Half Yearly Report

RNS Number : 1341X

EXPANSYS plc

08 January 2014

 



EXPANSYS PLC

("EXPANSYS" or the "Company" or the "Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2013

EXPANSYS plc (AIM: XPS), a global provider of end-to-end ecommerce and fulfilment solutions in the consumer electronics and wireless sectors, announces interim results for the six months ended 31 October 2013.

Financial Headlines

-     Turnover up 32% to £60.2m (H1 2012: £45.6m)

-     Adjusted profit before tax £0.3m (H1 2012: £0.4m)

-     Loss before tax £2.4m  (H1 2012: loss of £2.1m)

-     Exceptional charges of £2.2m (H1 2012: £2.3m)

Trading Headlines

o  US SIM business going through substantial change but has suffered an exceptional charge of £2.2m

o  DSNS UK in line with management expectations

o  Growth in turnover from retail business of 23%

o  Reduction in losses in the retail business of £700k to circa £150k

o  Growth in turnover from Partner division of 37%

Bob Wigley, Chairman of EXPANSYS, commented:

'It is disappointing that some encouraging trading in the first half of the year has been adversely affected by an exceptional charge related to our US SIM business.'

Enquiries:

EXPANSYS plc Anthony Catterson, CEO Chris Ogle, CFO               N+1 Singer Jonny Franklin-Adams Tel. [phone]

(via N+1 Singer) [e-mail]

CHAIRMAN'S STATEMENT

EXPANSYS announces its results for the six months ended 31 October 2013.  

Financial Review

Total turnover for the Group in the period increased by 32% to £60.2 million compared to the same period last year (H1 2012: £45.6 million). Revenue growth has come mainly from the Retail divisions.

The profit before tax as adjusted for share-based payments, foreign exchange and exceptional items was £0.3 million (2012: £0.4 million). 

After share-based payments, foreign exchange and exceptional items the loss before tax for the period was £2.4 million (H1 2012: loss of £2.1 million).

Cash at the end of October 2013 was £7.2 million (H1 2012: £2.3 million), however we do not expect a significant variance to market expectations at the year end.

Divisions

DSNS

Turnover in the US SIM business grew strongly in the period. However in building this business significant credit was extended to a trading partner to support the sales activities and a substantial receivable of c. £2.2 million was created. Changes in the business model impacted our partner's business and resulted in the debt becoming overdue.  On the basis of recent discussions the Board has prudently concluded that there is sufficient doubt about the recoverability of the debt to require a provision in full. Because of the amount involved this has been treated as an exceptional item.

DSNS USA is going through substantial changes as we evolve strategically from being a SIM distributor to a Network and SIM solutions provider for resellers, distributors and Mobile Network Operators.

As part of this planned change our US SIM business has recently been awarded an exclusive three year contract with T-Mobile in the USA, to become their prepaid top-up solution provider to the independent wholesale channel. This migration in business model has the potential to significantly improve the quality and scale of our business in the USA, and we are working with T-Mobile to develop the opportunity.

The SIM business model in the UK is now predominantly based upon revenue share from our network/MVNO suppliers and we have concentrated upon developing higher quality retail channels for the distribution of our SIMs. We will look to continue to develop our position in this channel, as well as provide differentiated services.

During the period, we have made the small acquisition of a 50% stake in SIMS4U, a UK based SIM distributor into the independent retail channel, and will look to leverage this incremental footprint of up to 40,000 locations through our channel experience and network relationships.

EXPANSYS.com

Revenues from EXPANSYS's own websites grew by 8% in the first half of the year, and B2B revenues grew strongly by 58%. Growth in Asia has been particularly strong with revenue from our own websites up by more than 40%. We have established local market presence in both Taiwan and China and we expect to see the benefits of this investment in H2. To continue to realise the growth potential of this region we have recently moved to a new, greater capacity fulfilment and office facility in Hong Kong, to service our fast growth Asian website and partner businesses.

