search continues to grow and the Group now has
almost 3 million businesses listed on its own business directories across a
network of 130 websites. The new contract with Yahoo! is doing well with month
by month increases in revenue.
The recent restructuring of the cost base will give the Group an efficient
platform from which it can continue to grow in the future. Future market
opportunities will provide the potential for substantial growth and enable the
Group to maintain its position as one of the leading players in this industry
sector.
James H Newman
Chairman 13 December 2007
Consolidated Interim Income Statement (unaudited)
(notes) Six months to Six months to 30 Year ended 31
30 September September March
2007 2006 2007
£'000 £'000 £'000
Continuing Operations
Turnover 2,396 1,756 4,015
Cost of sales (2,350) (1,764) (3,610)
Gross profit/(loss) 46 (8) 405
Administrative expenses (1,747) (1,460) (3,226)
Loss before interest, taxation and (1,528) (1,400) (2,700)
amortisation
Amortisation (173) (68) (121)
Operating loss (1,701) (1,468) (2,821)
Interest receivable 19 24 47
Interest payable (110) (94) (202)
Loss before taxation (1,792) (1,538) (2,976)
Taxation 4 350 893
Loss for the period (1,792) (1,188) (2,083)
Pence Pence Pence
Loss per share - pence 5 (10.39) (11.08) (16.64)
Consolidated interim balance sheet (unaudited)
As at 30 As at 30 As at 31
September September March
2007 2006 2007
£'000 £'000 £'000
Non-current assets
Intangible assets 560 389 515
Tangible assets 492 416 480
Deferred tax asset 893 350 893
1,945 1,155 1,888
Current assets
Trade and other receivables 318 143 405
Cash 956 1,709 330
1,274 1,852 735
Total assets 3,219 3,007 2,623
Current liabilities
Trade and other payables (3,730) (1,833) (2,648)
(3,730) (1,833) (2,648)
Non-current liabilities
Interest bearing loans (1,539) (2,466) (2,154)
Shares classed as financial liabilities (100) (100) (100)
(1,639) (2,566) (2,254)
Total liabilities (5,369) (4,399) (4,902)
Net liabilities (2,150) (1,392) (2,279)
Equity
Share capital 954 730 730
Share premium 3,871 2,210 2,210
Retained earnings (6,975) (4,332) (5,219)
Total equity (2,150) (1,392) (2,279)
Summarised consolidated cash flow statement (unaudited)
Six months to Six months to Year ended
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Cash flows from operating activities
Loss for the period (1,792) (1,188) (2,083)
Adjustments for
Share based payment charge 36 - 8
Financial income (19) (24) (47)
Financial expense 110 94 202
Deferred tax provision - (350) (893)
Depreciation charge 82 56 128
Amortisation of intangible fixed assets 173 68 121
Operating loss before movements in working capital (1,410) (1,344) (2,564)
Decrease/(increase) in trade and other receivables 87 205 (57)
Increase in trade and other payables 403 310 754
Net cash outflow from operations (920) (829) (1,867)
Net interest received 19 24 47
Interest paid (1) (1) (1)
Net cash outflow from operating activies (902) (806) (1,821)
Cash flows from investing activities
Sale of fixed assets 2 - -
Purchase of intangible fixed assets (211) (163) (341)
Purchase of tangible fixed assets (96) (258) (394)
Net cash outflow from investing activities (305) (421) (735)
Cash flows from financing activities
Issue of new shares 222 445 445
Share premium on issue of new shares 1,778 2,567 2,567
Costs in respect of share issues (117) (357) (357)
Loan repayment (50) - (50)
Loan advance - 70 70
Net cash from financing activities 1,833 2,725 2,675
Net increase in cash 626 1,498 119
Cash at the beginning of the period 330 211 211
Cash at the end of the period 956 1,709 330
Notes to the interim report
Basis of preparation
1. It is required that the next annual consolidated financial statements
of the Group, for the year ending 31 March 2008, be prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the EU
('adopted IFRSs').
The interim financial information has been prepared on the basis of the
recognition and measurement requirements of adopted IFRSs as at 30 September
2007 that are effective (or available for early adoption) at 31 March 2008, the
Group's first annual reporting date at which it is required to use adopted
IFRSs. Based on these adopted IFRSs, the directors have applied the accounting
policies, as set out below, which they expect to apply when the first annual
IFRS financial statements are prepared for the year ending 31 March 2008.
However, the adopted IFRSs that will be effective (or available for early
adoption) in the annual financial statements for the year ending 31 March 2008
are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending 31 March 2008.
