Half Yearly Report

RNS Number : 3774P

Synchronica PLC

15 July 2010

 



Synchronica plc

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

Interim Results for the six months ended 30 June 2010

Synchronica plc, the AIM-listed mobile email, instant messaging and data synchronisation provider, announces Interim Results for the six months ended 30 June 2010.

Synchronica plc's award-winning product portfolio includes the flagship product Mobile Gateway, which provides push email, synchronization, instant messaging, backup & restore, and mobile connectivity to social networks. Synchronica's white-label products are sold to mobile operators and device manufacturers targeting high-growth emerging markets.

Financial Highlights

·      Revenues up 2.5 times to £3.43m (H1 '09: £1.33m), 90% of previous full year revenues (FY '09: £3.8m)

·      Costs increased modestly to £4.1m (H1 '09: £3.5m)

·      Gross profits up significantly to £3.28m (H1 '09: £1.18m)

·      Gross Margin continues to be high at 96%

·      Loss before tax reduced to £1.34m (H1 '09: £2.49m loss)

Operational Highlights

·      Launched MessagePhone™ in February 2010, introducing the first low-cost messaging device bundled with Mobile Gateway; two purchase orders received from operators in Africa and Latin America and sales are expected to accelerate in the second half of 2010.

·      Announced major product upgrade to Synchronica Mobile Gateway 5, adding Instant Messaging and Mobile Social Networking, enhancing value proposition and improving the competitive position.

·      Acquired Colibria's IMPS business with group-wide framework agreements covering over 320m subscribers in Latin America.

·      Announced 10 deals with mobile operators and device manufacturers in H1 '10; expanded customer base to more than 40 contracts representing a total addressable market of 660m subscribers.

·      Extended global reseller network contributed six deals in H1 '10; reseller network now includes Brightstar, Nokia Siemens Networks and an Asian-based telecoms vendor.

·      Significantly increased deal size towards the end of H1 '10, with three $1m+ deals signed in June 2010.

·      Increasing traction with deals from three additional device manufacturers in H1 '10 bundling low-cost messaging devices with Synchronica Mobile Gateway to provide end-to-end push Email, instant messaging and mobile social networking. 

Carsten Brinkschulte, CEO of Synchronica, said, "We have made significant progress over the past six months and expect to continue this accelerated momentum in the second half of the year. Not only are we signing up more customers, we are also seeing an increase in the average deal size. With a sustained commitment to innovative product development, in tandem with our global international reseller network of system integrators and device manufacturers, Synchronica is on its way to become the market leader for next-generation mobile messaging services in emerging markets."

Enquiries:

Synchronica plc www.synchronica.com	Carsten Brinkschulte, CEO Angus Dent, CFO, Nicole Meissner, COO,	[phone] [phone] [phone]
FinnCap	Clive Carver , Nomad	[phone]
	Charlotte Stranner, Corporate Finance	[phone]
	Stephen Norcross, Corporate Broker	[phone]
Walbrook PR Ltd	Paul McManus	[phone] [phone] [e-mail]

Chairman's Statement

This time last year, I reported that Synchronica had made good progress with significantly improved revenues, an expanded customer footprint, and an enlarged global distribution channel. I'm delighted to report that we have seen that pattern continue with even greater success as Synchronica reports the most improved set of Interim results in its history. In the six months to June 2010 we have generated almost as much revenue as we did in the whole of 2009.

Financial Results

Revenue has increased more than two and a half times to £3.4m, when compared with the £1.3m for the same period last year. The revenue in H1 2010 is 90% of the £3.8m revenue reported for the whole of 2009. Historically, Synchronica's revenue has been heavily weighted towards H2.

We have, as expected, seen a modest increase in our costs of 17% between H1 2009 and H1 2010. We own all of our software outright, the majority having been developed in- house, and deliver the vast majority of professional services using our own staff; this means that, while costs will rise as we deliver more revenue, we expect that they will continue to rise far more slowly than the increase in revenue.

The loss for H1 2010, £1.3m, is almost half that of H1 2009, £2.3m. With increasing revenue and cost control we expect this trend of reducing losses to continue. 

With revenue heavily biased towards the end of H1 2010, our cash generation from operations in the period was delayed. We continue to monitor our cash position on a daily basis and continue to believe that the Group has sufficient cash to allow it to meet its present requirements, realise its assets and discharge its liabilities in the normal course of business.

