Final Results & Notice of AGM

RNS Number : 5673F

Messaging International Plc

24 May 2013

 



Messaging International Plc ('the Company')

Final Results & Notice of AGM

Messaging International Plc, the AIM traded company and provider of innovative messaging services, announces its results for the year ended 31 December 2012 and gives notice of its AGM to be held at the offices of AH Montpelier, 58-60 Berners Street, London W1T 3JS on 26 June 2013 at 1p.m. The report and accounts for the year ended 31 December 2012 will be sent to shareholders today and will be available on the Company's website at www.telemessage.com.

Overview

·      Continued revenue growth - increased by 2.6% to £3,769,263 (2011: £3,673,747) 

·      Pre tax profit for the year - £290,338 (2011 Profit: £361,226) with positive cash flow generated  

·      Strengthening offering and investing in new products to offer creative and user friendly messaging products and services to existing and new clients

·      Messaging Gateway gaining traction and being adopted by an increasing number of operators and enterprises

·      Healthy new business pipeline

For further information visit or contact: Guy Levit	Messaging International Plc	www.telemessage.com Tel: + 972 3 9225252
Mark Percy	Cantor Fitzgerald Europe	Tel: [phone]
Catherine Leftley	Cantor Fitzgerald Europe	Tel: [phone]

Chairman's Statement

Operational Review

Trading has been solid for Messaging during 2012 and into 2013 as we continue to focus on developing innovative messaging solutions and services, through our subsidiary TeleMessage, to improve the way users manage messages across various communication mediums. We have close relationships with our blue-chip client base, a highly creative R&D team and innovative messaging solutions, which ensure that the company retains its place as a leading provider in this sector.

Our Vision isto become a leading provider of innovative messaging where people are free to use messaging services in the way that is most appropriate, effective and convenient.

Our Mission is to provide Telecom Operators and Enterprises with solutions that enhance the messaging experience and which are flexible, secure, reliable, easy to implement and meet their current and future needs.

TeleMessage helps operators retain their subscriber base by enhancing the user experience and assists enterprises achieve greater efficiency by optimizing their communication capabilities, TeleMessage seamlessly handles text, voice, data, multimedia and IP messages over mobiles, tablets, the web, Office, APIs and IT infrastructure.

Our clients include, among others, companies such as Sprint in the USA, Rogers, Bell and Telus in Canada. We ensure stable revenues by either hosting messaging services for a per-message fee or by selling software licences, which are usually linked to the number of messages that can be sent through the system or to the number of active users.

As the messaging world is changing, from SMS/MMS to IP messaging, we have increased our R&D capacity to stay ahead in the market and to continue to seize opportunities in the messaging space.  Specifically, we are investing in the new emerging devices (e.g. smartphones, tablets etc) and interfaces consumers and enterprises use to send and receive messages. In order to demonstrate these new capabilities to our customers we have already soft launched our new Messenger apps on Google Play and on the Apple Store.

Sales of our 'Messaging Gateway' product to Mobile operators and directly to enterprises, offering a range of interfaces for content providers, enterprises and developers, continue to increase. The product enables enterprises to deliver messages for customers and employees on a wide scale and uptake is gaining momentum particularly as more clients understand its convenience and cost-saving benefits.  During the year, we added a few more carrier clients to these services. 

Based on the same technology platform, the company has developed a new product: "Mobile Emergency Alerts", which is an advanced messaging platform, triggering emergency alerts via a mobile phone application.

In July 2012, we completed the delivery of a large installation of the Messaging Gateway to Dhiraagu, a mobile carrier in The Maldives extending the company's reach geographically. 

During the year, the company has been developing partnerships and a pipeline of opportunities with a few leading players in India for its Talking SMS solution, which enables subscribers to receive text messages as voice using Text to Speech technology.

Financial Results

Messaging continues to show growth and maintain profitability. For the year ended 31 December 2012, we are reporting a pre-tax profit of £290,338--- (2011: £-------361,226) based on gross revenues of £3,769,263 (2011: £-----3,673,747).

During 2012, the company has continued to be supported by the Israeli Office of the Chief Scientist (OCS) in relation to some elements of R&D.  In 2012, the resources provided by the OCS were £108,173.

