Half Yearly Report

RNS Number : 4233Z

Synchronica PLC

22 September 2009

 



Synchronica plc

('Synchronica' or 'the Company')

Interim Results for the six months ending 30 June 2009

Synchronica plc, the AIM listed mobile email and synchronisation provider, reports interim results for the six months ending 30 June 2009. 

Synchronica's award-winning product portfolio includes the flagship email and synchronization solution Mobile Gateway, and the device backup solution, Mobile Backup. Synchronica's products provide push email and mobile synchronisation services for the broadest range of handsets, from high-end Smartphones to low-cost entry level devices, ideally suited to fast growing emerging markets.

Financial Highlights

• Revenues increased seven-fold to £1.33m (H1 '08: £0.19m).

• Administrative costs up 15% to £3.34m (H1 '08: £2.91m) in anticipation of future growth.

• Operating Loss down 14% to £2.34m (H1 '08: £2.72m loss).

• Loss Before Tax down 12% to £2.49m (H1 '08: £2.82m loss).

• Historically results are heavily weighted towards the second half.

• Cash position in line at £0.26m but bolstered post period end by £4.7m placing.

Operational Highlights

• Launch of Mobile Gateway 4 enabling mobile email for 100% of mobile phones in the market.

• Global preferred reseller agreement signed with Nokia Siemens Networks, the world's second largest Network Equipment Provider, expected to contribute to second half growth and beyond.

• 9 contract wins with mobile operators in Eastern Europe, Latin America, Middle East and Africa.

• Collaboration agreement signed in June to design, build and market low cost mobile devices to be bundled with Synchronica Mobile Gateway.

• Placing completed post period end to raise £4.7m to fund development and rollout of the low cost mobile devices and ongoing development of software products.

Carsten Brinkschulte, CEO of Synchronica, said, "Given the large potential of our expanding target markets, our growing network of resellers worldwide, our strong pipeline of prospects, and the launch of the low cost mobile devices which is on track for release later this year, the Board believes that the growth prospects for the Company are excellent and we are confident of meeting market expectations for the full year as we move towards sustainable profitability the following year."

Enquiries:

Synchronica plc www.synchronica.com	Carsten Brinkschulte, CEO  Angus Dent, CFO  Nicole Meissner, COO	[phone] [phone] [phone]
FinnCap	Charles Cunningham	[phone]
Walbrook PR Ltd	Paul McManus	[phone] [phone] [e-mail]

  Synchronica plc is a leading provider of industry-standard mobile push email and synchronization solutions. The award-winning product portfolio includes the flagship email and synchronization solution Mobile Gateway, and the device backup solution, Mobile Backup. Mobile operators in emerging and developed markets use Synchronica's white-labelled products to offer their consumer and business subscriber's mobile email, PIM synchronization, and backup and restore services.

Synchronica's Mobile Gateway provides a unique multi-protocol gateway combining Push IMAP, SyncML, Email-to-MMS and Email-to-SMS, delivering push email and synchronization to literally any mobile phone currently in the market today. The device backup solution Synchronica Mobile Backup, also based on industry-standards, reaches the built-in synchronization clients of more than 2 billion mobile phones worldwide, without requiring an additional client to be downloaded.

Headquartered in England, Synchronica also maintains a development centre in Germany, in addition to a regional presence in the USA, Hong Kong and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.L). For further information please visit www.synchronica.com.

  Chairman's Statement

During the first half of 2009 Synchronica made good progress, both financially and operationally. We have delivered significantly increased revenues, expanded our customer footprint and have demonstrated the strength of our distribution partnerships which give us genuine global reach into a number of high growth markets. We are confident that we will add further new customers in the second half and continue the trend of strong revenue growth.

Financial Results

Revenue has increased significantly to £1.33m, nearly a seven-fold increase compared to the same period last year (H1 '08: £0.19m) reflecting a number of significant new contracts and the first revenue contribution since 2007 from our software licensing agreement with a major US hardware manufacturer. Administrative costs have risen to £3.52m (H1 '08: £2.91m) due in part to an increase in employee headcount to provide capacity for future organic growth, as well as the inclusion of some costs relating to the acquisition made last year. As a result, the Company recorded an Operating Loss of £2.34m, down from £2.72m for the same period last year and Loss before tax was reduced to £2.49m (H1 '08: £2.82m). It should be noted that historically, Synchronica's results are heavily weighted towards the second half.

