RNS Number:3341A
CES Software PLC
30 June 2004
Company Registration Number 4809097
CES SOFTWARE PLC
CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2003
Contents Pages
Officers and professional advisers 1
Chairman's statement 2
Directors' report 3 to 5
Corporate governance 6 to 7
Board report on directors' remuneration 8 to 9
Independent auditors' report to the members 10
Consolidated profit and loss account 11
Balance sheets 12 to 13
Consolidated cash flow statement 14
Statement of total recognised gains and losses 15
Reconciliation of movements in shareholders' funds 15
Notes to the consolidated financial statements 16 to 29
Notice of annual general meeting 30 to 32
Directors A Rivkin (Executive Chairman)
L Abony (Chief Executive Officer)
T W Reeve
A Plotkin
D A Lake (Non-executive)
S Fielder (Non-executive)
Company secretary S Fielder
Registered office Hillgate House
26 Old Bailey
London EC4M 7HW
Auditors KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
The Board of CES Software plc ("CES") announces its results for the year ended
31 December 2003.
Given the significant developments and milestones achieved in 2003, the company
and its subsidiaries ("the Group") are now well positioned for growth. The
Group is focused on delivering on its core strategy, which is to provide a
world-class person-to-person gaming experience to the end user base transacting
across its network. The Group will deliver these services to the end user
through arrangements with leading, licensed gaming operators in regulated
jurisdictions, across geographic regions and markets.
2003 was a period of intensive technology development and testing, which saw the
Group complete development on the first version of its exchange wagering
platform. The exchange platform was successfully test-marketed in the UK with
Betmart Limited, the Group's first licensee, which is a joint venture owned 50%
by the Group and 50% by 4Gi Limited.
2003 also saw the company obtain a quotation on the Alternative Investment
Market ('AIM') of the London Stock Exchange. On 4 December 2003, CES was
admitted to AIM raising over #4.3 million before expenses by way of a placing of
shares to institutional investors in the United Kingdom, Europe, and North
America.
The bulk of the Group's operating loss for 2003 is attributable to research and
the development of its exchange technology. Going forward, the Board is
confident in management's ability to maintain a low cost structure that will
afford the Group maximum flexibility in pursuing its business strategy.
The focus of the business in the months since the end of 2003 has been on
establishing distribution channels through which it will commercialise its
existing technology. A significant undertaking for the Group has been
establishing Ebex, an exchange targeting the Continental European markets, with
BETandWIN Interactive Entertainment AG, a leading interactive bookmaker in
Europe. Drawing on the Group's technology, an experienced executive team, and
BETandWIN's marketing expertise, Ebex has the potential to become a highly
successful business. In addition to Ebex, the Group continues to seek to
establish new business relationships with licensed gaming operators in leading
regulated jurisdictions.
The Board is confident that, thanks to the efforts in 2003, the Group is well
positioned to capitalise on the enormous and growing person-to-person gaming
market in 2004 and beyond.
Andrew Rivkin
Executive Chairman
The directors have pleasure in presenting their report and the financial
statements of the company and the group for the year ended 31 December 2003.
The report and the financial statements of the company and the group for the
year ended 31 December 2003 have been sent to the company's shareholders and
copies are available for viewing at Canaccord Capital (Europe) Limited, 27 Upper
Brook Street, London W1K 7QF.
Incorporation of the company
The company was incorporated on 24 June 2003 as Oval (1872) Limited, changing
its name to CES Software Limited on 27 August 2003. The company acquired,
pursuant to a share for share exchange, all of the issued share capital of
Columbia Exchange Systems Limited. The company re-registered as a public
company on 21 November 2003, and was admitted to the Alternative Investment
Market ("AIM") of the London Stock Exchange on 4 December 2003 following the
successful placing of 6.339 million ordinary shares for net proceeds of #3.7
million.
Principal activity, business review and future developments
The principal activity of the company, along with its wholly owned subsidiaries,
is as a software solutions provider developing gaming applications for the
European, UK and Asian markets. The company has taken advantage of the merger
accounting provisions, whereby the results of merged subsidiary undertakings are
treated as if those undertakings had always been members of the group.