The group's cash balances at 31 December 2012 totalled £1,069,661 (2011: £543,684).

In February 2012, the company completed the buyback of 80,007,853 ordinary shares in the company from Pacific Continental Securities UK Limited '(Pacific)' for £127,500. The acquired shares were cancelled leaving the company with 155,872,147 ordinary shares of 0.5 pence each in issue.

As part of the agreement and following completion of the buyback, Pacific were granted options to subscribe for up to 10,000,000 new ordinary shares at 0.5 pence per share exercisable in whole or in part, which will lapse on the earlier of three years from the date of grant or the date on which Pacific is dissolved.

In June 2012, the company's subsidiary, TeleMessage Ltd, signed an agreement for a loan of US$1,000,000 from Mizrahi Tefahot Bank Ltd. This loan will be used for the development of new innovative products and services as well as assisting the group's working capital requirements.

Under the terms of the agreement, repayments will be over 36 equal monthly instalments with an interest rate based on the London Interbank Offered Rate plus 5.5%.

In addition, as part of the agreement, the company granted to Mizrahi Tefahot Bank Ltd 3,896,804 warrants exercisable at any time from grant until 17 June 2017. The warrants are exercisable at a price of 0.63p per share, although in certain circumstances the exercise price might be subject to adjustment.

In May this year, the company announced details of an offer to buy back from shareholders 40,000,000 shares at 1 penny per share. Full details have been provided in a circular to shareholders dated 17 May 2013.

Outlook

Our focus remains on increasing our presence within the telecom sector both geographically and technologically. We are a profitable company with a growing team of technical experts that has again proven its ability to provide innovative messaging services that add value to our blue chip customers, thus positioning the Company for continued growth.

I would like to thank our team for their hard work and dedication over the past year, and our shareholders for their continued support. I look forward to reporting another successful period of trading at our interims.

H Furman

Chairman

24 May 2013

Consolidated statement of comprehensive income for the year ended 31 December 2012

			2012		2011
			£		£
Continuing operations:
Revenues			3,769,263		3,673,747
Cost of revenues			(1,332,419)		(1,507,492)
Grossprofit			2,436,844		2,166,255
Operating expenses
Research and development			(918,078)		(676,923)
Selling and marketing			(643,539)		(606,382)
General and administrative			(540,331)		(480,264)
Total operating expenses			(2,101,948)		(1,763,569)
Operating profit			334,896		402,686
Finance costs (net)			(44,558)		(41,460)
Profit before taxation			290,338		361,226
Taxation			(17,740)		(36,850)
Comprehensive profit for the year  attributable to equity holders of the parent company			272,598		324,376
Other comprehensive profit/(loss)
Foreign exchange difference on translation of foreign operations			(35,204)		3,009
Foreign exchange difference arising from restating the carrying value of goodwill associated with foreign operations			(155,158)		4,538
			(190,362)		7,547
Total comprehensive profit attributable to equity holders of the parent company			82,236		331,923

Earnings per share
Earnings per share from operations			0.16p		0.14p
Diluted earnings per share from operations			0.15p		0.12p

Statement of changes in equity for the year ended 31 December 2012

The group

	Share           capital	Share premium	Capital redemption reserve fund	Foreign exchange reserve	Revenue reserves	Total
As at 1 January 2011	1,179,400	4,298,727		390,561	(1,520,598)	4,348,090
Profit for the year	-	-	-	-	324,376	324,376
Foreign currency translation changes for goodwill	-	-	-	4,538	-	4,538
Other foreign currency translation changes	-	-	-	3,009	-	3,009
Share based payments for employee share options	-	-	-	-	1,496	1,496
At 31 December 2011	1,179,400	4,298,727		398,108	(1,194,726)	4,681,509
Capital reorganisation	(400,039)	(4,298,727)	400,039	-	4,298,727	-
Share buyback	-	-	-	-	(127,500)	(127,500)
Profit for the year	-	-	-	-	272,598	272,598
Foreign currency translation changes for goodwill	-	-	-	(155,158)	-	(155,158)
Foreign currency translation changes	-	-	-	(35,204)	-	(35,204)
Share based payments	-	-	-	-	90,907	90,907
At 31 December 2012	779,361	-	400,039	207,746	3,340,006	4,727,152