Having reduced costs materially in FY 13 and generated revenue growth of 39%, the European operation has returned to profitability in this period.  The US region has also delivered a contribution to profit in the period, a turn-around from the losses in the first half last year.

Partners

Our partner strategy is to leverage our unique global infrastructure to support technology brands and network operators through a variety of end-2-end solutions (from ecommerce to fulfilment to customer support) thereby enabling them to sell their products directly to consumers and businesses across international markets. This is a more consistent and stable business model for us and with additional value added to our partners it offers higher and better quality returns than our core retail business.

We continue to look for new partnerships and are encouraged by our discussions with new potential partners.

PJ Media

PJ Media has performed below expectations during the first half and as a result we have significantly reduced costs. We expect to see a stronger second half compared to the first half and we will continue to develop our sales pipeline, including in Asia. PJ Media has diversified its offering but the board recognises that a more focused sales approach is required to maximise the opportunities that it has.

Current trading and outlook

Trading during the November and December periods has been in line with expectations, with continuing momentum in the retail and partner businesses.

Bob Wigley

Chairman

8 January 2014

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended 31 October 2013

		6 months ended	6 months ended
		31 October 2013	31 October 2012
	Note	£000	£000
Revenue		60,175	45,643
Cost of sales		(50,776)	(36,375)
Gross profit		9,399	9,268
Distribution costs		(2,352)	(1,910)
Exceptional administrative items	2	(2,177)	(2,313)
Amortisation of acquired intangibles		-	(6)
Share-based payments expense		(100)	(172)
Foreign exchange		(426)	(22)
Other administrative expenses		(6,754)	(6,987)
Administrative expenses		(9,457)	(9,500)
Operating loss		(2,410)	(2,142)
Finance costs		(7)	(5)
Share of loss in associates		(5)	-
Loss before taxation	3	(2,422)	(2,147)
Income tax credit		17	547
Loss for the half year		(2,405)	(1,600)
Attributable to owners of the parent		(2,411)	(1,628)
Attributable to non-controlling interests		6	28
Currency translation differences		110	(56)
Total comprehensive expense for the half year		(2,295)	(1,656)
Attributable to owners of the parent		(2,301)	(1,684)
Attributable to non-controlling interests		6	28
Earnings per share (pence)
Basic loss per share for the half year	4	(0.21p)	(0.14p)
Diluted loss per share for the half year	4	(0.21p)	(0.14p)
Adjusted basic earnings per share for the half year *	4	0.03p	0.08p
Adjusted diluted earnings per share for the half year *	4	0.03p	0.08p

* The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled.  The method of calculating adjusted earnings is detailed in note 3.

GROUP STATEMENT OF FINANCIAL POSITION

		As at	As at	As at
		31 October 2013	30 April  2013	31 October 2012
		£000	£000	£000
ASSETS
Non current assets
Plant and equipment		849	808	714
Intangible assets		33,635	33,701	50,762
Investments in associates		115	-	-
Deferred income tax assets		475	475	339
		35,074	34,984	51,815
Current assets
Inventories		3,393	2,975	3,393
Trade and other receivables		8,655	9,035	11,200
Cash and short term deposits		7,197	3,347	2,270
Restricted cash deposits		736	2,426	-
		19,981	17,783	16,863
Total assets		55,055	52,767	68,678
LIABILITIES
Current liabilities
Trade and other payables		(18,413)	(13,796)	(11,721)
Financial liabilities		(215)	(95)	(30)
Income tax payable		-	-	(168)
Government grants		(28)	(38)	(50)
Provisions		(275)	(486)	(2,279)
		(18,931)	(14,415)	(14,248)
Non current liabilities
Financial liabilities		(85)	(129)	-
Deferred income tax liabilities		-	-	(8)
		(85)	(129)	(8)
Total liabilities		(19,016)	(14,544)	(14,256)
Net assets		36,039	38,223	54,422
Capital and reserves
Equity share capital		2,905	2,900	2,896
Equity share premium		37,593	37,587	37,582
Merger reserve		24,417	24,417	24,417
Currency translation		607	497	518
Retained losses		(29,574)	(27,263)	(11,081)
Equity attributable to equity holders of the parent company		35,948	38,138	54,332
Non-controlling interests		91	85	90
Total equity		36,039	38,223	54,422