Accordingly, the results of Columbia Exchange Systems Limited, and its
subsidiary undertakings ("the Columbia Group"), have been included for the whole
of the year ended 31 December 2003. The comparative figures are presented as if
the combination had existed throughout the period from 9 May 2002 to 31 December
2002.
A review of the business, together with comments on the future development of
the group, is contained in the Chairman's Statement on page 2.
Results and dividends
The results for the year and the group's financial position at the end of the
year are shown in the attached financial statements. The directors do not
recommend the payment of a dividend.
It is proposed to transfer the retained loss for the year of #775,000 to
reserves.
Post balance sheet events
These are disclosed in note 23 to the accounts.
The directors and directors' interests
The directors who held office during the year were as follows:
A Rivkin (Appointed 22 August 2003)
L Abony (Appointed 22 August 2003)
T W Reeve (Appointed 13 October 2003)
A Plotkin (Appointed 22 August 2003)
D A Lake (Appointed 27 November 2003)
S Fielder (Appointed 27 November 2003)
Oval Nominees Limited (Appointed 24 June 2003; resigned 22 August 2003)
The Board Report on Directors' Remuneration is set out on pages 8 and 9 and
includes details of directors' interests in the shares of the company.
Directors' responsibilities
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and the group and of the profit or loss of the group for the year then
ended.
In preparing those financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and the group and to enable them to ensure that the financial statements
comply with the Companies Act 1985. The directors are also responsible for
safeguarding the assets of the company and the group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Suppliers' payment policy
It is the company's policy that payments to suppliers are made in accordance
with those terms and conditions agreed between the company and its suppliers,
provided that all trading terms and conditions have been complied with. Trade
creditors at the year end represented 30 days of purchases.
Political and charitable donations
The group made no political or charitable donations in the year (2002: #nil).
Research and development
The group has carried on research and development during the year, the costs of
which have been written off to the profit and loss account.
Substantial shareholdings
As at 29 June 2004 the company had been advised of the following shareholdings
that exceed 3% of its issued share capital:
Number of shares %
T Hoare Nominees Limited 1,027,500 5.3
HSBC Global Custody Nominees Limited 716,500 3.7
Morstan Nominees Limited 672,500 3.4
Nortrust Nominees Limited 1,445,500 7.4
L Abony 3,540,000 18.1
A Rivkin* 4,800,000 24.5
* Andrew Rivkin controls 4,600,000 ordinary shares of 5 pence each held by
Stampee Technologies Inc by virtue of having the right to direct the
exercise of the voting rights attaching to such shares.
Purchase of shares
As part of the company's capital reorganisation at the time of the flotation, 14
deferred shares with a nominal value of #664,271.50 were repurchased from the
preference shareholders for cancellation for a total consideration of 14 pence.
Auditors
KPMG Audit Plc were appointed as auditors during the period. KPMG Audit Plc
have expressed their willingness to continue in office and a resolution to
re-appoint them will be proposed at the annual general meeting.
Signed by order of the directors
S Fielder - Company Secretary
29 June 2004
Corporate governance
In June 1998, the London Stock Exchange published the Principles of Good
Governance and Code of Best Practice (the Combined Code) which embraces the work
of the Cadbury, Greenbury, Hampel and Turnbull committees and became effective
in respect of accounting periods ending on or after December 1998.
The listing rules require that listed companies (but not companies traded on
AIM) that are incorporated in the UK should state in the report and accounts
whether they comply with the Code of Best Practice and identify and give reasons
for any area of non-compliance. The company is listed on AIM and therefore no
disclosure is required.
The company supports the principles and aims of the code and follows the code
wherever it is reasonable to do so. It operates an effective Board which meets
on a timely basis.
The Board is aware of the requirements of the code and the need for appropriate
controls to be in place and monitored by the Board. The extent of the controls
are commensurate with the size of the company. As the company grows in size and
resources, the Board intends to increase its controls as needed. The Board is
also aware that in July 2003 the Financial Reporting Council issued a revised
Combined Code ("the Revised Combined Code") which will be effective for
companies for the period commencing 1 January 2004. The Board will consider the
revisions throughout 2004.