The company

	Share           capital	Share premium	Capital redemption reserve fund	Revenue reserves	Total
As at 1 January 2011	1,179,400	4,298,727	-	(76,804)	5,401,323
Profit for the year	-	-	-	33,204	33,204
At 31 December 2011	1,179,400	4,298,727	-	(43,600)	5,434,527
Capital reorganisation	(400,039)	(4,298,727)	400,039	4,298,727	-
Share buyback	-	-	-	(127,500)	(127,500)
Share based payments				64,222	64,222
Loss for the year	-	-	-	(66,520)	(66,520)
At 31 December 2012	779,361	-	400,039	4,125,329	5,304,729

The following describes the nature and purpose of each reserve within owners' equity.

Share capital: The amount subscribed for shares at nominal value.

Share premium: The amount subscribed for share capital in excess of nominal value.

Capital redemption reserve fund: The amount equivalent to the nominal value of shares redeemed by the company.

Foreign exchange reserve: The effect of changes in exchange rates arising from translating the financial statements of subsidiary undertakings into the company's reporting currency. 

Revenue reserves: Cumulative realised profits less losses and distributions attributable to equity holders of the group.

Consolidated statement of financial position at 31 December 2012

			2012		2011
			£		£
Non-current assets
Intangible assets			3,518,045		3,673,203
Property, plant and equipment			179,125		118,807
Other investments			275,692		238,230
Total non-current assets			3,972,862		4,030,240
Current assets
Trade and other receivables			1,086,271		1,144,714
Cash and cash equivalents			1,069,661		543,684
Total current assets			2,155,932		1,688,398
Total assets			6,128,794		5,718,638
Current liabilities
Trade and other payables			(520,142)		(706,348)
Borrowings			(191,985)		-
Total current liabilities			(712,127)		(706,348)
Non-current liabilities
Other payables			(48,554)		(58,100)
Provisions			(329,857)		(272,681)
Borrowings			(311,104)		-
Total non-current liabilities			(689,515)		(330,781)
Total liabilities			(1,401,642)		(1,037,129)
Net assets			4,727,152		4,681,509
Equity attributable to owners of the parent company
Share capital			779,361		1,179,400
Share premium			-		4,298,727
Capital redemption reserve			400,039		-
Foreign currency translation reserve			207,746		398,108
Revenue reserves			3,340,006		(1,194,726)
Total Equity			4,727,152		4,681,509

Consolidated statement of cash flows for the year ended at 31 December 2012

			2012		2011
			£		£
Cash flow from operating activities
Operating profit			334,896		402,686
Adjustments for:
Share based payments			90,907		12,056
Depreciation and amortisation			66,245		36,803
Foreign currency differences			(53,186)		(29,152)
			103,966		19,707
Operating cash inflow before working capital movements			438,862		422,393
Decrease/(increase) in receivables			58,443		(299,489)
(Decrease)/increase in payables			(195,752)		235,679
Increase in provisions			57,176		34,820
			(80,133)		(28,990)
Cash inflow from operating activities			358,729		393,403
Investing activities
Interest received			727		6,687
Interest and related costs			(22,876)		(15,762)
Investments			(37,462)		(31,868)
Purchase of tangible assets			(130,990)		(98,686)
Repurchase of shares			(127,500)		-
Net cash used in investing activities			(318,101)		(139,629)
Taxation			(17,740)		(12,112)
Financing activities
Bank borrowing			621,118		-
Bank loan repayments			(118,029)		(55,297)
Net cash used from financing activities			503,089		(55,297)
Net change in cash and cash equivalents			525,977		186,365
Cash and cash equivalents and bank overdraft at the beginning of the year			543,684		357,319
Cash and cash equivalents and bank overdraft at the end of the year			1,069,661		543,684

