Final Results

RNS Number : 8340X

Messaging International Plc

30 June 2008

 

Messaging International Plc / Market: AIM / Epic: MES / Sector: Technology

Messaging International Plc 

('Messaging International' or the 'Company')

Final Results

Messaging International Plc, ('Messaging') the AIM traded company and provider of innovative messaging services, announces its results for the year ended 31 December 2007.

      Highlights

• Strengthened position as leading provider of innovative messaging services especially in our 
  'Text-to-Landline' and 'PC to Mobile' solutions.

• Post-tax loss reduced to £259,892 (2006: loss £1,102,272)

• Total revenue increased by over 100% to £1,367,235 (2006: £674,620) 

• Expansion into new geographic territories

• New relationships and extended existing contracts with leading mobile operator

Chairman's Statement

The period under review has been a time of growth. Innovative messaging services, as developed by our wholly owned subsidiary, TeleMessage Ltd ('TeleMessage'), are becoming increasingly recognised as desirable tools in the competitive and rapidly changing telecommunication industry. Leading mobile operators in a growing number of countries and the millions of customers that subscribe to their services are acknowledging the position of our products in the reality of converged communication media. This translates in the continuing improvement in the company's performance with revenues growing by over 100% and a dramatic drop in losses. 

The growth we have achieved this year is not only due to the strengthening of existing relationships but also to the forging of new alliances with blue-chip operators, both in our established regions and in new territories. With a firm foundation now in place, we firmly believe in our ability to continue building on this growth, delivering cutting edge technology and products and solutions that satisfy customer needs.

I am delighted to announce that TeleMessage has been successful in obtaining a research and development grant from Israel's Chief Scientist Office of in the region of £150,000 within a scheme developed in collaboration with the Eureka Programme. Created as an intergovernmental initiative in 1985, Eureka is a pan-European network which aims to enhance competitiveness through its support to businesses, research centres and universities in the development of innovative products, processes and services.  

Financial Results

The results for the year ended 31 December 2007 show a loss of £259,892 (2006: loss of £1,102,272), on revenue of £1,367,235 (2006: £674,620). Included in revenue is £280,000 (2006; £nil) representing the sale of patent rights (net of costs).

In March 2007, the group raised £900,000 before costs through a placing of new shares. These funds were used for general working capital and the development of new products and services.

The group's cash position at 31 December 2007 was £355,780 (2006: £86,869 overdrawn).  

The board does not recommend the payment of a dividend.

Operations

The products and services developed by TeleMessage continue to provide new and more convenient forms of integration between mobile phones, the Internet, personal computers and landline phones. The agreements and partnerships that the company have developed with telecom operators and enterprises provide two main revenue streams for TeleMessage:

• 'Software licensing' - which is usually linked to the number of messages that can be sent through the system or the number of active users.

• 'Hosted platform' - where we host messaging services for customers and where we receive a fixed fee or are paid per message.

TeleMessage not only gained further recognition within the telecommunications industry this year, but also achieved a high ranking (14th) in the prestigious Deloitte Israel Technology Fast 50 Awards. As a result of this award, TeleMessage Ltd. became eligible for the Deloitte Technology Fast 500 award which recognises growth in the revenue of companies operating in Europe, the Middle East and Africa. This second prestigious award has given the company further market exposure and credibility.  

North America

We expanded two of our existing contracts held with major North American operators during the year. The first deal was an extension of the 'PC to Mobile' contract with Rogers Wireless, Canada's largest wireless operator, through the launch of its Mail Plug-in application. Using the 'PC to Mobile' technology, Rogers Wireless subscribers can now compose and send text messages directly from within Microsoft Outlook® and Outlook® Express. We also strengthened our relationship with Sprint Nextel, the third largest wireless operator in the US, as it launched a Spanish language feature to its popular Text-to-Landline application. In addition to the original service in English, Sprint Nextel customers are now able to compose text messages that are converted into voice messages and delivered to landline phones in Spanish, a feature that increases substantially the appeal of the service among Sprint's subscriber base.

