Final Results
Cashbox PLC
20 December 2007
Press Release 20 December 2007
Cashbox Public Limited Company
('Cashbox' or 'the Company')
Preliminary Results for the year ended 30 June 2007
Cashbox (AIM:CBOX), the independent Automated Teller Machine ('ATM') deployer
and operator, announces its preliminary results for the year ended 30 June 2007.
John Maples, Chairman said
'2006/07 has been a transformational year for Cashbox. As a result of changing
funding partners and executive management, the underperforming business of much
of the year, has evolved into a predictable, consistent, execution focused
company, with a clear strategy for growth and future profitability'.
Year ended Year ended
30 June 2007 30 June 2006
Machines installed at period end 1,442 1,058
Turnover £000 4,380 3,159
Gross Margin % 27% 29%
EBITDA *+ £000 (3,510) (2,048)
Loss on ordinary activities before exceptionals*
£000 (4,056) (2,458)
Loss on ordinary activities after exceptionals
£000 (6,741) (3,637)
Loss per share before exceptionals*(pence) (6.3) (5.8)
Loss per share after exceptionals (pence) (10.5) (8.5)
Net debt £000 855 315
* exceptional items are £2,000,000 and £685,000 in year ended 30 June 2007
relating to litigation settlement costs and lease termination costs respectively
and £1,179,000 in year ended 30 June 2006 relating to listing and share option
costs.
+ EBITDA is defined as Earnings before interest, tax, depreciation and
amortisation, share based payments and exceptional items, (see note 11).
Highlights
• Installed estate increased to 1,442 despite difficulties with lease provider
during year; increasing installed estate market share (of surcharging IADs)
from 4.2% to 5.7%, with a smaller growth from 1.4% to 1.5% share of the
total IAD transaction volumes market.
• Turnover up 39% from last year.
• Loss on ordinary activities increased due to higher administration costs and
lease termination costs.
• Replacement of previous lease facilities with new loan facilities signed in
June 2007.
• Further £3.26m of equity raised in May 2007 and £583,000 convertible loan
note issued in December 2007.
• Litigation settled with Hanco at a total of £2.0m.
For further information:
Cashbox plc
David Auger, Chief Financial Officer Tel: +44 (0) 1256 441000
dauger@cashboxplc.co.uk www.cashboxplc.co.uk
Seymour Pierce Limited
Jonathan Wright Tel: +44 (0) 20 7107 8000
www.seymourpierce.com
Fairfax IS PLC
Ewan Leggat Tel: +44 (0) 20 460 4389
www.fairfaxplc.com
Media enquiries:
Threadneedle Communications
Josh Royston / Graham Herring Tel: +44 (0) 20 7936 9606
www.threadneedlepr.co.uk
CHAIRMAN'S STATEMENT
My statement as Chairman of Cashbox comes following a difficult period for the
Company. The dismissal of the founder and former CEO, Carl Thomas, has meant
that the Company has had to meet an unanticipated challenge. Further, it was
necessary to change funding providers, resulting in delays in the installation
of ATMs across our estate. This has meant that the Company has gone through a
challenging year to say the least. Each of these factors would have been
impossible to envisage at the start of the year.
We now have a new Chief Executive Officer in Ciaran Morton and a new Chief
Financial Officer in David Auger. Together with Matt Thomas and Andy Wilmott,
they form a first class senior executive team, which gives us confidence for the
future. They have already negotiated new funding arrangements with the Bank of
Scotland, which provide greater access to capital and the flexibility needed to
roll out our ATMs more aggressively.
Despite these difficulties, we have continued to benefit from one of the UK's
fastest organically grown estates of ATMs. We have negotiated new agreements,
which complement our already impressive client list. These new contracts will
open up opportunities for further growth in the Group's estate. At the beginning
of the year (July 2006) the business had 1,058 installed ATMs. This rose to
1,442 installed ATMs by June 2007 and was over 1,750 by the middle of December
2007.
2007 results
Sales for the year to 30 June 2007 were £4,380,000 (2006: £3,159,000) resulting
in an operating loss of £5,932,000 (2006: £3,396,000) and a loss before tax of
£6,741,000 (2006: £3,637,000). These results are very disappointing but there
were exceptional items of £2,000,000 litigation settlement costs and an
exceptional finance charge of £685,000 to resolve the Group's lease finance
arrangements as well as the large professional fees in connection with the Hanco
lawsuit and other legal and financial expenses.
Consistently, through the year, Cashbox has continued to secure contracts to
roll out ATMs into both independent and managed sites. There continues to be a
large number of contract opportunities ahead for the Company which we will
continue to pursue.
We have maintained our focus on the Merchant Fill model which has seen the
estate grow by 36.2% in the last year. This model continues to present the best
option for many of our customers who, in turn, are able to offer an added value
service to their customers. The business model has further been developed to
ensure that the commissions paid out to the merchant relate directly to the
transaction levels in that particular site.
Resource
With the challenges highlighted above, the Company's resilience and
determination to succeed have been evident in the past year. I believe that we
have a Company which is professional and resolute in its partnership with its
customers, and one that continues to ensure that the customer experience with
Cashbox is productive. I believe our shareholders can have confidence that we
have built a professional team that will create both significant value for
investors and an effective service for our customers.