This is not a statement of compliance as required by the Combined Code.
The Board and Committees
The principal standing committees appointed by the Board are the audit committee
and the remuneration committee. The role of the audit committee is described
below and the role of the remuneration committee is described on pages 8 and 9.
Relations with shareholders
The Company intends to seek to maintain good communications with shareholders.
The notice of the Annual General Meeting ("AGM"), with an explanatory circular
describing items of special business is on pages 30 to 32. All shareholders
will have the opportunity formally or informally to put questions to the Company
at the AGM.
Internal Control
Audit committee
The audit committee comprises the independent non-executive director, David Lake
(Chairman) and Simon Fielder. The committee provides a forum for reporting by
the group's external auditors and reviews the group's budget and will review the
half yearly interim financial statements before their submission to the Board.
The committee advises the Board on the appointment of external auditors and on
their remuneration both for audit and non audit work. It also discusses the
nature and scope of the audit with the external auditors, and assesses their
independence.
Key procedures
The Board are responsible for the group's system of internal control and for
reviewing its effectiveness. However, such a system can only provide
reasonable, but not absolute, assurance against material misstatement or loss.
Procedures encompass regular Board Meetings, including consideration of monthly
financial information presented to the Board. The Board will seek to develop the
internal control environment as the group grows.
Going concern
After making enquiries, the directors have a reasonable expectation that the
company and the group have adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue to adopt
the going concern basis.
Remuneration committee
The remuneration committee comprises Simon Fielder (Chairman) and David Lake,
the independent non-executive director. The committee is responsible for
determining the contract terms, remuneration and other benefits for executive
directors. Its policy is to ensure the group's remuneration arrangements are in
line with best practice, through a process of regular review.
The Committee will take account of comparative responsibilities and ranking,
established through a job evaluation process and levels of remuneration in the
market.
The Committee will be involved in the selection process for executive directors
and will approve remuneration before a final offer is made.
Remuneration policy
The Committee and the Board believe that in order to attract and maintain a
senior management team of the right calibre, which can make a significant
contribution to maximising shareholder value, it is necessary to provide a
competitive remuneration structure. The Committee's policy for executive
remuneration is to reward executives fairly and responsibly for their
contribution to the Group's performance.
The remuneration for non-executive directors comprises fees for their services
in connection with Board and Board Committee meetings and, where relevant, for
additional services such as chairing a Board committee. Their fees are
determined by the executive directors who have due regard to the level of fees
paid to the non-executives of similar companies.
Directors' remuneration
The information in this section of the Board Report on Directors' Remuneration
and in this section alone, is subject to audit.
Remuneration for each director, comprising salary, consultancy fees and, where
relevant, non-executive directors' fees, are as follows:
2003 2002
# #
L Abony 66,832 41,500
T W Reeve 37,500 --
A Plotkin 21,874 --
A Rivkin 3,333 --
D A Lake 1,667 --
S Fielder 1,667 --
132,873 41,500
Payments to L Abony and A Plotkin include amounts totalling #46,000 (2002 :
#41,500) and #8,750 (2002 : #nil) paid to Abony Consulting and Rela Inc.
respectively, by the group under consultancy arrangements prior to the
commencement of their service contracts with the company with effect from 1
November 2003. S Fielder's non-executive fees are payable to Osborne Clarke for
the provision of his services to the company.
There were no bonus arrangements in place for the directors for the year ended
31 December 2003, nor in the period ended 31 December 2002.
There was no pension provision for the directors in the year ended 31 December
2003 nor in the period ended 31 December 2002.
Re-election of directors
All directors are standing for re-election at the AGM this year, being the first
since the company's incorporation. In the future, one third of directors will
retire by rotation each year, with any director appointed between AGMs standing
for re-election.
Directors' service contracts
All of the service agreements with the directors are terminable on less than 12
months notice by the company or the director concerned.