The comparative figures for the financial year ended 31 March 2007 are not the
company's statutory accounts for that financial year. Those accounts, which were
prepared under UK GAAP, have been reported on by the company's auditors and
delivered to the registrar of companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
Conversion to IFRS - Accounting policies
2. The Group's accounting policies remain as stated in the Group's full
annual accounts for the year ended 31 March 2007 with the exception of the
following accounting policies which are now as follows:
Business Combinations
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries, associates
and jointly controlled entities. In respect of business acquisitions that have
occurred since 1 April 2006, goodwill represents the difference between the cost
of the acquisition and the fair value of the net identifiable assets acquired.
Identifiable intangibles are those which can be sold separately or which arise
from legal rights regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment. In respect of associates, the carrying amount of goodwill is
included in the carrying amount of the investment in the associate.
The acquisition of Infoserve Limited by Infoserve plc has been treated as a
reverse acquisition, in line with IFRS 3.
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease
expense.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The following temporary differences are not provided for:
the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
Database costs
Expenditure on development activities associated with the costs of producing the
group's database is capitalised if the product or process is technically and
commercially feasible and the Group intends, has the technical ability and has
sufficient resources to complete development and if the Group can measure
reliably the expenditure attributable to the intangible asset during its
development. The expenditure capitalised includes the cost of materials. Other
development expenditure is recognised in the income statement as an expense as
incurred. Capitalised development expenditure is stated at cost less accumulated
amortisation and impairment losses.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Intangible assets with an indefinite useful life are systematically
tested for impairment at each balance sheet date. The estimated useful lives are
as follows:
Capitalised database costs - indefinite life
Database enhancements - one year
3. The impact of the changes in accounting policies is as follows:
Business Combinations - Goodwill
The acquisition of Infoserve Limited by Infoserve plc has been treated as a
reverse acquisition, in line with IFRS 3. As a result, no goodwill has been
recognised.
Operating lease payments
Under UK GAAP, rent free periods have been spread over the period from the date
of grant to the first available break clause in the lease. Under IFRS, rent free
periods are amortised over the period from the date of grant to the end of the
lease.
Employee benefits - holiday pay
Under UK GAAP, provision for holiday pay is a matter of accounting policy. The
Group's policy was not to provide for holiday pay. Under IFRS, it is a
requirement to provide for holiday pay.
Deferred tax assets
Under UK GAAP, the Group's deferred tax asset was discounted. Under IFRS this is
not permissible therefore the effect of the discounting has been reversed.
The details of how these changes in accounting policies have affected the
Group's financial position and financial performance are set out in the tables
in note 6.
Tax and Loss per share
4. The tax position for the period is based on the anticipated effective
tax rate for the year to 31 March 2008.
5. Basic losses per share are calculated on the loss for the period of
£1,792,000 (six months to September 2006: loss of £1,188,000 and year ended
March 2007: loss of £2,083,000) and on 17,251,747 ordinary shares, being the
weighted average number of ordinary shares in issue in the period (September
2006: 10,717,617 ordinary shares and March 2007: 12,516,101 ordinary shares).
Share options in issue in 2007 did not have a dilutive impact on the loss per
share calculation.
6 Reconciliation of profits and equity
Reconciliation of profits for the six months to 30 September 2006
UK GAAP Holiday Business Deferred Lease Restated
pay combination tax costs under IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 1,756 - - - - 1,756
Cost of sales (1,764) - - - - (1,764)
Gross loss (8) - - - - (8)
Administrative expenses (1,538) - 78 - - (1,460)
Loss before interest, taxation (1,400) - - - - (1,400)
and amortisation
Amortisation (146) - 78 - - (68)
Operating loss (1,546) - 78 - - (1,468)
Interest receivable 24 - - - - 24
Interest payable (94) - - - - (94)
Loss before taxation (1,616) - 78 - - (1,538)
Taxation 350 - - - - 350