Cash position

The cash position at the end of the period was in line with management expectations at £0.26m (H1 '08: £0.61m). This was bolstered post the period end by the placing concluded early in July which raised £4.7m in gross proceeds. All funds have been received and will be used to enable the development and roll out of low cost mobile devices and to accelerate the ongoing development of the Company's software products.

Operations Review

The first half of 2009 has shown a solid start for Synchronica in its goal of becoming the leading provider of push mobile email solutions in emerging markets.

• Mobile Gateway 4.0

In February, we launched Mobile Gateway 4.0, bolstering our award winning product with a multi-protocol architecture that extends mobile email and data synchronisation to virtually any mobile phone on the market today. Mobile Gateway 4.0 introduces email-to-SMS and email-to-MMS gateways and Push-to-WAP/xHTML browser access - ideal for emerging markets, where PC-based access is limited and entry-level devices dominate. We continue to invest into the ongoing development of this product to ensure that it remains a leading mobile solution in our target markets.

• Contract wins

During the period, Synchronica signed a number of significant contracts in various fast growing emerging markets. At the beginning of the year we announced two expansion orders from Russia and Eastern Europe, followed by three contract wins with mobile operators in Latin America, demonstrating the strength of our relationship with our strategic distribution partner in this region. In July and August, we were able to announce purchase orders from two North-African mobile operators.

• Emerging market focus

It is important to note that the demographics in emerging markets are considerably different from the UK. Very few users in emerging markets can afford Smartphones, but continue to use entry-level handsets. Our solutions, which are based entirely on open industry standards and require no additional software to be installed on the handset, enable mobile email on Smartphones, but also on the most basic mobile handsets. Our strategy of targeting those countries where the mobile handset is the primary device for Internet and email access, and where PC and fixed-line penetration remains low, is proving to be very successful. Our product has been optimized for the specific requirements in these target markets and is generating considerable interest from mobile operators in Russia, Latin America, Africa and South-East Asia.

• Collaboration agreement

In June, we announced a collaboration agreement with third parties to design, build, market and sell low cost mobile devices to be bundled with our Mobile Gateway product. The development of the low cost mobile devices is on schedule and the initial feedback from prospective customers has been positive and a number of major operators are showing interest. We expect to be able to launch the devices before the end of this calendar year.

• Success with reseller network 

The success of Synchronica is based on a direct and indirect sales network. For this reason we have over the last two years created a strong international reseller network based on system integrators and hardware manufacturers, which is now bringing its first contract wins. 

In February, we announced a global reseller agreement with Nokia Siemens Networks, the world's second largest network equipment provider, establishing a scalable sales channel for the Company's flagship product. The agreement itself reinforces the technical superiority that Mobile Gateway has established in the market and gives Synchronica truly global reach. We have yet to receive purchase orders from this agreement, but we are confident that this relationship will contribute to revenue growth in the second half and beyond. 

Outlook

We have seen a move away from a perpetual licence model to an annuity licence or revenue share model as CAPEX budgets of our customers come under increasing pressure. Whilst this has some short-term impact, annuity and revenue share income is expected to generate more revenue over the long-term and has the benefit of being recurring revenue. This should improve our operational gearing and predictability of earnings in the future, eventually delivering greater return for shareholders.

Given the large potential of our expanding target markets, our growing network of resellers worldwide, our strong pipeline of prospects, and the launch of the low cost mobile devices which is on track for release later this year, the Board believes that the growth prospects for the Company are excellent and we are confident of meeting market expectations for the full year as we move towards sustainable profitability the following year.

David A Mason

Chairman

21 September 2009

  Consolidated Statement of Comprehensive Income

for the six month period ended 30 June 2009

	Note	6 months to  30 June     2009  (unaudited)	6 months to  30 June  2008   (unaudited)	Year to     31 December 2008 (audited)
		£'000	£'000	£'000
Revenue		1,328	190	3,708
Cost of Sales		(152)	-	(1,675)
		________	________	________
Gross Profit		1,176	190	2,033
Administrative costs
Reorganisation costs		-	-	(1,956)
Other administrative expenses		(3,517)	(2,906)	(6,564)
Total administrative costs		(3,517)	(2,906)	(8,520)
		________	________	________
Operating loss		(2,341)	(2,716)	(6,487)
Finance income		96	78	518
Finance costs		(242)	(177)	(495)
		________	________	________
Loss before taxation		(2,487)	(2,815)	(6,464)
Taxation	2	221	39	258
		________	________	________
Loss for the period after tax attributable to the equity holders of the parent company		(2,266)	(2,776)	(6,206)
Other comprehensive income:
Exchange difference on translation of foreign operations		(117)	14	(92)
		________	________	________
Total comprehensive income for the year		(2,383)	(2,762)	(6,298)
		________	________	________
Loss per ordinary share from continuing operations
Basic and diluted loss per ordinary share	3	(0.6p)	(2.0p)	(3.0p)
		________	________	________