Hanco Litigation
In October 2007, we were able to agree a full and final settlement with Hanco in
respect of the long standing litigation between the two companies. In the
settlement, Cashbox ATM Systems Limited will pay an additional £1.8m, on top of
the £200,000 already paid. As previously announced to the market and
shareholders, Cashbox ATM Systems Limited has the benefit of a joint and several
indemnity from Carl Thomas and Anthony Sharp in connection with this litigation,
which Directors intend to enforce to recover the £2m. This brings to an end the
litigation which has been a drain on management time, and was continuing to
incur substantial legal bills. The Board did not believe that continuing the
litigation was in the best interests of shareholders.
The Board was surprised and disappointed to receive a letter from Anthony Sharp
disputing the validity of his indemnity to Cashbox ATM Systems Limited. The
Board has subsequently received legal advice supporting that the indemnity is
valid and enforceable. As the indemnity is a reimbursement and receipt is not
virtually certain, the amount recoverable will not be recorded as a receivable
until receipt is virtually certain in accordance with UK GAAP. Hence, the value
of the indemnity does not appear on the Balance Sheet. However, shareholders can
rest assured that the Board intends to pursue the indemnity to the full extent
of its powers.
Post Balance Sheet Events
The rollout of ATMs has been slower than expected for several reasons, not least
being changes to the production procedure of our ATM supplier. This, coupled
with a maturing market, has led to slower installation rates than originally
planned. Breakeven, which was expected towards the end of 2007, is now forecast
for summer 2008. As a result we have had to raise new operating capital, as well
as re-structure our existing arrangements with Bank of Scotland. I am happy to
report that we have achieved this.
Bank of Scotland have agreed to lengthen our drawdown period from March 2008 to
December 2008, with a corresponding reduction in the required facility from £8m
to £6m, reflecting current trading conditions. This was agreed on the basis that
we raised £1m of funding for operating capital, which we have done in the form
of one convertible loan and one non-convertible loan. The convertible loan of
£583,000 has already been loaned to the Company and the non-convertible loan of
£417,000 is available from 31 March 2008.The Board are proposing a fund raising
in 2008 about which shareholders will be notified in due course.
The Board recognises that there are now two main goals for the business:
•To continue to exploit the opportunity in the market to grow the core
business organically. With that in mind, Matthew Thomas (Chief Technology
Officer), and Andrew Wilmott (Technical Director) will focus upon driving
the execution of this growth taking major roles within the Executive Board
of the operating company, Cashbox ATM Systems Limited. They will relinquish
their plc roles in order to achieve this goal.
•To develop a more external focus, with a view to deriving value from
transactions in what we believe to be a market ready for consolidation. This
requires the Board leadership to leverage a different skill-set from that of
running and growing an existing business operation. Cashbox is fortunate to
have that talent already in place. It is my intention to step down at the
AGM and allow Non-executive Director, Robin Saunders, with her considerable
financial market experience, to replace me as Chair, to take forward this
next phase of Cashbox's evolution. Non-executive Director, Stephen L Brown,
will also stand down at the next AGM, to enable a balanced Board of two
Executives, Ciaran Morton and David Auger, and two Non-executives, Robin
Saunders and William Hughes to leverage transactional value in a changing
market.
2007/08
The current year will be one of high expectations, challenges and hard work for
Cashbox, with demanding yet achievable goals. The rollout of ATMs will continue
and we intend to reach monthly break-even during 2008. I send my fellow
Directors and all the staff at Cashbox my best wishes for their future success.
John Maples
Chairman
19 December 2007
CHIEF EXECUTIVE'S STATEMENT
Whilst the last year has clearly been a challenging one for the business, it has
also clearly proved that Cashbox has the resilience, capabilities and the
correct strategy to thrive in a highly competitive marketplace. There has been
considerable change within both the Executive Management Team and the
Non-executive Board. However, staff both old and new have remained fully focused
upon the cornerstones of our business, namely:
•The continuing acquisition of key client contracts with high volume
estates;
•The rapid conversion and installation of profitable sites within these
estates;
•The provision of outstanding service and support levels to drive
transaction volumes; and
•The utilisation of a robust and flexible platform technology and
reporting systems to ensure the maximum level of uptime for all ATMs.
During the course of 2006/07, Cashbox was hampered in its ability to execute
against those cornerstones by a lack of funding. This situation was resolved in
June 2007 by the signing of a deal with Bank of Scotland. A lack of funding also
causes a business to wholly focus upon the short term rather than plan for the
long term. Securing a funding partner has enabled management to restructure the
business with a view to meeting short term requirements whilst providing a
secure and stable platform for the consistent and predictable execution of the
growth business plan over the medium to long term.
These changes are designed to focus the business, especially sales and support
operations, upon meeting the needs of our customers. An Account Management team
has been created to develop a partnership approach with our key clients. This
single point of contact provides regular site penetration and transaction
reports, and works with our clients to target new sites and create marketing
materials to drive additional estate penetration as well as transaction volumes
within existing sites.
Closer links to our clients and the resulting increased understanding of their
business priorities also allows for the efforts of the Field Sales team to be
co-ordinated with our clients' internal marketing efforts. This has resulted in
over 30% growth of site conversions H2 v H1 in 2006/07. This performance is
expected to be maintained, if not accelerated further, in 2007/08; especially
with the recent addition of a Telephone Sales team to drive estate penetration.