New blue chip mobile operators added to our distinguished list of customers which now includes amongst others, Telus, a leading national telecommunications company in Canada and EMBARQ, a USA based 

communications provider. Both have launched the Text-to-Landline application during this past year.  

Subsequently, several other major communication providers have also launched this service including Bell Canada, Qwest and Alltel. These new agreements offer further proof of the strengthening of our position in the 'Text-to-Landline' market in North America.

Europe

We have continued to expand our presence in Europe through Dominion, our partner based in Spain and have to date secured close to £150,000 in orders through two public sector agencies for our Mail Plug-in and Multi Alert products. We also launched our 'PC to Mobile' suite of applications with T-Mobile Macedonia, Macedonia's largest mobile operator. This was a great endorsement of our technology as T-Mobile is often regarded as one of the most innovative operators in the region and the first to launch this kind of service.

Our operations in Israel remain of vital importance to the group, as we continue to secure contracts and partnerships with leading operators in this demanding and competitive market. TeleMessage now has contracts with several of the major wireless operators in Israel for various products, including Orange, Pelephone and Israel's leading business mobile operator, MIRS Communications Ltd ('MIRS'), which launched our Mail Plug-in product. This enables MIRS mobile subscribers to send SMS to any local mobile phone directly from their Microsoft Outlook; an important tool which is progressively being integrated in corporate communication solutions worldwide.

The company also won a competitive tender process initiated for Israel Discount Bank Ltd., one of Israel's leading financial institutions, to implement a service enabling the bank to contact its customers via text and fax. This tender process saw the company competing against a number of strong contenders. Implementation of the service is scheduled for December 2008.

In October 2007, TeleMessage was chosen to showcase its 'PC to Mobile' applications at DEMO Germany, the premier launch venue for new products, technologies and companies. Our innovative 'PC to Mobile' applications were identified and chosen by the DEMO's Advisory Board, which screens dozens of companies to uncover 25 emerging technology companies that demonstrate the most promise. DEMO's recognition of the importance of this application underlines our belief that our technology will have significant impact on the marketplace and market trends in the coming years.

Other Territories

We continue to be proactive in targeting operators in new markets. During the year we strengthened our market presence in Asia-Pacific through an agreement with AIS (Advanced Info Service), the largest operator in Thailand, to launch our converged 'PC to Mobile' products. The messaging industry is booming in Asia, and we are confident that the adoption of our services will play a major role in future messaging growth.

We also signed a contract to launch 'Text-to-Landline' with a leading mobile operator in Latin America, part of a market leading mobile phone communications network with over 2.5 million users. This gives us significant exposure to operators and customers in Latin America, a region in which, to date, we have not had a market presence. We believe that we are now well positioned to target other operators in the rapidly expanding Latin American telecommunications market.

Prospects

The demand for easier and more convenient methods of integrated communication continues to increase worldwide and we are confident that TeleMessage's pioneering technologies will benefit customers across the globe. We are fast becoming leaders in 'Text-to-Landline' and 'PC to Mobile' solutions with the use of such merging solutions gaining popularity, we will benefit from our technology and our position in the market. 

We remain committed to our corporate growth strategy of targeting blue-chip operators and constantly reviewing potential acquisition opportunities in order to expand our offering into new geographic regions and markets. 

I would like to take this opportunity to thank all those involved in the Messaging International family for their hard work and dedication over the past year.  