Operational Review

Our focus on product development in tandem with a global reseller network is finally beginning to bear fruit. Over the past six months we've moved closer to our goal of Synchronica being the leading provider of mobile messaging services for mobile operators and device manufacturers in emerging markets.

While the initial period of the first half began with a slower than expected conversion rate, during the end of the period we saw strong demand for our products, an accelerated conversion rate and an increased deal size. We signed our three largest deals ever, totalling more than US $1m each, in June 2010. Two of these deals came from emerging market-focused device manufacturers intending to bundle Mobile Gateway with their devices. The third came from a Tier-1 multinational operator group that provides services in Latin America.

Product Launches

In February, the Group launched two new products.

The MessagePhone™, is a family of low-cost messaging-centric mobile devices that provide email, instant messaging and social networking provided by Synchronica Mobile Gateway. We have since received two orders for MessagePhone™ from operating subsidiaries of large mobile operator groups - one in Africa, the other in Latin America - and we have a strong pipeline of prospective customers in Africa and Latin America.

We also launched Mobile Gateway 5, a new version of our flagship mobile messaging middleware product. This award-winning product provides clientless push email and synchronisation, instant messaging, social networking, and access to web feeds to any mobile phone.

Colibria Transaction

A key development in this period was the agreement to acquire Colibria's IMPS technology and their entire IMPS customer base, announced in March 2010. This was a key milestone for the Group as it accelerates our entry to the instant messaging market and is expected to boost sales of the MessagePhone™. The transaction significantly expanded the Group's customer base with 13 additional contracts (including group-wide framework agreements with two large-multinational mobile operator groups) which provide a combined addressable market of more than 320 million subscribers.

Outlook

Our management team is to be congratulated for achieving significant performance under challenging conditions. On the Board's behalf I thank them for their dedication, hard work and tireless commitment to Synchronica's success.

In recent years, Synchronica's staff complement has evolved to reflect the internationalisation of the Group, showing more diversity in culture, language and ways of doing business in our target markets.  The team does a great job of looking after our customers in particularly difficult environments, sometimes working very unsociable hours. This dedication gives Synchronica a significant competitive edge, and I would like to thank my colleagues for the vital contribution that they make.

Synchronica's consistent growth over time has been quite remarkable. The Group is capable of continuing to deliver, particularly as the potential from customer expansion orders begins to unfold. Given the sales trend from the first half of the year, and our strong pipeline of prospects, the Board believes that the growth prospects for Synchronica are positive.

David A Mason

Chairman

14 July 2010

CHIEF EXECUTIVE'S REVIEW

Synchronica has made significant progress during the first half of 2010, with a robust operational performance that has allowed us to generate substantially improved results. This increased traction is a result of our consistent strategy to focus on opportunities in high-growth emerging markets and our dual strategy of licensing Mobile Gateway to mobile operators as well as device manufacturers targeting these regions.

Launch of Mobile Gateway 5

With the announcement of Mobile Gateway 5 at Mobile World Congress in February, our flagship product has been significantly enhanced with key functionality, thereby improving our competitive positioning and even better addressing the requirements of our customers. Mobile Gateway 5 continues to deliver a state-of-the-art push email and synchronisation infrastructure, but now also supports push notifications for news feeds (RSS) as well as mobile connectivity for rapidly increasing social networks (SNS) such as Facebook, Twitter and LinkedIn. Finally, Mobile Gateway 5 introduces mobile instant messaging (MiM) with connectivity to existing communities such as Facebook chat, but also allowing our customers to create their own communities to bind customers and reduce churn.

I believe that Mobile Gateway 5 represents a very compelling and complete solution addressing the needs of operators, in particular in emerging markets, enabling them to deliver a complete suite of advanced mobile messaging services to the entire device landscape - from high-end Smartphones to the most basic mobile phones.

Our consistent technical approach of exclusively using open industry standards to deliver our services to the native clients on mobile handsets, removing the requirement to download additional software to the device, continues to be a major competitive advantage. I believe that the technical limitation of most competing products is exposed when compared to Mobile Gateway, as they tend to address only high-end devices, which means they are failing to meet the demographic realities in emerging markets.

Initial feedback from existing and prospective customers has been very positive, and we have created a strong pipeline of mobile operators and device manufacturers interested in licensing Mobile Gateway 5. Since the product introduction of Mobile Gateway 5 at Mobile World Congress in February, we have already signed contracts with two customers and we expect to continue expanding our customer base and market share with this significantly enhanced product.