Directors' shareholdings
Their beneficial interests in the 5p ordinary shares of the company were as
follows:
Ordinary shares At 31 December 2003 On incorporation or date of appointment
A Rivkin* 4,800,000 -
L Abony 3,540,000 20
T W Reeve - -
A Plotkin - -
D A Lake - -
S Fielder - -
* Andrew Rivkin controls 4,600,000 ordinary shares of 5 pence each held by
Stampee Technologies Inc by virtue of having the right to direct the
exercise of the voting rights attaching to such shares.
No director held shares in any other group companies at the year end nor on
incorporation or date of appointment.
Number of options held during the year:
On incorporation or Granted At 31 December Exercise Expiry date
date of appointment 2003 price
if later
A Rivkin - 200,000 200,000 68p 27.11.13
L Abony - 200,000 200,000 68p 27.11.13
T W Reeve - 701,842 701,842 68p 27.11.13
A Plotkin - 340,000 340,000 68p 27.11.13
D A Lake - - - - -
S Fielder - - - -
All options vest in equal annual tranches over the three year period from and
including the date of the company's admission to AIM (4 December 2003) starting
with the anniversary of such admission provided the director remains an employee
of the group at the relevant vesting date. All the options are exercisable from
the date of vesting at any time prior to the date ten years from the date of
grant. There are no performance conditions attaching to the exercise of the
options.
The market value of the shares at the year end was 75p. The exercise price of
the above options, of 68p, reflects the price at which shares were issued by the
company pursuant to the placing effected in conjunction with the company's
admission to AIM. Subsequent to the admission to AIM, the highest market value
of the shares was 75p and the lowest market value was 72.37p in the period to 31
December 2003.
We have audited the financial statements on pages 11 to 29. We have also
audited the information in the Report of the Board on Directors' Remuneration
that is described therein as having been audited.
This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the annual report and accounts. As
described on page 4 this includes responsibility for preparing the financial
statements in accordance with applicable United Kingdom law and Accounting
Standards. Our responsibilities, as independent auditors, are established in the
United Kingdom by statute, the Auditing Practices Board and by our profession's
ethical guidance.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the directors' report is not
consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and transactions with the group is not disclosed.
We read the other information accompanying the financial statements and consider
whether it is consistent with those statements. We consider the implications for
our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. An audit includes examination, on a
test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
* the financial statements give a true and fair view of the state of affairs
of the company and the group as at 31 December 2003 and of the loss for the
year then ended; and
* the financial statements and the part of the directors' remuneration
report to be audited have been properly prepared in accordance with the
Companies Act 1985.
KPMG Audit Plc Chartered Accountants and
Registered Auditor
..........................
29 June 2004 London
Notes 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Administrative expenses (742) (428)
Operating loss (742) (428)
Share of operating loss in joint venture (2) -
Loss on ordinary activities before interest and other (744) (428)
income
Interest receivable and similar income 5 (4) 1
Loss on ordinary activities before taxation 2 and 3 (740) (427)
Tax on loss on ordinary activities 6 - -
Loss on ordinary activities after taxation and loss for (740) (427)
the financial period
Appropriations (non equity) 7 (35) (20)
Retained loss for the period (775) (447)
Loss per share
Basic and diluted 8 (0.07p) (0.04p)
The results disclosed in the consolidated profit and loss accounts are on a
historical cost basis.
All of the above results are from continuing operations.