Recently acquired clients such as Total Fitness and Marstons Pub Company are
experiencing a rapid fulfilment of their estate's potential thus reducing the
time to generate substantial revenues.
The provision of outstanding support services are increasingly the key business
differentiator between Cashbox and all other players in the market. By retaining
all these functions in-house, Cashbox can ensure the quality and timeliness of
all installation, upgrade and repair services. The Help Desk and Sales Support
teams were also recently merged to provide available scale for any particular
priority task, such as large scale customer roll out, software upgrades and
loading graphic images.
However, the real benefit has been the sharing of information about client
needs, issues and requests across the organisation, reducing response times and
increasing our ability to proactively manage anticipated issues. As a result,
despite growth in the installed base of nearly 50% over the past year, we have
been able to maintain our benchmark of resolving 85% of all ATM performance
issues immediately by phone, the remainder being handled in person by trained
engineers within twenty-four hours of the fault being logged. This dedicated
approach to service ensures we experience ATM uptime in excess of 98% as an
average across the entire estate. In this way, our clients are continually
driving increased footfall to their locations, and increased spending at these
locations from customers who always enjoy access to cash.
Moving into 2007/08, it is the Cashbox experience - the actual verbal and
physical interaction with Cashbox staff - that will differentiate us from our
competition. After discussing the business goals of any potential client, our
in-house survey team assesses whether an ATM can deliver those goals wholly, or
in part. This then drives the discussions between Sales Management and the
on-site Merchant to agree mutually beneficial contract terms, prior to any
installation. This integrated and professional approach to meeting our clients'
business needs together with our company wide commitment to service excellence
will ensure that Cashbox customers are fully informed as to what the ATM can
achieve for their business, and that both parties have a realistic expectation
of transaction performance. A true partnership that we expect to build upon and
renew during the lifetime of the contract.
As the Bank of Scotland funding allows for the regular purchase and roll-out of
ATMs to drive revenues, similarly the Executive Management are seeking ways to
optimise operational efficiencies, whilst driving towards sustainable profitable
growth. All major supplier contracts have been renegotiated resulting in
increased funds to invest in sales and support areas. Additional sales headcount
and capital expenditure on Customer Relationship Management software has partly
been funded out of operational efficiencies.
The placement strategy continues to drive our growth, but we have taken steps to
ensure that the rapid deployment of ATMs does not affect future profitability. A
new approach in customer contracts, which grow merchant commissions in line with
transaction volume, ensures that even low transacting ATMs generate significant
profits over the contract duration.
Transaction volumes, as expected, continue to grow, and, more importantly,
average transactions per ATM have not suffered as a result from the swing in
emphasis from sales and managed ATMs to placement ATMs. This has been driven in
part by the high quality machines used. We have recently upgraded from the Tidel
3400 to the 3600, which we believe to be 'best in class'. With enlarged screen
and enhanced colour graphics, keypad and security features, the 3600 provides
tangible reassurance to merchant and user alike.
In conclusion, a difficult year of trading, where a lack of funding and personal
governance created an environment where execution was severely hampered.
However, the staff and the new management are energised about the future. The
restructuring has created purpose and enabled focus upon those key elements of
our business that create the foundation of our long-term, profitable future.
Exit run rates from 2006/2007 are very encouraging and are built upon in H1 2007
/08.
As I look to 2007/08, I am fully resolved that the defining element of this new
Cashbox will be the delivery of consistent and predictable performance. We will
achieve this by developing meaningful partnerships that deliver true mutual
value with all of our clients, and by demanding more of ourselves and our
performance.
Ciaran Morton
Chief Executive Officer
19 December 2007
OPERATING AND FINANCIAL REVIEW
The Operating and Financial Review should be read in conjunction with the
Condensed Financial Statements starting on page 10. The figures for year ended
30 June 2006 have been restated following the adoption of the accounting
standard FRS20 on share based payments.
Operationally the business has been fundamentally restricted by the funding
difficulties which prevented the roll-out of ATMs across sites under contract.
The Board considers reaching critical mass and profitability key objectives and
the number of installations in a period to be one of the Key Performance
Indicators, KPIs.
During the year the estate was increased by 384 machines with 631 installs and
247 uplift of machines, as the machine locations were optimised when new
machines were not available. With difficulties involving General Capital Venture
Finance (GCVF) not being resolved until the end of June 2007, the increase in
the second half of the year was only marginally up on the first half. The
proportion of machines operating under the placement model, where Cashbox
retains ownership of the machine, continued to increase and at 30 June 2007 was
34% of the total estate.
Turnover
Turnover for the year was £4.4m, up 39% on last year as the business continued
to grow and further machines were installed, albeit at a slower rate than
envisaged. Gross transaction revenues were up 40% on last year to £4.0m as the
installed base of machines increased. Other revenues, principally from the sale
of machines, increased to £0.4m but the increase has slowed as the focus
continues to be on the placement model.
Gross margin
Gross margin for the year was 27%, 2 percentage points lower than the previous
year which benefited from service income from relocating a number of a
customer's ATMs. The margin on Transaction fees continued to improve with 31%
for the year against 29% in the comparable period. This is expected to continue
as the ATM estate continues to grow with the higher margin placement machines
making up a greater proportion of the estate.