GROUP STATEMENT OF CHANGES IN EQUITY

For the 6 months ended 31 October 2013

	Equity share capital £000	Equity share premium £000	Merger reserve £000	Currency translation reserve £000	Retained earnings £000	Non-controlling interests £000	Total equity £000
At 1 May 2013	2,900	37,587	24,417	497	(27,263)	85	38,223
Loss for the period	-	-	-	-	(2,411)	6	(2,405)
Exchange differences*	-	-	-	110	-	-	110
Total comprehensive loss for the period	-	-	-	110	(2,411)	6	(2,295)
Equity share issue	5	6	-	-	-	-	11
Share-based payment	-	-	-	-	100	-	100
Total contributions by and distribution to owners of the Company	5	6	-	-	100	-	111
At 31 October 2013	2,905	37,593	24,417	607	(29,574)	91	36,039

	Equity share capital £000	Equity share premium £000	Merger reserve £000	Currency translation reserve £000	Retained earnings £000	Non-controlling interests £000	Total equity £000
At 1 May 2012	2,893	37,574	24,417	574	(9,625)	62	55,895
Loss for the period	-	-	-	-	(1,628)	28	(1,600)
Exchange differences*				(56)			(56)
Total comprehensive loss for the period	-	-	-	(56)	(1,628)	28	(1,656)
Equity share issue	3	8	-	-	-	-	11
Share based payment	-	-	-	-	172	-	172
Total contributions by and distribution to owners of the Company	3	8	-	-	172	-	183
At 31 October 2012	2.896	37,582	24,417	518	(11,081)	90	54,422

*Exchange differences relate to the retranslation of net assets of subsidiary undertakings.

GROUP CASH FLOW STATEMENT

For the 6 months ended 31 October 2013

		6 months ended	6 months ended
		31 October 2013	31 October 2012
	Note	£000	£000
Cash flows from operating activities
Loss before income tax		(2,422)	(2,147)
Depreciation		125	121
Amortisation		294	214
Equity-settled share-based payment expense		110	182
Foreign exchange		0	22
Net finance costs		7	(3)
(Increase) / decrease in inventories		(453)	1,342
Increase / (decrease) in trade and other receivables		215	(2,541)
Increase / (decrease) in trade and other payables		6,645	(541)
(Release of) / increase in provisions		(168)	991
Cash generated from / (used in) operations		4,353	(2,360)
Interest (paid) / received		(7)	3
Income tax paid		(53)	(82)
Net generated from / (used in) operating activities		4,293	(2,439)
Purchase of property, plant and equipment		(203)	(402)
Disposals of property, plant and equipment		31	-
Purchase of intangible assets		(229)	(318)
Consideration paid for associates		(114)	-
Net cash used in investing activities		(515)	(720)
Proceeds from borrowings		116	-
Capital repayment of borrowings		(10)	(23)
Capital repayment of finance leases and hire purchase contracts		(41)	(4)
Net generated from / (used in) financing activities		65	(27)
Increase / (decrease) in cash and cash equivalents		3,843	(3,186)
Cash and cash equivalents as at 1 May		3,347	5,485
Effects of exchange rate changes		7	(29)
Cash and cash equivalents as at 31 October		7,197	2,270

NOTES

1.  Basis of preparation and accounting policies

The financial information comprises the unaudited results for the six months ended 31 October 2013 and 31 October 2012.

The condensed consolidated financial statements for the six months ended 31 October 2013 should be read in conjunction with the annual financial statements for the year ended 30 April 2013 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  The Auditors' Report on those statements was unqualified and did not contain any statements under section 498 of the Companies Act 2006.