H Furman

Chairman

27 June 2008

For further information visit www.telemessage.com or contact:

Guy Levit                 Messaging International Plc              Tel: + 972 3 9225252

Isabel Crossley        St Brides Media & Finance Ltd        Tel: [phone]

Mark Percy             Seymour Pierce Limited                    Tel: [phone]

Consolidated income statement for the year ended 31 December 2007

				2007		2006
		Notes		£		£
Revenues				1,367,235		674,620
Cost of revenue				(536,697)		(466,001)
Gross profit				830,538		208,619
Operating expenses
Research and development				(333,668)		(489,429)
Selling and marketing				(368,481)		(440,968)
General and administrative				(368,158)		(362,174)
Total operating expenses				(1,070,307)		(1,292,571)
Operating loss				(239,769)		(1,083,952)
Financial income				(20,123)		(18,320))
						-
Loss before taxation				(259,892)		(1,102,272)
Taxation				-		-)
Loss for the year				(259,892)		(1,102,272)

 

 

Basic and diluted loss per share		6		(0.12)p		(0.7)p

Consolidated statement of recognised income and expense

			2007		2006
			£		£
Exchange difference on translation of foreign operation			(11,334)		(14,158)
Loss for the year			(259,892)		(1,102,272)
Total recognised income and expense for the year			(271,226)		(1,116,430)

Consolidated balance sheet as at 31 December 2007

			Notes	2007		2006
				£		£
Non-current assets
Goodwill				3,236,617		3,236,617
Other intangible assets				-		715
Tangible assets				25,047		43,592
Other investments				107,500		53,929
Total non-current assets				3,369,164		3,334,853
Current assets
Trade and other receivables				380,610		191,346
Cash and cash equivalents				355,780		84,965
Total current assets				736,390		276,311
Total assets				4,105,554		3,611,164
Current liabilities
Trade and other payables				(200,520)		(381,181)
Total current liabilities				(200,520)		(381,181)
Non-current liabilities
Provisions				(121,000)		(90,894)
Total non-current liabilities				(121,000)		(90,894)
Total liabilities				(321,520)		(472,075)
Net assets				3,784,034		3,139,089
Equity
Share capital				1,176,900		576,900
Share premium				4,266,227		3,999,475
Foreign currency translation reserve				(34,379)		(23,045)
Revenue reserves				(1,624,714)		(1,414,241)
Total Equity				3,784,034		3,139,089

The financial statements were approved and authorised for issue by the board on 27 June 2008 and signed on its behalf by:

 

H Furman

Director

 

 

I Fishman

Director

Consolidated cash flow statement for the year ended 31 December 2007

		Notes		2007		2006
				£		£
Cash flow from operating activities
Loss before tax on continuing operations				(239,769)		(1,083,952)
Adjustments for:
Share based payment charges				49,419		80,950
Depreciation and amortisation				19,394		23,292
Foreign currency differences				(26,640)		(46,529)
				42,173		57,713
Operating cash flow before working capital movements				(197,596)		(1,026,239)
Increase in receivables				(189,264)		(9,845)
Decrease in payables				(8,827)		(11,202)
Increase/(decrease) in provisions				30,106		(25,334)
				(167,985)		(46,381)
Cash outflow from operating activities				(365,581)		(1,072,620)
Investing activities
Interest (paid)/received				(3,945)		7,072
Investments				(53,571)		30,401
Purchase of tangible assets				(1,006)		(6,610)
Net cash (absorbed by)/from investing activities				(58,522)		30,863
Financing activities
Issue of equity capital				900,000		-
Share issue costs				(33,248)		-
Net cash from financing activities				866,752		-
Net change in cash and cash equivalents				442,649		(1,041,757)
Cash and cash equivalents and bank overdraft at the beginning of the year				(86,869)		954,888
Cash and cash equivalents and bank overdraft at the end of the year				355,780		(86,869)

Notes to the 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 and directors' report. 

2.    Basis of Accounting

The consolidated financial statements of the company for the year ended 31 December 2007 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. 

(a)     Standards, amendments and interpretations effective at 1 January 2007

The following interpretations to existing standards have been published that are mandatory for the company's accounting periods beginning on or after 1 January 2007:

• IFRS 7, 'Financial Instruments: Disclosure', and complementary amendment to IAS 1, 'Presentation of financial statements - Capital disclosures', introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the company's financial instruments, or the disclosures relating to taxation and trade and other payables. 