Notes 31 December 2003 31 December 2002
#000 #000 #000 #000
Fixed assets
Intangible assets 9 51 85
Tangible assets 10 19 10
Investment in joint ventures: 11
Share of gross assets 20 1
Share of gross liabilities (21) -
(1) 1
69 96
Current assets
Debtors 12 280 15
Cash at bank and in hand 3,437 375
3,717 390
Creditors:
Amounts falling due within one year 13 (273) (40)
Net current assets 3,444 350
Total assets less current liabilities and net 3,513 446
assets
Capital and reserves
Called up share capital 14 978 -
Share premium account 15 3,345 -
Shares to be issued 15 - 876
Other reserve 15 (298) -
Capital redemption reserve 15 664 -
Profit and loss account 15 (1,176) (430)
Shareholders' funds - equity 3,513 446
These financial statements were approved by the Board of Directors on June
2004 and were signed on its behalf by:
A Rivkin L Abony
Director Director
Notes 31 December 2003
#000 #000
Fixed assets
Investments 11 1,325
Current assets
Debtors 12 301
Cash at bank and in hand 3,349
3,650
Creditors: 13 (137)
Amounts falling due within one year
Net current assets 3,513
Total assets less current liabilities and net assets 4,838
Capital and reserves
Called up share capital 14 978
Share premium account 15 3,345
Capital redemption reserve 15 664
Profit and loss account 15 (149)
Shareholders' funds - equity 4,838
These financial statements were approved by the Board of Directors on June
2004 and were signed on its behalf by:
A Rivkin L Abony
Director Director
Consolidated cash flow statement Notes 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Net cash outflow from operating activities 17 (732) (249)
Returns on investments and servicing of finance 18 4 1
Capital expenditure and financial investment 18 (17) (13)
Acquisitions and disposals 18 - (103)
Cash outflow before management of liquid resources and (745) (364)
financing
Management of liquid resources 18 350 (350)
Financing 18 3,813 742
Increase in cash in the period 3,418 28
Reconciliation of net cash flow to movement in net Notes 12 months Period from
funds ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Increase in cash in the period 3,418 28
Cash (inflow)/outflow from (decrease)/increase in
liquid resources (350) 350
Translation differences and other non cash movements (6) (3)
Movement in net funds in the period 3,062 375
Net funds at the start of the period 19 375 -
Net funds at the end of the period 19 3,437 375
Statement of total consolidated recognised gains and losses 12 months Period from 9
ended 31 May 2002 to
December 31 December
2003 2002
#000 #000
Loss for the financial period:
Group (738) (427)
Joint venture (2) -
(740) (427)
Foreign exchange differences (6) (3)
Total consolidated recognised gains and losses (746) (430)
12 months Period from 9
ended 31 May 2002 to
Reconciliation of movements in shareholders' funds December 31 December
2003 2002
#000 #000
Loss for the financial period (740) (427)
Appropriations (35) (20)
Retained loss for the financial period (775) (447)
Reversal of financing charge on preference shares 35 20
New ordinary share capital issued in lieu of compensation and other - 134
services
New share capital subscribed net of issue costs 3,813 742
Foreign exchange differences (6) (3)
Net increase in shareholders' funds 3,067 446
Opening shareholders' funds 446 -
Closing shareholders' funds 3,513 446
1 Accounting policies
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the consolidated
financial statements.
1.1 Basis of preparation
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
The company was incorporated on 24 June 2003. On 24 October 2003 it
acquired the entire share capital of Columbia Exchange Systems Limited in a
share for share exchange as part of a group reorganisation. The
acquisition by the company of Columbia Exchange Systems Limited was
accounted for in accordance with the principles of merger accounting set
out in Financial Reporting Standards 6 "Mergers and Acquisitions".
Accordingly, the financial information is presented as if the combination
had existed throughout the period ended 31 December 2002.
In the company's balance sheet, the investment in Columbia Exchange Systems
Limited is stated at the nominal value of the shares issued in
consideration for that company. As permitted by sections 131 and 133 of
the Companies Act 1985, no premium has been recorded on the shares issued
in consideration. On consolidation, the difference between the nominal
value of shares issued and received is credited directly to the other
reserve.
Under section 230(4) of the Companies Act 1985, the company is exempt from
the requirement to present its own profit and loss account. The loss for
the period ended 31 December 2003 dealt with in the individual financial
statements of CES Software plc was #149,169.
1.2 Going concern
The group has had limited commercial activity to date. The group remains
in a development stage and, accordingly, continues to generate losses.
The directors are of the opinion, however, that taking account of the net
proceeds of the placing completed in December 2003, the group will have
sufficient financial resources to enable it to continue to trade and to
meet its liabilities as they fall due for the foreseeable future and for at
least the next 12 months from the date of approval of these financial
statements.
1.3 Valuation of investments
Investments held as fixed assets are stated at cost less any provision for
impairment.
1.4 Joint ventures
An entity is treated as a joint venture where the group holds a long term
interest and shares control under a contractual agreement.