Administration costs
Administration costs have risen significantly from last year as the business
continues to resolve ongoing issues. In particular salary and other related
costs are up significantly, but in line with expectations as the average number
of employees employed by the Group has risen from 22 in the year ended 30 June
2006 to 44 in the year ended 30 June 2007. 2006 also included share based
remuneration costs of £574,000 associated with the IPO recorded as an
exceptional item. While staff costs are considerably higher, the second half was
only 18% higher than the first half, as the staffing levels reached the
appropriate level to take the business forward and grow the ATM estate. The
current number of employees in October 2007, 50, is not expected to increase
significantly as the business moves forward for the foreseeable future.
Vehicle and motor expenses have also increased reflecting the growing sales
force. However these are expected to be reduced once the fleet is migrated from
short term rental contracts currently in place to a vehicle financing
arrangement with Bank of Scotland as part of the long term refinancing of the
business. Occupancy costs were £316,000 for the year up 21% all relating to
telephony while travel and entertaining expenses increased by 50% for the year.
The majority of this increase related to higher spend in the first half of the
year and spending has been dramatically reduced from the last quarter of the
year.
The other significant area of overheads are professional fees which amounted to
£874,000 during the year. This includes the cost of resolving some of the
difficulties the business has faced during the year, particularly in the second
half with the litigation costs of the Hanco case, cancelling the financing
arrangement with GCVF, arranging the new financing facility with Bank of
Scotland and the dismissal of the former chief executive. As the new management
team resolve these issues and progress to a more 'business as usual' situation
it is expected that the professional fees being incurred will significantly
reduce.
EBITDA
Earnings before interest, tax, depreciation, amortisation, share based payments
and exceptional items. This is considered a KPI for the business at its current
state of development. EBITDA, was a loss of £3.5m compared to £2.0m last year,
with the increased losses due to higher administration costs, (a reconciliation
to statutory headings is included in note 11).
Non cash administration costs
Non cash administration costs of depreciation and costs associated with share
based payments, principally the employee share option scheme, meant that the
operating loss was £3.9m before exceptionals, £1.7m worse than last year before
exceptionals, while the operating loss after exceptionals was £5.9m and last
year was £3.4m reflecting £2.0m settlement costs recorded this year and IPO
costs and share option costs at the time of the IPO of £1.2m.
Interest costs
Interest costs for the year amounted to £809,000 which included the finance cost
of exiting the GCVF lease facilities of £685,000 which has been treated as an
exceptional item. This includes a cash cost of £467,000 being the settlement of
the interest element of future rental payments under the lease agreements
together with the write off of prepaid fees £189,000 and the remaining accretion
of warrants cost issued to GCVF, £29,000, which were cancelled as part of the
settlement. Other interest costs were £161,000 partially offset by interest
income of £37,000 which arose on the Group's Bank of England settlement account.
Loss on ordinary activities
The Loss on ordinary activities for the year was £6.7m compared to a £3.6m loss
last year with the higher gross profits failing to offset the higher overheads.
Before exceptional items, losses for the year were £4.0m, against £2.5m last
year as explained above. The operating loss of £5.9m gave rise to a net cash
outflow from operating activities of £2.5m, with non cash items included in the
operating loss of £0.4m and movements in working capital of £3.0m. Closely
monitoring cashflow is critical for a business which is loss making, as Cashbox
currently is, consequently all the headings within the cashflow are considered
KPIs.
Working capital movements
Working capital movements provided a cash flow benefit as reported for the year.
The underlying performance of the same is critical to the Group maintaining a
sound financial base.
At 30 June 2006, total operating debtors amounted to £1.3m of which £840,000
related to amounts due from GCVF included in Trade debtors and relating to the
purchase and sale and leaseback of machines and other fixed assets. The last of
these monies was not received until the middle of September 2006, over 16 weeks
after it was due to be paid. This created cash-flow difficulties that lead to
delays in the purchase and roll out of ATMs. Trade Debtors at 30 June 2007 were
minimal, reflecting the situation where transaction revenues are collected
automatically through the settlement process and the sale of machines has
reduced. Total debtors at 30 June 2007 were £0.8m, including £479,000 in
relation to VAT, £306,000 of which related to VAT on the purchase of assets back
from GCVF, to be recovered from Her Majesty's Revenue and Customs (HMRC). In
addition, but not recognised in the accounts, as explained in note 10, is
£2,000,000 due from Anthony Sharp, previously Chairman, and Carl Thomas,
previously CEO, under the terms of the indemnity signed by them as part of the
IPO process under which they are jointly and severally liable for the settlement
reached with Hanco.
The increase in operating creditors resulted in a cash inflow of £2,661,000.
However underlying operating creditors were at a similar level with £543,000 of
this inflow as a result of increases in the 'Bank of England settlement'
creditor which relates to the settlement of amounts withdrawn by consumers back
to the merchants who filled the ATMs with cash as part of the three day
settlement process. It also includes the impact of the 2007 year end falling on
a Saturday compared to a Friday last year. In addition, at 30 June 2007, a
£2,000,000 liability is included in Other Creditors in relation to the Hanco
litigation of which £200,000 was paid on 24 July 2007 as described in note 9.