The Group's principal accounting policies used in preparing this information are as stated in the financial statements for the year ended 30 April 2013, which have been filed with the Registrar of Companies, and are available on our website www.EXPANSYS.com .

2.  Exceptional items

	6 months ended	6 months ended
	31 October 2013	31 October 2012
	£000	£000
Administrative expenses
Provision for disputes with customers/trading partners	-	1,300
Provision for bad debt	2,177	-
Costs in relation to office relocation and redundancies	-	893
Aborted acquisition costs	-	87
Other	-	33
Total exceptional costs	2,177	2,313

3.  Adjusted measures

The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled.

The tables below illustrate how the key adjusted measures are calculated.

	6 months ended	6 months ended
	31 October 2013	31 October 2012
	£000	£000
Loss before tax for the half year (as reported)	(2,422)	(2,147)
Add back:
Amortisation of acquired intangibles	-	6
Exceptional items	2,177	2,313
Foreign exchange	426	22
Share-based payments expense	100	172
Adjusted profit before tax for the half year	281	366

		6 months ended	6 months ended
		31 October 2013	31 October 2012
		£000	£000
Loss for the half year attributable to equity holders of the parent company (as reported)		(2,411)	(1,628)
Add back:
Amortisation of acquired intangibles		-	6
	Exceptional items	2,177	2,313
	Foreign exchange	426	22
	Share-based payments expense	100	172
	Adjusted profit for the half year attributable to equity holders of the parent company	292	885

Calculations for adjusted earnings per share use adjusted profit for the half year attributable to equity holders of the parent company (shown above) and are detailed in note 4.

4.  Earnings per ordinary share

Basic earnings per share amounts are calculated by dividing earnings/(loss) for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share for the year amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	6 months ended	6 months  ended
	31 October 2013	31 October  2012
	£000	£000
Loss for the period	(2,405)	(1,600)
Less earnings attributable to non-controlling interests	(6)	(28)
Loss attributable to equity holders of the parent	(2,411)	(1,628)

	6 months ended	6 months ended
	31 October 2013	31 October 2012
	'000	'000
Basic weighted average number of shares	1,158,278	1,157,707
Dilutive potential ordinary shares:
Employee and consultant options	1,480	4,396
Diluted weighted average number of shares	1,159,758	1,162,103

Where ordinary shares are issued at a discount to the market price, the weighted average number of shares should reflect that the discount is effectively a bonus given to shareholders for no consideration.  The weighted average number of shares in the current year and prior year reflect this. 

The amounts for earnings per share are as follows:

	6 months ended	6 months ended
	31 October 2013	31 October 2012
Basic loss per share	(0.21p)	(0.14p)
Diluted loss per share	(0.21p)	(0.14p)

Adjusted earnings per ordinary share

The Directors believe that reporting adjusted measures provides a more useful comparison of business performance and reflects the way in which the business is controlled.

To this end, basic and diluted earnings per share are also presented on this basis below. 

Adjusted profit for the half year attributable to equity holders of the parent is calculated in note 3 above, and is as follows:

	6 months ended	6 months  ended
	31 October 2013	31 October  2012
	£000	£000
Adjusted profit attributable to equity holders of the parent	292	885

The amounts for adjusted earnings per share using this adjusted profit for the half year attributable to equity holders of the parent are as follows:

	6 months  ended	6 months ended
	31 October 2013	31 October 2012
Adjusted basic earnings per share	0.03p	0.08p
Adjusted diluted earnings per share	0.03p	0.08p

5.    Approval by the Board of Directors and Audit Committee

The interim statement was approved by the Board of Directors and the Audit Committee on 7 January 2014 and is neither audited nor reviewed by the Group's auditors.

The Directors of EXPANSYS plc are listed in the EXPANSYS plc Annual Report for 30 April 2013.  A list of current directors is maintained on the EXPANSYS plc website www.EXPANSYS.com .

 

END

 

 

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