Preliminary Results - Year En

RNS Number : 9358Z

Coms PLC

28 July 2008

 

COMS PLC

('Coms' or the 'Company')

Preliminary Results for the year ended 31st January 2008

Coms plc, a provider of internet telephony services to business customers, today reports its Preliminary Results for the year ended 31 January 2008. 

Highlights:

• Significant increase in revenues to £1.30m (2007: £106k)

• Strong growth in gross profit £443k (2007: £27k)

• Loss per share significantly reduced to £0.09p (2007: £0.14p)

• VCOMM (UK) Limited acquired in March 2007

• Appointed as a Polycom distributor of IP Phones in September 2007

Post period highlights:

• Coms recommended by Federation of Small Businesses

• Change of Nominated Adviser and broker to Daniel Stewart and Company 

Jason Drummond, Chairman, commented:

"Our business has made significant progress in the last twelve months. Since joining AIM we have acquired and successfully integrated three businesses which have enhanced our product offerings and given us new routes to market. Recent significant customer wins such as Halfords Group plc ("Halfords") and the Federation of Small Businesses clearly demonstrate demand for our hosted telephony service.  

"In what many are finding a difficult market, businesses are becoming ever more conscious of cost. We believe there is a significant opportunity to evaluate our alternative lower cost telecom solutions and as a result the Board views the future with optimism."

For further information:

Coms PLC Richard Bennett, Corporate Development Officer	Tel: [phone] [e-mail]
Daniel Stewart & Company plc Simon Leathers / Tessa Smith	Tel: [phone]
Threadneedle Communications  Graham Herring Alex White	Tel: [phone]

  CHAIRMAN'S STATEMENT

Overview

Our business has made significant progress in the last twelve months. Since joining AIM we have acquired and successfully integrated three businesses which have enhanced our product offerings and given us new routes to market. Recent significant customer wins such as Halfords and the Federation of Small Businesses clearly demonstrate demand for our hosted telephony service. We have focussed our sales on more high-value business customers which has resulted in higher average revenues per user (ARPU) and strong gross margins. 

To support this phase of customer growth we have strengthened our corporate team with the appointment of Daniel Stewart and Company as our nominated adviser and broker and Threadneedle Communications as our investor relations advisers.

The market for internet telephony (VoIP) continues to expand, and it is our belief that every traditional telecom (PSTN) call minute will become an internet call minute, as businesses increasingly begin to understand the cost and location benefits and advanced functionality that internet telephony offers. 

At the heart of the Coms service is our own proprietary internet telephony switch and network, which unlike Skype is based upon the SIP (Session Initiation Protocol) standard. In contrast to many competitors this allows us to control the call quality from end to end and so provide a business class service. 

We therefore have the ability to create compelling offerings that reduce operating costs and outlay such as buying an internal switchboard ('PBX'). At the same time we provide enhanced features often only found on expensive corporate PBXs, providing a Legacy free future, where new emerging features such as video telephony will be added. 

Our core business is focused on selling hosted telephony to small and medium sized businesses and integrated solutions to corporate customers. This creates long-term recurring income, which is more comparable to a post-pay mobile operator than other VoIP competitors.

Many of our target customers are currently reviewing their telecoms costs as part of a broader cut in budgets due to the difficult market conditions. Coms expects to benefit from this downturn as we demonstrably reduce a business's telephony costs, and can scale up and down to suit changing business requirements.

I believe that the Company is at a key stage in its development and poised for a period of revenue growth that will substantially enhance shareholder value. To achieve this, we are in the process of expanding our sales and marketing teams.

Coms remains on track to become cash flow positive at an operational level this financial year based upon our organic growth of 160% in the last six months of the financial year. The costs this year were higher than expected due to the fees relating to the aborted acquisition of Sim4Travel Holdings.

I am confident that we have in place a strong business plan and motivated management team and I very much look forward to the year ahead. 

Jason Drummond. 

Executive Chairman

  BUSINESS REVIEW

Introduction

Through the successful integration of our recent acquisitions and our own research and development, Coms has developed a proprietary internet telephony service and business model that is rapidly gaining traction in the lucrative business communications market. As our service is based upon the internet, which continues to develop and increase bandwidth, so we can continue to add innovative communications features such as video conferencing, and provide a legacy free communications service for our customers.

Target Market

There is a large growing market for internet telephony services and a plethora of providers who are offering a variety of service level propositions from free. However, we have now succeeded in structuring Coms to completely focus on providing a high quality service to the business sector. Our service provides a compelling offer that decreases immediate CAPEX costs for buying and maintaining an internal switchboard ('PBX') as well as reducing ongoing call costs. We have two primary product offerings:

• Hosted Internet Telephony

For small and medium sized businesses, small corporations and micro offices such as home offices, Coms provides a hosted internet telephony service that leverages the customer's existing broadband connection. The customer simply purchases and connects an internet telephony handset directly to their broadband router (via a CAT5 network, WiFi or DECT) and can immediately take advantage of our rich features and significantly low call rates. 