Loss for the period (1,266) - 78 - - (1,188)
Reconciliation of profits for the year ended 31 March 2007
UK GAAP Holiday Business Deferred Lease Restated
pay combination tax costs under IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4015 - - - - 4015
Cost of sales (3,607) (3) - - - (3,610)
Gross profit 408 (3) - - - 405
Administrative expenses (3,367) (3) 156 (12) (3,226)
Loss before interest, taxation (2,682) (6) - - (12) (2,700)
and amortisation
Amortisation (277) - 156 - - (121)
Operating loss (2,959) (6) 156 - (12) (2,821)
Interest receivable 47 - - - - 47
Interest payable (202) - - - - (202)
Loss before taxation (3,114) (6) 156 - (12) (2,976)
Taxation 703 - - 190 - 893
Loss for the period (2,411) (6) 156 190 (12) (2,083)
Reconciliation of equity as at 31 March 2006
UK GAAP Holiday Business Deferred Lease Restated
pay combination tax costs under IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Intangible assets 294 - - - - 294
Tangible assets 214 - - - - 214
Deferred tax asset - - - - -
-
508 - - - - 508
Current assets
Trade and other receivables 348 - - - - 348
Cash and cash equivalents 211 - - - - 211
559 - - - - 559
Total assets 1,067 - - - - 1,067
Current liabilities
Trade and other payables (3,802) (23) - - - (3,825)
(3,802) (23) - - - (3,825)
Non-current liabilities
Interest bearing loans - - - - - -
Shares classed as financial liabilities (100) - - - - (100)
(100) - - - - (100)
Total liabilities (3,902) (23) - - - (3,925)
Net liabilities (2,835) (23) - - - (2,858)
Equity
Share capital 286 - - - - 286
Share premium - - - - - -
Retained earnings (3,121) (23) - - - (3,144)
Total equity (2,835) (23) - - - (2,858)
Reconciliation of equity as at 30 September 2006
UK GAAP Holiday Business Deferred Lease Restated
pay combination tax costs under
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Intangible assets 3,432 - (3,043) - - 389
Tangible assets 416 - - - - 416
Deferred tax asset 350 - - - 350
-
4,198 - (3,043) - - 1,155
Current assets
Trade and other receivables 143 - - - - 143
Cash and cash equivalents 1,709 - - - - 1,709
1,852 - - - - 1,852
Total assets 6,050 - (3,043) - - 3,007
Current liabilities
Trade and other payables (1,810) (23) - - - (1,833)
(1,810) (23) - - - (1,833)
Non-current liabilities
Interest bearing loans (2,466) - - - - (2,466)
Shares classed as financial liabilities (100) - - - - (100)
(2,566) - - - - (2,566)
Total liabilities (4,376) (23) - - - (4,399)
Net assets/(liabilities) 1,674 (23) (3,043) - - (1,392)
Equity
Share capital 730 - - - - 730
Share premium 2,210 - - - - 2,210
Retained earnings (1,266) (23) (3,043) - - (4,332)
Total equity 1,674 (23) (3,043) - - (1,392)
Reconciliation of equity as at 31 March 2007
UK GAAP Holiday Business Deferred Lease Restated
pay combination tax costs under
IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Intangible assets 3,480 - (2,965) - - 515
Tangible assets 480 - - - - 480
Deferred tax asset 703 - - 190 - 893
4,663 - (2,965) 190 - 1,888
Current assets
Trade and other receivables 405 - - - - 405
Cash and cash equivalents 330 - - - - 330
735 - - - - 735
Total assets 5,398 - (2,965) 190 - 2,623
Current liabilities
Trade and other payables (2,607) (29) - - (12) (2,648)
(2,607) (29) - - (12) (2,648)
Non-current liabilities
Interest bearing loans (2,154) - - - - (2,154)
Shares classed as financial liabilities (100) - - - - (100)
(2,254) - - - - (2,254)
Total liabilities (4,861) (29) - - (12) (4,902)
Net assets/(liabilities) 537 (29) (2,965) 190 (12) (2,279)
Equity
Share capital 730 - - - - 730
Share premium 2,210 - - - - 2,210
Retained earnings (2,403) (29) (2,965) 190 (12) (5,219)
Total equity 537 (29) (2,965) 190 (12) (2,279)
7 Reconciliation of movements in equity
6 months ended 30 September 2006 Share Share premium Profit and
capital account loss account
Group £'000 £'000 £'000
Balance brought forward at transition 730 2,210 (3,144)
Loss for the period - - (1,188)
Share option charge recognised - - -
At end of period 730 2,210 (4,332)
12 months ended 31 March 2007 Share Share premium Profit and
Capital account loss account
Group £'000 £'000 £'000
Balance brought forward at transition 730 2,210 (3,144)
Loss for the year - - (2,083)
Share option charge recognised - - 8
At end of year 730 2,210 (5,219)
6 months ended 30 September 2007 Share Share premium Profit and
capital account loss account
Group £'000 £'000 £'000
At start of period 730 2,210 (5,219)
Loss for the period - - (1,792)
Share issue net of expenses 224 1,661 -
Share option charge recognised - - 36
At end of period 954 3,871 (6,975)
8 The unaudited results for the six month period do not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985.
9 A copy of this interim statement is available on the Company's web site
www.infoserve.com.
This information is provided by RNS
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