• IFRIC 8, 'Scope of IFRS 2', requires consideration of transactions involving the issuance of equity instruments, where the identifiable consideration received is less than the fair value of the equity instruments issues in order to establish whether or not they fall within the scope of IFRS 2. This standard does not have any impact on the company's financial statements. 

(b)     Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early
          by the group

  The following interpretations to existing standards have been published that are mandatory for the

  company's accounting periods beginning on or after 1 January 2008 or later periods but that 

  the company has not adopted early:

• IAS 1 Revised - Presentation of Financial Statements (effective from 1 January 2009). Key changes include, the requirement to aggregate information in the financial statements on the basis of shared characteristics, the introduction of a Statement of Comprehensive Income & changes in titles of some of the financial statements.

• IFRS 8 - Operating Segments (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The expected impact is still being assessed in detail by management, but it appears likely that the number of reportable segments, as well as the manner in which segments are reported, will change in a manner that is consistent with the internal reporting provided to the chief operating decision-maker.

(c)    Interpretations to existing standards that are not yet effective and not relevant for the company's operations

    The following interpretations to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 January 2008 or later periods but are not relevant to the group's operations:

IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions (effective from 1 March 2007)

IFRIC 12 - Service Concession Arrangements (effective from 1 January 2008)

IFRIC 13 - Customer Loyalty Programmes (effective from 1 July 2008)

IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interaction (effective from 1 January 2008)

3.    Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 31 December each year. Control is achieved where the company has the power to govern the financial and operating policies of any subsidiary undertaking so as to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group.

Details of subsidiary undertakings are set out in the report and accounts for the year ended 31 December 2007.

All intra-group transactions and balances have been eliminated in preparing the consolidated financial statements. 

4.    Presentational currency

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

5.    Significant accounting policies

(a)     Going concern

This statement has 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 generate future sales. 

The uncertainty as to the timing of the future growth in sales, require the directors to consider the group's ability to continue as a going concern.  

The directors are currently in the process of negotiating further funding from an Israeli bank to assist the group with its future working capital requirements.

Therefore the directors consider that it is appropriate to prepare the group's financial statements on a going concern basis, which assumes that the company is to continue in operational existence for the foreseeable future.

Were the Group is unable to continue as a going concern, adjustments may have to be made to 

the balance sheet of the Group to reduce balance sheet values 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, hosting and maintenance fees and sale of patent rights net of discounts, value added tax and other sales taxes.

The group recognise revenue when delivery of the product has occurred, a fee is determinable, no further obligations exist and collectability is probable.

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

(c)    Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the group's cash generating units expected to benefit from synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

(d)    Investment in subsidiary undertakings

    Investments in subsidiary undertakings are 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.

(e)    Property, plant & 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	10

The carrying values of property plant and equipment are 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.

(f)     Research and development 

Research and development costs are treated as an expense and are written off in the group's consolidated income statement in the year incurred.

(g)     Employee costs:

Share options

The group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7th November 2002 that was unvested as of 27 July 2005. 

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.

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.

(h)    Taxation

Income tax expense represents the sum of the tax currently payable and 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.

(i)    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.

 (j)     Investments

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

 (k)     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.

(l)     Cash and cash equivalents

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

(m)    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 the nominal value of their

holdings net of issue costs. 

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

6.    Basic and diluted loss per share

Basic loss per share has been calculated on the group's loss attributable to equity holders of the parent company of £259,891 (2006: £1,102,272) and on the weighted average number of shares in issue during the year, which was 217,498,000 (2006: 115,380,000). 

In view of the group loss for the year, share warrants and options to subscribe for ordinary shares in the company are anti-dilutive and therefore diluted earnings per share information is not presented.  

 

END

 

 

FR URAKRWARNORR