In the group accounts, interests in joint ventures are accounted for using
the gross equity method of accounting. The consolidated profit and loss
account indicates the group's share of the joint venture's turnover and
includes the group's share of the operating results, interest, pre-tax
results and attributable taxation of such undertakings based on audited
financial statements. In the consolidated balance sheet, the group's share
of the identifiable gross assets (including any unamortised premium paid on
acquisition) and its share of the gross liabilities attributable to its
joint ventures are shown separately.
1.5 Goodwill
Goodwill arising on acquisition is capitalised on the balance sheet and
amortised through the profit and loss account in equal annual instalments
over its estimated useful economic life of three years.
1.6 Tangible fixed assets and depreciation
Depreciation is provided to write off the cost of tangible fixed assets
over their estimated useful economic lives as follows:
Computer equipment 30%
straight line
Computer software 100%
straight line (one year life)
A half year's depreciation charge is made in the year of acquisition.
1.7 Leases
Rentals under operating leases are charged on a straight line basis over
the lease term.
1.8 Research and development expenditure
Expenditure related to the research, design and development of software
products are charged to profit as incurred. Software development costs are
capitalised, beginning when a product's feasibility has been established,
which generally occurs upon completion of a working model, and ending when
a product is available for general release to customers. To date, no
software development costs have been capitalised.
1.9 Deferred taxation
Deferred tax is provided in full on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay
less tax at a future date, at rates expected to apply when they
crystallise, based on current tax rates and law. Timing differences arise
from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in
financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are not discounted.
1.10 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the exchange rates
ruling at the balance sheet date and any exchange gains or losses arising
are taken to the profit and loss account.
The assets and liabilities of overseas subsidiaries are translated at the
period end closing exchange rates. The results of such undertakings are
consolidated at the average exchange rate during the period. Gains and
losses arising are taken to reserves.
1.11 Financial instruments
The group's financial instruments comprise cash and various items such as
trade debtors and creditors that arise directly from its operations. The
group's policy towards financial instruments is to manage interest rate,
liquidity and foreign exchange risk without exposing the group to undue
risk or speculation.
1.12 Cash and liquid resources
Cash, for the purpose of the cash flow statement, comprises cash in hand
and deposits repayable on demand.
Liquid resources comprise current asset investments held as readily
disposable stores of value as defined by Financial Reporting Standard 1
(Revised 1996) "Cash flow statements". Liquid resources held in the
preceding period comprise short term bank deposits and are included within
the caption "cash at bank and in hand" in the balance sheet.
Cash totalling #3,349,000 was, at 31 December 2003, held on the company's
behalf in accounts with qualifying financial institutions and managed by
Osborne Clarke. Because these balances were accessible by the company on
demand and without penalty, they are included as "cash" in both the balance
sheet and cash flow statement.
2 Segmental information 12 months Period from 9
ended 31 May 2002 to
December 31 December
2003 2002
#000 #000
Analysis by geographic market:
Pre-tax loss by origin
United Kingdom (184) (152)
Canada (554) (275)
Group (738) (427)
Joint venture (2) -
(740) (427)
Net assets by location
United Kingdom 3,503 85
Canada 10 361
3,513 446
3 Loss on ordinary activities before taxation 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Loss on ordinary activities before taxation is stated after charging:
Auditors' remuneration:
Group - audit (company: #20,000) 33 6
Depreciation and other amounts written off tangible fixed assets:
Owned 8 3
Amortisation of intangibles 34 18
Research and development costs 242 137
Hire of land and buildings - operating leases 18 10
The group also incurred fees of #22,841 (2002: #nil) for work by the auditors in
respect of the placing and listing on AIM. These fees have been charged to the
share premium account.
Details of directors' remuneration for the period are provided in the directors'
remuneration report on pages 8 to 9.
4 Staff numbers and costs
There were no employees of the group during the periods ended 31 December
2003 and 31 December 2002 other than directors, all staff being engaged on
consultancy contracts.
5 Interest receivable and similar income 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Bank interest 4 1
6 Taxation 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
UK corporation tax at 30% (2002: 30%) - -
Overseas tax - -
- -
6 Taxation (continued)
The current tax charge for both periods is lower than the standard rate of
corporation tax in the UK of 30%. The differences are explained below.