Launch of MessagePhone™ and Device Strategy

In June 2009, Synchronica announced a collaboration agreement with Brightstar, a global device distributor and KCM, a Korean device manufacturer, to design, build, market and sell a family of low-cost mobile devices that will be bundled with Synchronica's Mobile Gateway.

We launched MessagePhone™ with our partners in February 2010 at events in London and during Mobile World Congress in Barcelona. MessagePhone™ has received significant international media coverage in both print and online publications, and we have received several enquiries from prospective customers interested in the product. The current sales pipeline for potential new customers includes a double-digit number of mobile operators in Africa and Latin America.

Under the collaboration agreement, Synchronica receives a commission of 3% of the net sales revenue from the sale of every MessagePhone™. In addition, Synchronica receives licence fees, professional services, support and hosting revenues for the bundled Mobile Gateway. We have received the first two purchase orders for MessagePhone™, including revenues for licences and services for the bundled Mobile Gateway.

Since Mobile World Congress, Synchronica has seen significant interest from other device manufacturers to bundle Mobile Gateway with their devices to offer end-to-end solutions with push email, synchronisation, social networking and instant messaging. These device manufacturers are attracted by Synchronica's technical approach of using native messaging clients on the handsets and our experience in emerging markets, enabling them to provide true product differentiation and better user experience, even on low-cost handsets.

Device Manufacturers have become a second pillar of Synchronica's marketing strategy and we have assigned a dedicated sales and marketing team to capture the additional revenue stream. Our device strategy is highly complementary to our core business of licensing to mobile operators; with our operator sales we are generating the infrastructure and with device manufacturers we are producing the ideal devices for our platform.  

Contract Wins

Synchronica has had a very active first six months in 2010 with a number of contracts being signed and orders being delivered to customers. While 2009 was a record-breaking year for us with 13 new customers announced, the Group has already signed an additional 10 customers during the first half of 2010 alone.

We are encouraged by the accelerating conversion rate and increasing deal size towards the end of the first half, underlined with the closing of three US $1m-plus deals in June 2010. Two of these deals are with device manufacturers that intend to bundle Mobile Gateway 5 with their devices. The first device manufacturer is aiming to sell its devices in the CIS and India, while the second device manufacturer will deliver its devices to one of the largest mobile operators in Indonesia. The third deal was secured through our distributor Brightstar, delivering a large number of Mobile Gateway 4 licenses to a Tier-1 multinational operator group that provides services in Latin America.

We also received two purchase orders for an initial 100,000 licences from a further device manufacturer focused on selling devices to India. Whilst this may be a small order in the context of recent contract wins, we are confident that this will become a significant channel for us as the manufacturer has previously sold several million devices in the second largest mobile market in the world. 

Strategy and Emerging Market Focus

A winning strategy calls for innovative thinking, clear focus and consistent execution, in particular in the fast moving and highly competitive sector of mobile telecommunications. Synchronica has a clear strategy of targeting mobile operators and device manufacturers with a strong focus on high-growth emerging markets. We are consistently executing on this strategy and have aligned our product development, marketing and sales to the specific requirements of our target markets. As a result of this strategy, we now have a product that we believe ideally meets the requirements of our target customers and we are seeing the result of this with our increasing customer-win rate and rising deal size.

In emerging markets, broadband infrastructure is often outdated or simply unavailable, and very few households own a personal computer. Internet bandwidth tends to be an expensive commodity which is unjustifiable to the average wage earner. Consequently, Internet cafes are popular in emerging markets providing access to Internet services like email, instant messaging and social networking.

At the same time, the mobile phone is having a phenomenal success in emerging economies. ABI Research forecasts over five billion mobile subscriptions by the end of 2010, with an approximate 4.8 billion connections having been reached by the end of the year's first quarter. According to ABI Research, much of this growth will be registered in developing markets in Africa and the Asia-Pacific region. Africa remains the fastest growing mobile market with a year-on-year growth of over 22%. Mobile penetration in Asia-Pacific will rise significantly to 65% by the end of 2010. "This unprecedented growth is driven by India and Indonesia, which have together added over 150 million subscriptions in the past four quarters," comments ABI Research analyst Bhavya Khanna.

Synchronica believes that in emerging markets where consumers are mostly reliant on Internet cafes, the mobile phone has a unique opportunity to become the primary access device for Internet services. We believe that Synchronica's products and our strategy are well positioned to take advantage of this opportunity and accelerate the Group to a leading position in the race to market leadership for next-generation mobile messaging in emerging markets.