Servicing of finance costs
Servicing of finance costs were £580,000 including £467,000 in relation to the
GCVF settlement.
Fixed asset purchases
The investment in the future of the business through the purchase of fixed
assets, principally ATMs, was £693,000. These costs resulted in a net cash
outflow before financing of £3.7m for the year, less than the £4.6m reported in
2006. However while the majority of this reflects the losses being made rather
than investment in the business, this is disappointing.
Financing
Despite the difficulties faced by Cashbox, existing and new investors in the
business have continued to be supportive. During the second half of the year,
loans of £2.8m were raised in February and March to allow the Company time to
look at the financing alternatives. As part of the ongoing discussions with Bank
of Scotland, the Company raised £3.3m in new shares following an extraordinary
general meeting in May 2007, being £0.6m in cash and £2.7m in the conversion of
the loans raised a few months earlier. The key to the success of the placement
model is the financing of the purchase of the ATMs and in June 2007 the Company
reached settlement with GCVF, allowing the release of the charge GCVF held over
the Company's assets and allowing alternative funding from Bank of Scotland. The
net cash inflow from financing for the year was £4.7m, offsetting the cash
outflow before financing and resulting in a net increase in cash of £0.9m. For
the period until the Company moves to profitability, the long term financing of
the business has been reviewed and the refinancing described in note 9 actioned.
Increase in cash
The net increase in cash of £0.9m comprises an increase in cash held in the BOE
settlement account of £1.1m less a reduction in other cash of £0.2m. Cash at the
year end held in the BOE settlement account amounted to just over £1.3m, over
£200,000 in excess of the corresponding BOE settlement liability.
Future developments and outlook
Following the year-end, the Group has been utilising the Bank of Scotland loan
facility and is continuing the planned roll-out of ATMs with the installed base
increasing to over 1,750 machines by the middle of December. This is an increase
of 308 machines from the year end with 393 installations including 85
relocations. The 85 relocations are part of our ongoing plan to churn locations,
replacing low transacting sites with those with higher potential transaction
volumes. This churn policy also provided our ATM supplier with time to gear up
production capabilities at their new manufacturing facility. While transaction
volumes in the summer were slightly below expectations, overall transaction
revenues are continuing to grow with the increased installed base of ATMs and
are in line with future revenue expectations.
As part of the budgeting exercise for the new financial year, the new management
team has undertaken a thorough review of the cost base of the Group and has
identified considerable scope for cost savings without restricting the Group's
ability to grow to profitability. A series of action plans and targets have been
put in place across the business to realise these savings going forward,
particularly in the areas of vehicle costs, telephone communications, travel and
entertaining and professional fees. Marketing expenditure has also been
significantly reduced as the Company has moved towards targeting specific
sectors as opposed to the entire potential ATM community. It is anticipated that
these initiatives, together with the planned growth in the number of ATMs will
bring the Group to a break even position towards the end of the next financial
year. However, if the losses are forecast to extend beyond that point, then
additional cost saving measures, including possible reductions in staff, have
not been ruled out.
CASHBOX PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
Notes Year Year
ended ended
30-6-07 30-6-06
as
restated
£'000 £'000
Turnover 4,380 3,159
Cost of sales (3,219) (2,245)
--------- ---------
Gross profit 1,161 914
Administrative expenses (5,093) (3,131)
Exceptional items:
Share based remuneration (options) charge - (574)
relating to listing
Other listing costs - (605)
Litigation settlement costs 2 (2,000) -
--------- ---------
Total administrative expenses (7,093) (4,310)
--------- ---------
Operating loss (5,932) (3,396)
Interest receivable and
similar income 37 13
Interest payable and
similar charges (161) (254)
Exceptional finance charges 2 (685) -
--------- ---------
Net interest payable and
similar charges (809) (241)
--------- ---------
Loss on ordinary activities
before and after taxation (6,741) (3,637)
--------- ---------
Loss per ordinary share (pence) 3
Basic (10.5) (8.5)p
Diluted (10.5) (8.5)p
Loss on ordinary activities
excluding exceptional costs and
before and after taxation (4,056) (2,458)
All amounts relate to continuing activities.