Company statement of cash flows for the year ended at 31 December 2012

			2012		2011
			£		£
Cash flow from operating activities
Operating profit/(loss)			(85,462)		5,466
Share based payments			64,222		-
Operating cash flow before working capital movements			(21,240)		5,466
(Increase)/decrease in receivables			(22,365)		120,249
(Decrease)/increase in payables			(16,355)		7,881
Cash flow from operating activities			(59,960)		133,596
Finance income			24,559		27,738
Shares repurchased			(127,500)		-
Taxation paid			(5,617)		-
Net cash inflow from operating activities			(168,518)		161,334
Net cash from financing activities			-		-
Net change in cash and cash equivalents			(168,518)		161,334
Cash and cash equivalents and bank overdraft at the beginning of the year			176,786		15,452
Cash and cash equivalents and bank overdraft at the end of the year			8,268		176,786

Notes to the group and financial statements

1.   General information

Messaging International Plc is a company incorporated in the UK and its activities are as described in the chairman's statement.

The financial information is a preliminary announcement for the years ended 31 December 2012 and 2011 and does not comprise statutory accounts for the purposes of Section 434 of the Companies Act 2006.

The statutory accounts have been audited by Jeffreys Henry LLP, incorporate an unqualified auditors report and do not contain an emphasis of matter paragraph or any statement under Section 498 of the Companies Act 2006.

The preliminary announcement of the results for the year ended 31 December 2012 was approved by the boards of directors on 24 May 2012.

Whilst the information in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS's, this announcement does not itself contain sufficient information to comply with IFRS's.

The statutory accounts will be sent to those shareholders who have elected to receive a paper copy shortly. Further copies will be available to the public from the Company's registered office 58-60 Berners Street, LondonW1T 3JS.

Statutory accounts will be available on the Company's website www.telemessage.com.

2.         Basis of Accounting

The consolidated financial statements of the company for the year ended 31 December 2012 have been prepared on a historical cost basis and are in accordance with International Financial Reporting Standards ('IFRS'') as adopted by the EU.  These have been applied consistently except where otherwise stated.

The group has adopted the following new and amended IFRSs as of 1 January 2012:

IFRS7 (amendment) "Financial Instruments: Disclosures" - additional disclosures re transfers of financial assets, effective for reporting periods beginning after 1 July 2011;

Standards, interpretations and amendments to published standards that are not yet effective

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2012 and have not been early adopted:

IFRS 7, 'Financial instruments: disclosures (amendment), is effective for annual periods beginning on or after 1 July 2011. The amendments requires additional quantitative and qualitative disclosures relating to transfers of financial assets, where financial assets are derecognised in their entirety, but where the entity has a continuing involvement in them and where financial assets are not derecognised in their entirety. In addition to the above there has been a subsequent amendment effective for annual periods beginning on or after 1 January 2013 related to the offsetting of financial assets and financial liabilities. The adoption of these will have no effect on the financial statements of the company.

IFRS 9, 'Financial instruments: classification and measurement', as issued reflects the first phase of the IASB work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent phases, the IASB will address classification and measurement of financial liabilities and hedge accounting. The adoption of the first phase of IFRS 9 might have an effect on the classification and measurement of the company's assets. At this juncture it is difficult for the company to comprehend the impact on its financial position and performance.

IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Interests with Other Entities along with related amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures will have an effective date of 1 January 2013. Early adoption of these standards is permitted, but only if all five are early adopted together.

IFRS 10 does not change consolidation procedures but changes whether an entity is consolidated by revising the definition of control and provides a number of clarifications on applying the new definition of control. The adoption of this will have no effect on the financial statements of the company.

IFRS 12 Disclosures of Interests with Other Entities is effective from 1 January 2013. It requires increased disclosure about the nature, risks and financial effects of an entity's relationship with other entities along with its involvement with other entities. The adoption of this will have no effect on the financial statements of the company.

IFRS 13 Fair Value Measurement is effective from 1 January 2013. It defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. It includes a three-level fair value hierarchy which priorities the inputs in a fair value measurement. The adoption of this will have no effect on the financial statements of the company.

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 is effective for annual periods beginning on or after 1 July 2012. Items that would be reclassified to the profit and loss at a future point would be presented separately from items that will never be capitalised. The adoption of this will have no effect on the financial statements of the company.