Global Reseller Network

Synchronica has established reseller arrangements with large organisations, the most important among these are Brightstar, Nokia Siemens Networks, and an Asian-based telecommunications vendor providing global reach and local presence.

The reseller network is key to our accelerated market penetration, enabling the Group to scale beyond the capabilities of our direct sales force. In the first six months of 2010, we announced several deals received through our global reseller network, including the first significant purchase order generated thorough the preferred global reseller agreement with Nokia Siemens Networks.

Colibria Transaction

A key development this period was the agreement in March 2010 to acquire Colibria's IMPS business, including its technology and its entire IMPS customer base. This was an important milestone for the Group as it accelerates our entry to the instant messaging market and is also expected to boost sales of the MessagePhone™.

Synchronica continues to develop, market and support Colibria's open standards-based IM technology, and has started to integrate the Colibria product into Mobile Gateway. The Colibria IM client is also being pre-installed on the MessagePhone™ generating immediate synergy between the two products.

The transaction expanded Synchronica's customer base with 13 additional carrier contracts. Most importantly, the acquired contracts include group-wide framework agreements with two large-multinational operator groups, which provide a combined addressable market of more than 320 million subscribers.

The acquisition was well supported by new and existing institutional investors, and we received positive feedback from customers and partners, which we regard as a validation of our expansion strategy.

Customer Traction

Synchronica welcomed its 40th mobile operator customer in June 2010, effectively increasing the Group's customer base by 300% since 2007. The Group now has 20 mobile operators in live operation with its mobile email and mobile instant messaging products representing an addressable market of more than 430 million end-users. In addition, our mobile messaging solutions are currently being deployed to a further 20 carriers in parallel with anticipated launch dates in July and August increasing the addressable market to more than 660 million end-users.

Outlook

2010 has shown a promising start with a healthy pipeline of mobile operator and manufacturer prospects, the announcement of a major improvement to our flagship product, Mobile Gateway, the acquisition of Colibria's IMPS business, and the closing of three $1m plus deals in June 2010. We believe this momentum can be maintained for the second half, as we expect to announce further contract wins with mobile operators and device manufacturers and further milestones in our expansion strategy.

Our revenue channels are now more diverse and we are making significant progress in our transition of the revenue profile towards recurring revenues which will lead to a more predictable and sustainable cash-flow. We are now earning revenue from hosting arrangements, professional services, support and maintenance, and of course the MessagePhone™ and other devices with a mix of perpetual licenses and revenue share agreements.

With a sustained commitment to developing our product to meet the needs of our market, in tandem with a strong and recognised brand within the mobile industry, a global international reseller network of system integrators and hardware manufacturers, Synchronica is making great progress towards becoming the market leader for next-generation mobile messaging services in emerging markets.

Carsten Brinkschulte

Chief Executive Officer

14 July 2010

Independent Review Report To Synchronica Plc

Introduction

We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises of a Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Group's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the Group in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

Emphasis of matter - going concern

We have considered the adequacy of the disclosure made in note 1 of the financial statements concerning the Group's ability to continue as a going concern. The Group is reliant on signing new deals with customers which are expected but not guaranteed in order to continue as a going concern. These conditions, along with other matters discussed in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

BDO LLP

Chartered Accountants and Registered Auditors

Gatwick

United Kingdom

14 July 2010

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated Statement of Comprehensive Income

for the six month period ended 30 June 2010

	Note	6 months to 30 June 2010 (unaudited)	6 months to 30 June 2009 (unaudited)	Year to 31 December 2009 (audited)
			(restated)
		£'000	£'000	£'000
Revenue		3,430	1,328	3,827
Cost of Sales		(153)	(152)	(154)
		________	________	________
Gross profit		3,277	1,176	3,673
Administrative costs
Exceptional Items		-	-	(925)
Other administrative expenses		(4,077)	(3,517)	(5,986)
Total administrative costs		(4,077)	(3,517)	(6,911)
		________	________	________
Operating loss		(800)	(2,341)	(3,238)
Finance income		2	96	92
Finance costs		(545)	(242)	(75)
		________	________	________
Loss before taxation		(1,343)	(2,487)	(3,221)
Taxation	2	44	221	144
		________	________	________
Loss for the period after tax attributable to the equity holders of the parent company		(1,299)	(2,266)	(3,077)
Other comprehensive income:
Exchange difference on translation of foreign operations		(62)	(117)	(98)
		________	________	________
Total comprehensive income for the period		(1,361)	(2,383)	(3,175)
		________	________	________
Loss per ordinary share from continuing operations
Basic and diluted loss per ordinary share	3	(0.2p)	(0.6p)	(0.6p)
		________	________	________