12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Current tax reconciliation
Loss on ordinary activities before tax (740) (427)
Current tax charge/(credit) at 30% (222) (128)
Effects of:
Expenses not deductible for tax purposes and other adjustments 12 53
Non-utilisation of tax losses 210 75
Current tax charge - -
The group has a potential deferred tax asset of #289,000 (company: #44,000) at
31 December 2003 (2002: #75,000) in respect of unutilised tax losses. The
deferred tax asset has not been recognised due to the uncertainty surrounding
the timing of anticipated future taxable profits.
7 Dividends and other appropriations 12 months Period from
ended 31 9 May 2002
December to 31
2003 December
2002
#000 #000
Appropriation in respect of financing charge 35 (20)
The company did not have sufficient distributable reserves available to pay
preference shareholders so, in accordance with Financial Reporting Standard 4,
"Capital Instruments", the amounts attributable to preference shareholders have
been shown as an appropriation in the profit and loss account, but have then
been added back to the profit and loss reserve.
As described in note 14, the preference shares were converted into ordinary
shares during the period.
8 Loss per share
Loss per ordinary share has been calculated using the weighted average number of
shares in issue during the relevant financial periods. The weighted average
number of equity shares in issue is 11,140,186 (2002: 10,217,308) and the loss,
being loss after tax and preference dividends, is #775,000 (2002: #447,000).
Diluted loss per share has not been presented as including all potential
ordinary shares in the calculation would be anti-dilutive.
9 Intangible fixed assets Goodwill
#000
Group
Cost
At 1 January 2003 and at 31 December 2003 103
Amortisation
At 1 January 2003 18
Provided for the year 34
At 31 December 2003 52
Net book value
At 31 December 2003 51
At 31 December 2002 85
In May 2002, Columbia Exchange Systems Limited acquired 100% of the shares in
Betmart Limited, a company registered in Ireland, for consideration of #102,500
paid in cash.
There was no difference between the book value and the fair value of assets and
liabilities of Betmart Limited on acquisition, both of which were #nil and #nil
respectively.
10 Tangible fixed assets Computer Computer Total
equipment software
Group #000 #000 #000
Cost
At 1 January 2003 11 2 13
Additions 15 2 17
At 31 December 2003 26 4 30
Depreciation
At 1 January 2003 2 1 3
Provided for the year 6 2 8
At 31 December 2003 8 3 11
Net book value
At 31 December 2003 18 1 19
At 31 December 2002 9 1 10
Joint
Ventures
11 Fixed asset investments #000
Group
Cost 1
At 31 December 2003 and 1 January 2003
Share of retained losses
At 1 January 2003 -
Loss for the year (2)
At 31 December 2003 (2)
Net book value (1)
At 31 December 2003
At 31 December 2002 1
Company - cost and net book value Subsidiary
Undertakings
#000
Additions and at 31 December 2003 1,325
Subsidiary undertakings and joint ventures
The principal undertakings in which the company's interest at the period end is
20% or more are as follows:
Country of Proportion of Nature of business
incorporation voting rights and
ordinary share
capital held
Columbia Exchange Systems Limited England 100% Technology development
Columbia Exchange Systems Limited* Canada 100% Technology development
Betmart Limited* Republic of Ireland 100% Non-trading
Betmart Limited* England 50% Joint venture (see note)
Betmart Bookmakers Limited* England 100% Non-trading
* Undertakings held indirectly by the company.
The group owns 50% of the issued share capital of Betmart Limited (England).
This company is operated as a joint venture with 4Gi, and operates an internet
sports betting exchange.
12 Debtors Group Group Company
2003 2002 2003
#000 #000 #000
Amounts due from group undertakings - - 61
Other debtors 264 - 240
Prepayments and accrued income 16 15 -
280 15 301
13 Creditors - Amounts falling due within one year Group Group Company
2003 2002 2003
#000 #000 #000
Trade creditors 169 39 39
Amounts owed to joint ventures 1 1 -
Accruals 103 - 98
273 40 137
14 Share capital 2003
Number #000
Authorised share capital
Ordinary shares of 5p each 50,425,000 2,521
50,425,000 2,521
Number #000
Allotted, called up and fully paid
Ordinary shares of 5p each 19,554,000 978
19,554,000 978
On incorporation, the company issued one ordinary subscriber share of #1 at par.