IAS19 Employee Benefits (Revised) effective for annual periods beginning on or after 1 January 2013. For defined benefit plans the ability to defer recognition of actuarial gains and losses has been removed. There are new objectives for disclosure stated in the revised standard along with new or revised disclosure requirements. Plus the recognition of termination benefits and the distinction of short-term and other long-term employee benefits have changed. The adoption of this will have no effect on the financial statements of the company.

3.         Presentational currency

These financial statements are presented in pounds sterling because the parent is an AIM traded company on the London Stock Exchange.

4.         Significant accounting policies

(a)        Going concern

These financial statements have been prepared on the assumption that the group is a going concern.

When assessing the foreseeable future, the directors have looked at a period of twelve months from the date of approval of this report. The forecast cash-flow requirements of the business are contingent upon the ability of the group to retain revenues from existing contracts and generate future revenues from future business.

As the directors have reasonable expectations that the group has adequate resources to continue trading for the foreseeable future they continue to adopt the going concern basis in preparing the financial statements.

Were the group unable to continue as a going concern, adjustments would have to be made to the statement of financial position of the group to reduce the value of assets to their recoverable amounts, to provide for future liabilities that might arise and to reclassify non-current assets and long-term liabilities as current assets and liabilities.

 (b)           Revenue recognition

The group generates revenue primarily from licensing its messaging services to service providers, corporations and other distributors as well as from hosting and maintenance fees and from the use of messaging services by end users.

The group recognise revenue when delivery of the product has occurred, a fee can be reliably measured and the ability to collect such revenues is probable.

Deferred revenue includes amounts received from customers for which revenue has not yet been recognised.

(c)           Research and development costs

Research expenditures are recognised in profit or loss when incurred. An intangible asset arising from development or from the development phase of an internal project is recognised if the company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the company's intention to complete the intangible asset and use or sell it; the company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the company's ability to measure reliably the expenditure attributable to the intangible asset during its development.

The asset is measured at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use.

In the years ended 31 December 2012 and 2011, no development costs were capitalised

(d)            Goodwill and impairment

The carrying amounts of assets are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists then the asset's recoverable amount is estimated. For goodwill that has an indefinite useful life, recoverable amount is estimated at each reporting date or more frequently when indications of impairment are identified.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in the income statement in the period in which it arises. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(e)            Investment in subsidiary undertakings

The investment in subsidiary undertakings is stated in the balance sheet at cost less any provision for impairment. Impairment is recognised immediately in the income statement and is not subsequently reversed.

(f)             Property, plant and equipment

Property, plant, and equipment are stated at cost net of accumulated depreciation.  Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:

	%
Computers	33
Electronic equipment	15-25
Furniture and office equipment	7-15
Leasehold improvements	Over the term of the lease

The carrying value of property plant and equipment is reviewed for impairment when events or changes indicate the carrying value may not be recoverable.  If any such indication exists and carrying values exceed recoverable amounts such assets are written down to their recoverable amounts.

(g)            Operating leases

Rentals applicable to operating leases, where substantially all of the benefits and risks of ownership remain with the lessor, are charged against income as and when incurred.

(h)        Share options:

             Employee share options

The group has applied the requirements of IFRS 2 "Share-based Payments".

The group issues equity-settled and cash-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the group's estimate of shares that will eventually vest.

Fair value is measured by use of a Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance sheet date for cash-settled share-based payments.

Other share options and equity instruments:

Where equity instruments are granted to persons other than employees the income statement is charged with the fair value of services received.

This policy has been applied to share options granted to Pacific Continental on the buyback of their shares in February 2012. The share based cost of warrants issued to Mizrahi Tefahot Ltd in June 2012 as part of their loan agreement with the company's subsidiary undertaking in Israel  is written off to as part of the company's cost of finance over the term of the loan.

(i)          Severance pay

Pursuant to Israel's severance pay law, employees of more than one year are entitled to one month's salary for each year employed or a portion thereof.  The cost of providing severance pay is determined using an independent actuary. Actuarial gains and losses are recognised immediately in the income statement in the period in which they occur.

The value of deposited funds is based on the cash surrender value of the insurance policies. The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon fulfilment of the severance pay obligation, pursuant to Israel's severance pay law or labour agreements.