  Consolidated Statement of Financial Position as at 30 June 2009

	6 months to  30 June 2009  (unaudited)	6 months to  30 June      2008   (unaudited)	Year to 31 December 2008 (audited)
	£'000	£'000	£'000
Intangible assets	3,449	473	3,328
Property plant and equipment	148	174	192
Derivative financial instruments	207	296	465
	________	________	________
Non current assets	3,804	943	3,985
	________	________	________
Trade and other receivables	1,386	1,478	1,718
Corporation tax	221	50	104
Cash and cash equivalents	255	612	3,494
	________	________	________
Total Current assets	1,862	2,140	5,316
	________	________	________
TOTAL ASSETS	5,666	3,083	9,301
	________	________	________
Trade and other payables	1,166	737	2,603
Corporation tax	-	-	21
Provisions	1,004	161	1,135
	________	________	________
Total current liabilities	2,170	898	3,759
	________	________	________
Non current liabilities
Provisions	373	350	411
	________	________	________
Total non current liabilities	373	350	411
	________	________	________
Total liabilities	2,543	1,248	4,170
	________	________	________
Ordinary share capital	3,885	1,471	3,785
Share premium account	17,968	15,529	17,783
Merger reserve	1,578	-	1,578
Capital to be issued	532	-	532
Accumulated losses	(20,638)	(15,186)	(18,462)
Translation reserve	(202)	21	(85)
	________	________	________
Equity attributable to shareholders of the parent company	3,123	1,835	5,131
	________	________	________
TOTAL EQUITY AND LIABILITIES	5,666	3,083	9,301
	________	________	________

  Consolidated Statement of Cash Flow for the six month period ended 30 June 2009

		6 months to 30 June 2009 (unaudited)	6 months to 30 June  2008  (unaudited)	Year to 31 December 2008  (audited)
		£'000	£'000	£'000
Cash flow from operating activities
Loss before taxation		(2,487)	(2,815)	(6,464)
Adjusted for:
Depreciation		53	57	218
Amortisation of intangibles		162	114	297
Impairment of intangibles		-	-	415
Loss on disposal of property plant		5	-	-
Finance income		(96)	(80)	(518)
Finance costs		242	177	495
Equity settled share based payment		90	53	207
		_______	_______	_______
Cash flows from operating activities before changes in working capital		(2,031)	(2,494)	(5,350)
Decrease in assets held for resale		-	-	1,675
Decrease/(increase) in receivables		124	(365)	476
(Decrease)/increase in provisions		(55)	(51)	79
(Decrease)/increase in payables		(1,458)	(269)	209
		_______	_______	_______
Cash utilised in operating activities		(3,420)	(3,179)	(2,911)
Tax received		104	121	282
Interest paid		-	-	(2)
		_______	_______	_______
Net cash used in operating activities		(3,316)	(3,058)	(2,631)
		_______	_______	_______
Cash flow from investing activities
Acquisition of subsidiary net of cash acquired		-	-	(171)
Purchase of intangible assets		(375)	(8)	(145)
Purchase of property plant and equipment		(14)	(98)	(166)
Interest received		40	10	31
		_______	_______	_______
Net cash used in investing activities		(349)	(96)	(451)
		_______	_______	_______
Cash flow from financing activities
Net proceeds from issue of ordinary share capital		285	2,993	5,128
Proceeds from derivative financial instruments		286	-	357
		_______	_______	_______
Net cash generated from financing activities		571	2,993	5,485
		_______	_______	_______
Net decrease in cash and cash equivalents		(3,094)	(161)	2,403
Cash and cash equivalents at 1 January		3,494	757	757
Effects of exchange rate changes on cash equivalents		(145)	16	334
		_______	_______	_______
Cash and cash equivalents at period end		255	612	3,494
		_______	_______	_______

  Consolidated Statement of Changes in Equity for the six month period ended 30 June 2009