CASHBOX PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
Notes Year ended Year ended
30-6-07 30-6-06
as restated
£'000 £'000
Loss on ordinary activities after
taxation (6,741) (3,637)
--------- ---------
Total recognised gains and losses (6,741) (3,637)
Prior year adjustments 1
- share based payments (75)
---------
Total recognised gains and losses since
the last annual report (6,816)
---------
CASHBOX PLC
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2007
Notes 30-6-07 30-6-06
£'000 £'000
Fixed assets
Tangible assets 1,090 674
Current assets
Stocks 110 22
Debtors 850 1,492
Cash at bank and in hand 1,452 536
--------- --------- ---------
2,412 2,050
Creditors: amounts
falling due within one year 4 (4,717) (2,225)
--------- --------- ---------
Net current liabilities (2,305) (175)
--------- --------- ---------
Total assets less current
liabilities (1,215) 499
Creditors: amounts
falling due after more
than one year 4 (2,305) (679)
--------- --------- ---------
Net liabilities (3,520) (180)
--------- --------- ---------
Capital and reserves
Called up share capital 832 614
Share premium account 6,925 3,880
Merger reserve 2,180 2,180
Warrants reserve - 37
Profit and loss account (13,457) (6,891)
--------- --------- ---------
Shareholders' deficit 5 (3,520) (180)
--------- --------- ---------
CASHBOX PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
Notes Year ended Year ended
30-6-07 30-6-06
£'000 £'000
Net cash outflow from
operating activities 6 (2,477) (4,327)
---------- ----------
Returns on investments and servicing of
finance
Interest received 37 13
Interest paid (150) (254)
Lease termination costs paid (467) -
---------- ----------
Net cash outflow from returns on
investment and servicing of finance (580) (241)
---------- ----------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (693) (44)
---------- ----------
Net cash outflow from capital
expenditure and financial investment (693) (44)
---------- ----------
Cash outflow before use of
liquid resources and financing (3,750) (4,612)
---------- ----------
Financing
Issue of ordinary shares for cash (net 584 5,339
of issue costs)
New loans 5,100
Cash advances from finance lease 500
provider
Loans repaid (130) (457)
Capital element of finance leases (1,388) -
repaid
Sale and leaseback of tangible fixed - 215
assets ---------- ----------
Net cash inflow from financing 4,666 5,097
---------- ----------
Increase in cash 916 485
---------- ----------
CASHBOX PLC
NOTES TO THE PRELIMINARY STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
1. Accounting policies and basis of presentation of financial information
These financial statements have been prepared under the historical cost
convention and in accordance with applicable United Kingdom Accounting Standards
on a going concern basis and the accounting policies have been applied
consistently in all years. These statements should be read in conjunction with
the Group's Annual Accounts for the year ended 30 June 2006.
This financial information does not constitute the Company's statutory accounts
for the years ended 30 June 2007 or 30 June 2006 within the meaning of section
240 of the Companies Act 1985.
The financial information for the year ended 30 June 2007 has been extracted
from the audited statutory accounts which will be sent to shareholders and
delivered to the Registrar of Companies after the forthcoming AGM. The Auditors'
report on those accounts was unqualified and did not include reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under s237 (2) or (3)
Companies Act 1985.
The financial information for the year ended 30 June 2006 has been extracted
from the statutory accounts which have been filed with the Registrar of
Companies. The auditors' have reported on those accounts; their report was
unqualified but included an emphasis of matter statement regarding material
uncertainties over going concern. The auditors' report did not contain a
statement under s237 (2) or (3) Companies Act 1985.
Going concern
The Group incurred a loss of £6,741,000 (2006 £3,637,000) for the year and had
net current liabilities of £2,305,000 (2006 £175,000) at the balance sheet date
and net liabilities of £3,520,000 (2006 £180,000).
The Directors have prepared projected cash flow information for a period
including twelve months from the date of approval of these accounts. A key
assumption is the rate of installations of new machines which the Directors
believe is reasonable. On the basis of this cash flow information, and
discussions with and the continued support of the Group's bankers, the Directors
are confident, based on current results, projections and the Group's cash
position at the date of the approval of the financial statements, that the Group
will be able to continue to trade for the foreseeable future. As a result of the
above, the Directors consider it appropriate to prepare the financial statements
on the going concern basis.
Accordingly the financial statements do not reflect any adjustments that would
be required in the event that the Group were unable to achieve its forecast cash
flows.
Change of accounting policy - Share-based employee remuneration
The Group has adopted FRS 20 'Share based payment' which is obligatory for
periods commencing on or after 1 January 2006.
The Group issues equity settled share based payments including share options and
warrants to certain Directors and employees. In accordance with the FRS,
equity-settled share based payments are measured at fair value at the date of
grant using an appropriate option pricing model. The fair value determined at
the date of grant is expensed to the profit and loss account on a straight line
basis over the vesting period. At the balance sheet date the cumulative change
in respect of each award is adjusted to reflect the actual levels of options
vesting or expected to vest.
Prior to the adoption of FRS 20, the Group recognised the financial effect of
the share based payments when shares and share options were awarded to employees
by making a charge to the profit and loss account based on the difference
between the market value of the Company's shares at the date of grant and the
option exercise price in accordance with UITF Abstract 17 (revised 2003)
'Employee Share Schemes'. The credit entry for this charge was taken to the
profit and loss reserve and reported in the reconciliation of movements in
shareholders' funds.
The standard was applied to all grants of equity instruments as the earliest
grant by the Company was 29 March 2006.
For the year ending 30 June 2006, the change in accounting policy has resulted
in net decrease in profit (increase in loss) for the year of £75,000
(share-based payments expense) being £4,000 exceptional costs, in addition to
the £570,000 recorded under the old policy, on the options issued to key staff
at the time of the IPO as remuneration for services relating to the IPO process
together with £71,000 ordinary costs in relation to Award One options and
warrants. For 2007, the impact of share-based payments is a net charge to income
of £138,000. The share-based payments expense has been included in the
administrative expenses.