Consolidated Statement of Financial Position

as at 30 June 2010

	6 months to 30 June 2010 (unaudited)	6 months to 30 June 2009 (unaudited)	Year to 31 December 2009 (audited)
		(restated)
	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets	10,858	4,326	5,079
Property plant and equipment	191	148	165
Derivative financial instruments	711	207	194
	________	________	________
Total non-current assets	11,760	4,681	5,438
	________	________	________
Current assets
Trade and other receivables	4,519	1,386	1,659
Corporation tax	-	221	14
Cash and cash equivalents	781	255	2,633
	________	________	________
Total current assets	5,300	1,862	4,306
	________	________	________
TOTAL ASSETS	17,060	6,543	9,744
	________	________	________
Current liabilities
Trade and other payables	2,336	2,411	1,911
Corporation tax	17	-	88
Provisions	1,120	1,004	1,027
	________	________	________
Total current liabilities	3,473	3,415	3,026
	________	________	________
Non-current liabilities
Provisions	376	373	336
Deferred tax liability	1,380	140	76
	________	________	________
Total non-current liabilities	1,756	513	412
	________	________	________
Total liabilities	5,229	3,928	3,438
	________	________	________
Equity and Reserves
Ordinary share capital	8,396	3,885	5,775
Share premium account	22,381	17,968	20,572
Merger reserve	2,346	1,578	1,578
Capital to be issued	1,622	-	-
Accumulated losses	(22,669)	(20,614)	(21,436)
Translation reserve	(245)	(202)	(183)
	________	________	________
Equity attributable to shareholders of the parent company	11,831	2,615	6,306
	________	________	________
TOTAL EQUITY AND LIABILITIES	17,060	6,543	9,744
	________	________	________

Consolidated Statement of Cash Flow

For the six month period ended 30 June 2010

		6 months to 30 June 2010 (unaudited)	6 months to 30 June 2009 (unaudited)	Year to 31 December 2009 (audited)
			(restated)
		£'000	£'000	£'000
Cash flow from operating activities
Loss before taxation		(1,343)	(2,487)	(3,221)
Adjusted for:
Depreciation		60	53	134
Amortisation of intangibles		566	162	413
Impairment of intangibles		-	-	35
Loss on disposal of property plant and equipment		-	5	19
Finance income		(2)	(96)	(92)
Finance costs		545	242	75
Equity settled share based payment		66	90	79
		_______	_______	_______
Cash flows from operating activities before changes in working capital and provisions		(108)	(2,031)	(2,558)
(Increase)/decrease in receivables		(2,628)	124	(134)
(Decrease)/increase in provisions		(48)	(55)	(108)
Increase/(decrease) in payables		556	(1,458)	(1,937)
		_______	_______	_______
Cash utilised in operating activities		(2,228)	(3,420)	(4,737)
Tax (paid) / received		(46)	104	251
		_______	_______	_______
Net cash used in operating activities		(2,274)	(3,316)	(4,486)
		_______	_______	_______
Cash flow from investing activities
Acquisition of subsidiary net of cash acquired		(658)	-	-
Purchase of intangible assets		(1,499)	(375)	(1,322)
Purchase of property plant and equipment		(46)	(14)	(126)
		_______	_______	_______
Net cash used in investing activities		(2,203)	(389)	(1,448)
		_______	_______	_______
Cash flow from financing activities
Net proceeds from issue of ordinary share capital		2,510	285	4,779
Proceeds from derivative financial instruments		212	286	461
Finance costs paid		(1)	-	(7)
Interest received		2	40	22
		_______	_______	_______
Net cash generated from financing activities		2,723	611	5,255
		_______	_______	_______
Net decrease in cash and cash equivalents		(1,754)	(3,094)	(679)
Cash and cash equivalents at 1 January		2,633	3,494	3,494
Effects of exchange rate changes on cash equivalents		(98)	(145)	(182)
		_______	_______	_______
Cash and cash equivalents at period end		781	255	2,633
		_______	_______	_______

Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2010

	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 2009	3,785	17,783	1,578	-	(18,438)	(85)		4,623
Adjustment for share based payments	-	-	-	-	90	-		90
Proceeds from placing	100	185	-	-	-	-		285
Total comprehensive income	-	-	-	-	(2,266)	(117)		(2,383)
	____	______	______	______	_______	_______		_______
At  30 June 2009	3,885	17,968	1,578	-	(20,614)	(202)		2,615
Adjusted   Adjustment for share based payments	-	-	-	-	(11)	-		(11)
Proceeds from placings	1,890	2,604	-	-	-		-		4,494
Total comprehensive income	-	-	-	-	(811)		19		(792)
	____	______	______	______	_______		_______		_______
At 31 December 2009	5,775	20,572	1,578	-	(21,436)		(183)		6,306
Adjustment for share based payments	-	-	-	-	66		-		66
Proceeds from placing	1,116	1,394	-	-	-		-		2,510
Shares issued in exchange for derivative financial assets	880	415	-	-	-		-		1,295
Shares issued as consideration for acquisitions	625	-	768	1,622	-		-		3,015
Total comprehensive income	-	-	-	-	(1,299)		(62)		(1,361)
	____	______	______	______	_______		_______		_______
At 30 June 2010	8,396	22,381	2,346	1,622	(22,669)		(245)		11,831
	____	______	______	______	_______		_______		_______

Notes to the Interim Financial information for the six month period ended 30 June 2010

1. Basis of preparation

This financial information has been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS), International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. All accounting standards and interpretations issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee effective at the time of preparing these financial statements have been applied.

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 2010 and are unchanged from those disclosed in the Group's Report and Financial Statements for the year ended 31 December 2009.

The financial information for the six months ended 30 June 2010 and the six months ended 30 June 2009 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 2009 has, however, been derived from the audited statutory financial statement for that period.  A copy of those statutory financial statements has yet to be 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 498(2) or 498(3) of the Companies Act 2006.

The Board of Directors approved this interim report on 13 July 2010.

2. Taxation

The taxation charge for the six months to 30 June 2010 is based on the effective taxation rate, which is estimated will apply to earnings for the year ending 31 December 2010.

3. Loss per share

	6 months to 30 June 2010 (unaudited)		6 months to 30 June 2009 (unaudited)		Year to 31 December 2009 (audited)
	£'000		£'000		£'000
Numerator
Losses used for calculation of basic and diluted EPS	(1,299)		(2,266)		(3,077)
	_______		_______		_______
Denominator
Weighted average number of ordinary shares used in basic EPS	709,260,331		387,053,448		479,249,011
Basic and diluted loss per ordinary share	(0.2p)		(0.6p)		( 0.6p)
	_______		_______		_______

537,523,729 (June 2009: 44,476,681, December 2009: 67,694,512) 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. Prior Year Adjustment

The position of the Group as at 31 December 2008 was amended in the financial statements for the year ended 31 December 2009.The restatement of the position at 30 June 2009 reflects the impact of these changes and are as follows:

(1)	The group adopted IFRS 3 early in order to provide a consistent approach to this and future acquisitions.
(2)	The fair value of the 2008 acquisition has been amended to reflect the stage of completion of customer installations.
(3)	The effect of deferred tax on the 2008 acquisition was not accounted for in the 2008 accounts. The directors had not previously felt that the year end balance was material. This was revised on the review of the fair value position.
(4)	The merger reserve has been separated from the share premium account to comply with the Companies Act 2006.

Group	As Previously Stated £'000	Adoption of IFRS3 (revised) (1) £'000	Revision of 2008 Acquisition Fair Value (2) £'000	Deferred Tax on Acquisition (3) £'000	As Restated £'000
Effect on Statement of Financial position
Intangible assets	3,449	(105)	713	269	4,326
Trade and other payables	(1,166)	(532)	(713)	-	(2,411)
Deferred tax liability	-	-	-	(140)	(140)
Other net assets	840	-	-	-	840
	______	______	______	______	______
Net Assets	3,123	(637)	-	129	2,615
	______	______	______	______	______
Capital to be issued	532	(532)	-	-	-
Accumulated losses	(20,638)	(105)	-	129	(20,614)
Other equity reserves	23,229	-	-	-	23,229
	______	______	______	______	______
Equity	3,123	(637)	-	129	2,615
	______	______	______	______	______

 

END

 

 

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