	Share capital	Share premium	Merger reserve	Capital to be issued		Accumul-ated losses	Transla-tion Reserve	Total attributable to equity shareholders of the parent
	£'000	£'000	£'000	£'000		£'000	£'000	£'000
At 1 January 2008	840	13,167	-	-		(12,463)	7	1,551
Loss for the period	-	-	-	-		(2,776)	-	(2,776)
Currency translation difference	-	-	-	-		-	14	14
Adjustment for share based payments	-	-	-	-		53	-	53
Proceeds from placing	631	2,362	-	-		-	-	2,993
	____	______	______	______		_______	_______	_______
At  30 June 2008	1,471	15,529	-	-		(15,186)	21	1,835
Retained loss for the period	-	-	-	-		(3,430)	-	(3,430)
Adjusted  Adjustment for share based payments	-	-	-	-		154	-	154
Proceeds from placings	1,050	1,085	-	-	-		-	2,135
Share issued in exchange for derivative financial assets	517	1,169	-	-	-		-	1,686
Consideration on acquisition of subsidiary	681	-	1,446	532	-		-	2,659
Shares issued in exchange for debt on acquisition of subsidiary	66	-	132	-	-		-	198
Currency translation difference	-	-	-	-	-		(106)	(106)
	____	______	______	______	_______		_______	_______
At 31 December 2008	3,785	17,783	1,578	532	(18,462)		(85)	5,131
Retained  loss for the period	-	-	-	-	(2,266)		-	(2,266)
Adjustment for share based payments	-	-	-	-	90		-	90
Proceeds from placings	100	185	-	-	-		-	285
Cumulative translation differences	-	-	-	-	-		(117)	(117)
	____	______	______	______	_______		_______	_______
At 30 June 2009	3,885	17,968	1,578	532	(20,638)		(202)	3,123
	____	______	______	______	_______		_______	_______

  Notes to the Interim Financial information for the six month period ended 30 June 2009 

1. Basis of preparation

This financial information has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU Adopted IFRSs).  

The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ended 31 December 2009 and are unchanged from those disclosed in the Group's Report and Financial Statements for the year ended 31 December 2008, except for the adoption of IAS 1 "Presentation of Financial Statements" (Revised).

IAS 1 Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive Income (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The first option has been adopted by the Group in the preparation of the interim financial statements. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group. 

The financial information for the six months ended 30 June 2009 and the six months ended 30 June 2008 is unaudited and does not constitute the group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2008 has, however, been derived from the audited statutory financial statement for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, but did contain references to going concern to which the auditors drew attention by way of an emphasis of matter paragraph without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.

The Board of Directors approved this interim report on 21 September 2009.

2. Tax

	6 months to 30 June 2009 (unaudited)	6 months to 30 June 2008 (unaudited)	Year to     31 December 2008
	£'000	£'000	£'000
UK research & development tax credit	221	50	266
UK adjustment to provision for previous periods	-	-	(10)
Overseas corporation tax charge /(credit)	-	(11)	(3)
Overseas adjustment to provision in previous periods	-	-	5
	_______	_______	_______
Current taxation	221	39	258
	_______	_______	_______

The UK research and development tax credit received represents a refund of tax due from research carried out in the year ended 31 December 2008. 

A potential deferred tax asset of £6,216,000 (June 2008 - £4,852,000, December 2008 - £5,740,000) in relation to unrelieved trading losses of £22,200,000 (June 2008 - £17,328,000, December 2008 -£20,500,000) has not been recognised due to the uncertainty of the recovery of this amount. 

  3. Loss per share

	6 months to 30 June 2009 (unaudited)	6 months to 30 June 2008 (unaudited)	Year to 31 December 2008
	£'000	£'000	£'000
Numerator
Losses used for calculation of basic and diluted EPS	(2,266)	(2,776)	(6,206)
	_______	_______	_______
Denominator
Weighted average number of ordinary shares used in basic EPS	387,053,448	135,838,946	207,780,284
Basic and diluted loss per ordinary share	(0.6p)	( 2.0 p)	( 3.0 p)
	_______	_______	_______

44,476,681 (June 2008: 11,959,620, December 2008: 19,813,075) shares being the weighted average number of dilutive securities (options, warrants and deferred shares) have been excluded from the calculation of diluted loss per share because they would reduce loss per share.

4. Subsequent Events

On 7 July 2009 the company issued 188,938,480 ordinary shares raising £4,723,462 of additional capital before expenses. The proceeds of the fundraising will be used to enable the development and rollout of the low cost devices and to accelerate the ongoing development of the company's software products.

 

END

 

 

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