2. Exceptional items
Year ended 30-6-07 Year ended 30-6-06
£'000 £'000
Charged in arriving at operating losses:
Litigation settlement costs 2,000 -
Share based remuneration - 574
Listing expenses - 605
---------- ----------
2,000 1,179
---------- ----------
Charged within interest costs:
Lease termination costs 685 -
---------- ----------
685 -
---------- ----------
The litigation settlement costs relate to the full and final settlement costs of
£1,800,000 associated with the agreement reached with Hanco on 23 October 2007
together with the costs order of £199,760 paid on 24 July 2007 as described in
note 9. The Company's subsidiary, Cashbox ATM Systems Limited, has a joint and
several Indemnity in connection with this litigation. In accordance with
Financial Reporting Standard No 12, the amounts due under the indemnity have
been treated as a reimbursement as described in note 10.
The £685,000 exceptional costs associated with terminating the lease
arrangements with General Capital Venture Finance included the effective cash
payment of the interest element of future lease rentals £467,000 plus the
non-cash costs related to the write off of arrangement fees, £189,000, together
with write back of future warrant accretion costs £29,000. The agreement
terminating the lease arrangements provided for full and final settlement of all
outstanding obligations if the Group purchased the assets legally owned by GCVF
and GCVF agreed to release the debenture held over the Group's assets.
3. Loss per ordinary share
Basic and diluted loss per share has been calculated on the basis of losses
after taxation of £6,741,000 (2006: £3,637,000) and 64,129,470 1p ordinary
shares (2006: 42,692,407) being the weighted average number of shares in issue
during the year. The exercise of share options would have the effect of reducing
the loss per ordinary share and is therefore not dilutive under the terms of
Financial Reporting Standard 22.
4. Creditors falling due within and after one year
30-6-07 30-6-06
£'000 £'000
Amounts due within one year
Trade creditors 731 592
Taxation and social security 262 45
Amounts due under finance leases 2 172
Other creditors 2,111 469
Accruals and deferred income 1,611 947
4,717 2,225
Amounts due after one year
Amounts due under finance leases 5 679
Bank Loans 2,300 -
2,305 679
Included in Other creditors is an amount due of £1,999,760 due to Hanco ATM
Systems Limited as a result of the settlement of litigation as described in note
9.
A reimbursement of this amount is due under a joint and several indemnity from
both Carl Thomas (previously CEO) and Anthony Sharp (previously Chairman, and a
significant shareholder). This item has been treated as a reimbursement as
described in note 10 and will not be recorded as a receivable until receipt is
virtually certain in accordance with FRS 12.
5. Reconciliation of movements in shareholders' funds
Year ended 30-6-07 Year ended 30-06-06
as restated
£'000 £'000
Loss for the year (6,741) (3,637)
Share based payments - credit to reserves 138 645
(6,603) (2,992)
Issue of shares including premium 3,263 4,114
Merger reserve creation - 1,706
Warrants issued - 37
Movement in shareholders' funds (3,340) 2,865
Opening shareholders' deficit (180) (3,045)
Prior year adjustments:
Share based payments - credit to reserves 75 -
Share based payments - debit to reserves (75) -
Opening shareholders' deficit as restated (180) (3,045)
Shareholders' deficit at end of period (3,520) (180)
6. Reconciliation of operating loss to net cash outflow from operating
activities
Year ended 30-6-07 Year ended 30-6-06
as restated
£'000 £'000
Operating loss (5,932) (3,396)
Share based remuneration charge 138 645
Depreciation 284 98
Accretion of warrants 27
(Increase) / Decrease in stocks (88) 189
Decrease / (Increase) in debtors 433 (1,294)
Increase / (Decrease) in creditors 2,661 (569)
---------- ----------
Net cash outflow from operating activities (2,477) (4,327)
---------- ----------
7. Analysis of changes in net debt
Cash in hand and Debt due within Debt due after Total net
at bank one year one year debt
£'000 £'000 £'000 £'000
At 30 June 2006 536 (172) (679) (315)
Reclassifications (679) 679
Cash flows 916 (2,670) (2,300) (4,054)
Converted into shares 2,670 2,670
Cash advances from lease
provider (500) - (500)
Finance lease capital
repayments 163 - 163
Lease termination
capital repayments 1,225 1,225
New finance leases (2) (5) (7)
Non cash items (37) (37)
--------- --------- --------- ---------
At 30 June 2007 1,452 (2) (2,305) (855)
--------- --------- --------- ---------
8. Dividend
The Directors are not able to declare a dividend.
9. Post balance sheet events
In July 2007 the Company's subsidiary, Cashbox ATM Systems Limited, ('the
Company's subsidiary) was ordered to pay costs of £199,760 to Hanco ATM Systems
Limited ('Hanco') as part of the litigation brought by Hanco against Cashbox ATM
Systems Limited, claiming that Carl J Thomas and Cashbox ATM Systems Limited
diverted a business opportunity from Hanco to Cashbox. A total payment of
£200,526 was made on 24 July 2007 including interest of £766 in accordance with
this order.
On 23 October 2007 the Company's subsidiary reached full and final settlement
with Hanco concluding the ongoing litigation against the Company's subsidiary,
brought by Hanco. Under the terms of the Settlement, the Company's subsidiary is
liable to pay a further £1.8 million with interest if payment is deferred to
Hanco (the 'Settlement Amount'). The Company's subsidiary has the option of
deferring payment of the Settlement Amount for up to 2 years on the basis that
interest will accrue on that sum at a rate of 5 per cent. per annum for the
first year and at 20 per cent. per annum thereafter. The obligations of the
Company's subsidiary under the Settlement are guaranteed by the Company.