(j)         Government grants

Government grants are recognised when there is reasonable assurance that the grants will be received and the company will comply with the attached conditions. Government grants received from the Office of the Chief Scientist ("OCS") are recognized upon receipt as a liability if future financial benefits are expected from the project that will result in royalty-bearing sales.

A liability for the loan is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received and the fair value of the liability is accounted for as a Government grant and recognised as a reduction of research and development expenses. After initial recognition, the liability is measured at amortised cost using the effective interest method. Royalty payments are treated as a reduction of the liability. If no economic benefits are expected from the research activity, the grant receipts are recognised as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as a contingent liability in accordance with IAS 37.

At the end of each reporting date, the company evaluates whether there is reasonable assurance that the royalty liability, in whole or in part, will or will not be settled based on the best estimate of future sales. If the estimate of future sales indicates that there is no such reasonable assurance, the appropriate liability reflecting the anticipated royalty payments is recognised with a corresponding charge to research and development expenditure.

Grants received from OCS prior to January 2009 which are recognised as a liability, are accountable as forgivable loans in accordance with IAS 20, based on the original terms of the loan.

(k)        Taxation

             Income tax expense represents the sum of the current tax payable and the deferred tax.

             The tax currently payable is based on taxable profit for the year.  Taxable profit differs from profit as reported in the same income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.  Deferred tax is charged or credited to income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.

(l)         Foreign currency

Transactions in foreign currency are recorded at the rate of exchange prevailing at the date of the transaction.  All differences are taken to the income statement.  Assets and liabilities denominated in foreign currency are translated into sterling at the rate of exchange prevailing at the balance sheet date.

On consolidation, income and expenditure of subsidiary undertakings are translated into sterling at average rates of exchange in the period.  Assets and liabilities are translated into sterling at the rate of exchange ruling at the balance sheet date.  Exchange differences arising from the use of average rates for translating the results of foreign subsidiaries or from the translation of net assets on the acquisition of foreign subsidiary undertakings are taken to the group's translation reserves.

(m)           Investments

Investments represent funds invested in insurance policies in order to meet severance pay obligations pursuant to Israeli severance pay law and staff contracts of employment relevant to the company's principal subsidiary undertaking in Israel.

(n)            Trade receivables

Trade receivables are recognised at fair value.  A provision for impairment of trade receivables is established where there is objective evidence that the company or group will not be able to collect all amounts due according to the original terms of the receivables.  Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or liquidation and default or delinquency of payments are considered indicators that the trade receivable is impaired.  The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the original rate of interest.  The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement within administrative expenses.  When a trade receivable is uncollectable it is written off against the allowance account for trade receivables.

(o)            Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call with banks.  Bank overdrafts are shown as borrowings within current liabilities.

(p)            Provisions

A provision is recognised when the group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and the effect is material.

(q)            Financial liabilities and equities

Financial liabilities and equities instruments are classified according to the substance of the contractual arrangements entered into.  An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Ordinary shares are classified as equity.  Incremental costs directly attributable to new shares are shown in equity as a deduction from the proceeds.

Share premium represents funds raised from shareholders in excess of their nominal value net of issue costs.

Revenue reserves represent the cumulative net gains and losses of the group along with increases in equity for services received in equity settled share-based transactions.

Borrowings represent bank borrowings and are measured at amortised cost.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(r)            Borrowing costs

Borrowing costs are expensed to the comprehensive income statement in the period incurred.

(s)            Managing capital

The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

5.         Basic and diluted loss per share

Basic earnings per share has been calculated on the group's profit attributable to equity holders of the parent company of £272,598 (2011: £324,376) and on the weighted average number of shares in issue during the year, which was 166,832,000 (2011: 235,880,000).

Diluted earnings per share has been calculated on the group's profit of £272,598 (2011: £324,376) and  179,784,836 shares which includes further 12,952,836 shares arising from the exercise of future share options and warrants.

6.   Cash and cash equivalents and net funds

	At 1 January 2012		Cash Flow		At 31 December 2012
	£		£		£
Group
Cash and cash equivalents	543,684		525,977		1,069,661
Borrowings	-		(503,089)		(503,089)
	543,684		22,888		566,572
Company
Cash and cash equivalents	176,786		(168,518)		8,268

Ends

 

END

 

 

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