• Bespoke Internet Telephony Solutions

Large corporations often prefer to integrate internet telephony with their internal messaging systems such as Microsoft exchange. In such cases, Coms provides all of the necessary enabling hardware such as internet telephony handsets, VoIP gateways, integration consulting and SIP trunks. These are the equivalent of internet telephone lines that enable internal intranet messaging systems to be linked to traditional telephones and mobile phone networks. 

Advanced Telecoms Functionality

The flexible design of our internet telephony application allows us create bespoke packages that enable our customers to select advanced features that would normally only be found in expensive corporate switchboards, including:

• Geographic Numbers

As an OFCOM licensed carrier, our customers can select from an inventory of more than 2 million geographic numbers in area codes around the country 

• Advanced Switchboard functions

Customer packages can include an array of advanced switchboard functions including call waiting, call transfer, call queuing, hunt groups, auto-attendant and intelligent routing

• Unified messaging

Enables users to collect messages from anywhere and in any format, including on an email application

• Enabling technology

Coms can supply leading internet telephony handsets including Polycom handsets which are exclusive to Coms and Vegastream gateways

• SIP (session initiation protocol) Trunks

Internet telephone lines that allow corporate intranet applications to connect to traditional phones and mobiles

Unique Differentiators

The effect of our strategy has been to create a quality service, which creates a differentiator and barrier to entry to the business market for other providers.

• Quality of Service

• Relationships

Routes to Market

Coms continues to develop cost effective routes to market including:

• web

• Sales team

• Distributors

Business Model

We have succeeded in transitioning Coms to a recurring income business model that is based on revenue for the initial set-up from hardware and consulting and recurring monthly income from subscription fees and additional call minutes. This is more comparable to a post-pay-mobile phone operator and allows us to use similar valuation metrics for our business.  

Average metrics by user type:

Hosted Internet Telephony  Services		Bespoke Internet Telephony  Solutions
Set-up ARPU Gross Margin	£70 £17 45%	Set-up ARPU Gross Margin	£ 4,000 £ 1,000 39%

Other Products and Revenue

The legacy Superline service (www.superline.co.uk) which is a carrier pre-select (CPS) and an indirect-access (IDA) telephony product that continues to deliver strong recurring revenues with low churn. This remains a useful product in our portfolio for non-internet users, and the Company intends to launch a VoIP equivalent pay-as-you service IDA service that we anticipate, will breath new growth into this product.

Customer Growth 

Coms is now strongly positioned for growth and the management are actively implementing appropriate strategies that will increase the number of users, including:

• increasing the sales head count to sell directly to internally generated sales leads

• increasing our business development team to develop strategic relationships

• increasing our marketing head count and ability to implement marketing and PR campaigns to generate leads and develop the Coms® brand

• implementing marketing campaigns, particularly PR based campaigns that explain the service and are based on reference customers

Corporate Development 

We believe that Coms is at a key stage in its development and we are working closely with our new nominated advisor and broker, Daniel Stewart and Company, and our IR agency to communicate our investor proposition and future potential. We are also investigating a number of strategies to increase our attractiveness to institutional investors that include consolidating our stock.

We are also optimistic that the current trading environment is likely to create potential acquisitions opportunities that will increase our customer base, technology and routes to market. For this reason, the board also seeks to renew its authorisation to raise finance through a placing and issue equity for acquisitions and other opportunities that will accelerate our growth. 

Outlook

In what many are finding a difficult market background, businesses are becoming ever more conscious of cost. We believe there is a significant opportunity to evaluate our alternative lower cost telecom solutions and as a result the Board views the future with optimism.

Terry Martin

Chief Executive    

The financial information reported in this announcement is not the Group's full statutory financial statements. The Group's full statutory financial statements will be published and sent to shareholders before the end of July 2008. Electronic copies will also be available on the Company's website: www.coms.com.

Consolidated income statement

		Year ended	Year ended
		31 January 2008	31 January 2007
		£	£
Revenue		1,297,728	106,380
Cost of Sales		(854,378)	(79,334)
Gross Profit		443,350	27,046
Administrative expenses		(1,300,345)	(699,590)
Operating loss		(856,995)	(672,544)
Finance expense		(7,065)	(1,594)
Finance income		3,618	9,807
Loss before taxation for the year		(860,442)	(664,331)
Taxation		30,232	-
Loss for the year attributable to equity shareholders		(830,210)	(664,331)
Basic and diluted loss per share		(0.09)p	(0.17)p

                 Consolidated balance sheet      

			31 January 2008	31 January 2007
		£		£
ASSETS
Non-current assets
Goodwill		2,307,613			1,949,734
Other intangible assets		45,590			10,162
Property, plant and equipment		37,349			22,266
		2,390,552			1,982,162
Current assets
Inventories		187,311			4,635
Trade and other receivables		757,891			94,649
Cash and cash equivalents		21,859			178,522
		967,061			277,806
Total assets		3,357,613			2,259,968
EQUITY and LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital		1,056,378			793,878
Share premium		7,347,958			6,098,658
Reverse acquisition reserve		(4,236,239)			(4,236,239)
Accumulated deficit		(1,544,171)			(713,961)
Total equity		2,623,926			1,942,336
Current liabilities
Bank overdrafts		1,889			-
Bank loans		36,667			-
Trade and other payables		652,353			317,632
		690,909			317,632
Non-current liabilities
Bank loans		42,778			-
		42,778			-
Total equity and liabilities		3,357,613			2,259,968