The Company's subsidiary has a joint and several indemnity in connection with
this litigation, from Carl J Thomas (previously Chief Executive) and Anthony CJ
Sharp (previously Chairman) signed on 23 March 2006 prior to the listing of the
Company on the AIM market of the London Stock Exchange in which the Indemnifiers
jointly and severally agreed to keep the Company's subsidiary indemnified from
and against all Hanco expenses including any settlement costs and against all
legal and other costs, charges and expenses the Company and or its subsidiary
may incur in enforcing, or attempting to enforce, their rights under the
Indemnity. The Company and its subsidiary propose to enforce the indemnity.
In accepting the terms of the Settlement Hanco foregoes the right to bring any
further claims against the Company or its subsidiary and the other defendants in
relation to the subject matter of the proceedings.
On 19 December 2007, the Company agreed further financing arrangements to
provide additional working capital to the business and rescheduled repayments of
the loan facility with Bank of Scotland. While longer term financing is
arranged, the Company has issued a convertible loan note for £583,788 together
with a separate non-convertible loan note for £416,212 for draw down after 31
March 2008, both to MBC Investments Limited, a Gibraltar based company, both
being due for redemption on or before 31 March 2009.
To secure the long term financial security of the Company, the Directors are
considering funding alternatives to take place during early 2008. The Directors
have agreed with MBC Investments Limited that all shareholders should be in a
position to participate in the refinancing arrangements and has agreed, subject
to the Company raising sufficient financing for the offer, that MBC Investments
Limited will only take up its rights under the Convertible Loan Note and the Non
convertible Loan Note to the extent that other current shareholders do not
choose to subscribe in any further funding arrangements.
The Convertible note has a coupon attached of 9% per annum, calculated on a
monthly basis and to be paid in cash upon redemption. The note has the right to
convert into 11,675,764 ordinary 1p shares in the Company at a conversion price
of 5p per share but not before 31 March 2008 except in the event of a capital
event for the Company, including but not limited to a take over, capital
raising, liquidation, insolvency etc. Thereafter it may be converted at any time
at the option of the holder. The shares to which the Convertible note relates
will be held in a separate trust for the benefit of MBC Investments Limited
until the loan note is converted and / or the envisaged fundraising described
above takes place.
The Non-convertible loan note will have a coupon of 10% per annum on all drawn
amounts until 30 April 2008 rising at a rate of 1.5% per month subject to a cap
of 20% per annum.
10. Contingencies
On 17 July 2007 the Company's subsidiary wrote to Anthony CJ Sharp and Carl J
Thomas (the indemnifiers) under the terms of the deed of indemnity signed on 23
March 2006. The Company's subsidiary has received a reply from Anthony Sharp
informing the Company that he does not consider the indemnity to be binding on
him. The Directors do not accept Mr Sharp's position and having taken legal
advice, believe the indemnity is enforceable. Discussions have been taking place
with the indemnifiers to resolve matters, however, if agreement with the
indemnifiers cannot be reached in the near future then proceedings to recover
monies due under the indemnities will commence.
As a result of Mr Sharp's position disputing the indemnity and concerns relating
to Mr Thomas' ability to pay, the Directors, while believing the indemnity is
enforceable, have treated the receivable as a reimbursement in accordance with
Financial Reporting Standard No 12, Provisions and Contingencies, and since
receipt is not virtually certain, have not recorded the amount due of £1,999,760
in the accounts.
Following the initial public offering of the Company it was expected that the
above indemnity would be replaced by a further indemnity from KKR Investment
management SA , ('KKR', a company in which A CJ Sharp was expected to be a
minority shareholder), Annenberg Investment Management SA (a company controlled
by ACJ Sharp) and CJ Thomas severally (the 'Further Indemnity') with sole
recourse (in the case of Annenberg and CJ Thomas) to their respective holdings
of ordinary shares in the Company. The Further Indemnity was intended to come
into effect only once KKR had unconditional finance in place, to the
satisfaction of the Directors and Seymour Pierce Limited (the Company's
Nominated Advisor and Broker) to cover its liabilities under the Further
Indemnity. As part of this agreement, the Company agreed to pay a cash fee in
the amount of £112,500 to KKR in respect of the provision of the Further
Indemnity together with the issue of 187,500 new ordinary shares to KKR. These
shares would only be issued once the Further Indemnity was unconditional.
Pursuant to the deed, unconditional finance has not been put in place.
11. Non-GAAP terms
EBITDA is earnings before interest, tax, depreciation, amortisation, share based
payments and exceptional items and equals operating income before exceptional
items plus depreciation, amortisation and share based payments.
EBITDA, which we consider to be a meaningful measure of operating performance,
particularly the ability to generate cash, does not have a standard meaning
under UK GAAP and may not be comparable with similar measures used by others.
Year ended Year ended
30-6-07 30-6-06
as restated
£'000 £'000
Operating loss (5,932) (3,396)
Add back:
Exceptional items 2,000 1,179
Share based payments charge 138 71
Depreciation 284 98
--------- ---------
EBITDA (3,510) (2,048)
--------- ---------
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