                  Consolidated cash flow statement 

		Year ended 31 January 2008	Year ended 31 January 2007
		£	£
Cash flows from operating activities
Loss before taxation		(860,442)	(664,331)
Share-based payments		-	29,850
Write-off of intangibles		-	125,887
Depreciation and amortisation		34,054	28,860
Finance income		(3,618)	(9,807)
Finance expense		7,065	1,594
(Increase)/decrease in inventories		(130,016)	7,679
Increase in receivables		(475,325)	(11,085)
Increase in payables		11,364	26,808
Net cash outflow from operating activities		(1,416,918)	(464,545)
Cash flows from investing activities
Acquisition of intangible assets		(39,390)	(110,129)
Acquisition of property, plant and equipment		(39,637)	(7,128)
Acquisition of subsidiaries		(45,582)	(486,504)
Cash in subsidiaries at acquisition		2,121	-
Net cash from investing activities		(122,488)	(603,761)
Cash flows from financing activities
Proceeds from issues of share capital		1,411,800	916,697
Repayment of bank loans		(27,499)	-
Finance income		3,618	9,807
Finance expense		(7,065)	(1,594)
Net cash from financing activities		1,380,854	924,910
Net decrease in cash and cash equivalents		(158,552)	(143,396)
Cash and cash equivalents at start of year		178,522	321,918
Cash and cash equivalents at end of year		19,970	178,522

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with maturity of three months or less, as adjusted for any bank overdrafts.

                   Consolidated statement of changes in equity

		Attributable to equity shareholders of the Company
		Share capital	Share premium	Reverse acquisition reserve	Accumulated deficit	Total
		£	£	£	£	£
At 1 February 2006 in Coms Limited		50,000	-	-	(79,480)	(29,480)
Loss for the year		-	-	-	(664,331)	(664,331)
Total recognised in income and expense for the year		-	-	-	(664,331)	(664,331)
Equity of legal parent on acquisition of Coms Limited		121,750	354,089	-	-	475,839
Shares issues for the acquisition of Coms Limited		550,000	4,950,000	-	-	5,500,000
Effect on equity of reverse acquisition of Coms Limited		(50,000)	-	(4,236,239)	-	(4,286,239)
Equity-settled share-based payments		-	-	-	29,850	29,850
Other shares issued in the year		122,128	1,099,154	-	-	1,221,282
Share issue costs		-	(304,585)	-	-	(304,585)
At 31 January 2007		793,878	6,098,658	(4,236,239)	(713,961)	1,942,336
At 1 February 2007		793,878	6,098,658	(4,236,239)	(713,961)	1,942,336
Loss for the year		-	-	-	(830,210)	(830,210
Total recognised in income and expense for the year		-	-	-	(830,210)	(830,210
Shares issued in the year		262,500	1,327,500	-	-	1,590,000
Share issue costs		-	(78,200)	-	-	(78,200)
At 31 January 2008		1,056,378	7,347,958	(4,236,239)	(1,544,171)	2,623,926

Share capital	Amount subscribed for shares at nominal value.
Share premium	Amount subscribed for share capital in excess of nominal value.
Reverse acquisition reserve	Effect on equity of the reverse acquisition of Coms Limited.
Accumulated deficit	Cumulative loss of the Group attributable to equity shareholders.

Notes to Editor: 

About Coms plc

Coms was founded by Jason Drummond in 2000 with the vision of using the Internet

to carry and deliver voice telephone calls. Unlike Skype, Coms is based upon the industry standard SIP protocol which enables the widest possible connection of customers, devices and integrated Web 2.0 applications. Coms subscribers can make high quality calls over the internet wherever a high-speed internet connection is available including in wireless hotspots. Coms subscribers can also select their own free telephone number. Ofcom has allocated Coms 2 million numbers in the top 178 UK geographic area codes by population which Coms subscribers can choose from. In addition, Coms can transfer a company's existing telephone number to their service. Subscription is available in a range of packages from the Company's website www.coms.com.

As well as the obvious cost saving implications for businesses and consumers, the expanding market will enable Coms to develop and offer innovative new convergent services such as video calling, IP Centrex, location independence and online presence. It is these new innovative features, alongside the cost saving benefits that are likely to encourage customers away from traditional PSTN systems and combine their broadband service and voice calling system.

Coms launched its consumer service in October 2006, and recently acquired ExchangeXT, a leading provider of business VoIP services, to enable Coms to enter the SME market.

Coms is an Ofcom authorised Public Electronic Communications Network (PECN) and a member of the Internet Telephony Service Providers Association (ITSPA).

Coms plc joined the AIM market of the London Stock Exchange on 6 September 2006

 

END

 

 

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