The original share of #1 in the company was subsequently sub-divided into ten
ordinary shares of 10p each on 24 October 2003. The company issued 5,352,490
ordinary shares of 10p each and 1,255,000 convertible redeemable preference
shares of 62.93p each at par as consideration for the acquisition of Columbia
Exchange Systems Limited.
The holders of the convertible redeemable preference shares were entitled to
dividends, if and when declared, so as to provide a cumulative compounding
return of 5% per annum.
The preference shares were convertible, at the option of the holder or the
company, into ordinary shares on a one-for-one basis, in a number of
circumstances.
The holders of the preference shares were entitled to that number of votes equal
to the number of ordinary shares into which the preference shares were
convertible.
On admission of the company to AIM, each preference share was converted into one
ordinary share of 10p. Each holder of the preference shares also received one
deferred share in the company. Fourteen deferred shares were issued with an
aggregate nominal value of #664,271.50. The deferred shares were subsequently
bought back by the company for consideration of 14 pence on 4 December 2003 and
cancelled.
Pursuant to a resolution passed on 17 September 2003, each ordinary share of 10p
each was sub-divided into two ordinary shares of 5p each on admission of the
ordinary shares to trading on AIM.
14 Share capital (continued)
The company issued 6,339,000 new ordinary shares of 5p each for gross proceeds
of #4,310,520, including share premium of #3,993,570, on 4 December 2003,
following admission of the ordinary shares to trading on AIM. The issue costs
of #648,948 have been set against the share premium arising on these shares.
On 27 November 2003, the company granted options to directors and officers over
1,621,842 ordinary shares under the Employee Share Option Scheme. The options
were granted with an exercise price of 68p per share. The options vest in three
instalments, annually on the anniversary of admission to AIM. The options were
outstanding as at 31 December 2003. The company also granted options over
10,000 shares to a third party during the period. These were also outstanding
at 31 December 2003.
The company also issued 190,170 warrants to third parties on 4 December 2003.
The warrants entitle the holders to subscribe for shares in the company at 68p
per share for a period of 18 months from the date of issue.
15 Share premium Share Share Shares to be Other Capital redemption Profit and loss
and reserves Capital premium Issued reserve reserve account
#000 #000 #000 #000 #000 #000
Group
At 1 January 2003 - - 876 - - (430)
New share capital - - 151 - - -
issued by Columbia
Exchange Systems
Limited
Share for share 1,325 - (1,027) (298) - -
exchange re
acquisition of
Columbia Exchange
Systems Limited
On ordinary shares 317 3,994 - - - -
issued (IPO) - (649) - - - -
Less: issue costs
Less: issue costs
Conversion of (664) - - - 664 -
preference shares
Retained loss for - - - - - (775)
the year
Appropriations - - - - - 35
added back
Foreign currency - - - - - (6)
differences
At 31 December 978 3,345 - (298) 664 (1,176)
2003
Company
At 1 January 2003 - - - - - -
Share for share 1,325 - - - - -
exchange re
acquisition of
Columbia Exchange
Systems Limited
On ordinary shares 317 3,994 - - - -
issued (IPO) - (649) - - - -
Less: issue costs
Conversion of (664) - - - 664 -
preference shares
Retained loss for - - - - - (149)
the year
At 31 December 978 3,345 - - 664 (149)
2003
15 Share premium and reserves (continued)
Shares to be issued represent the share premium and capital redemption reserve
account of Columbia Exchange Systems Limited capital and immediately prior to
the share for share exchange. The other movements on the other reserve in the
group represents the difference in the nominal value of the shares issued in
exchange for the entire issued share capital of Columbia Exchange Systems
Limited (England) as described in note 14.
The company has established a capital redemption reserve to record the
difference between the nominal value of the 10p ordinary shares issued and the
preference shares converted as described in note 14.
16 Commitments 31 December 2003 31 December 2002
Group Land and Other Land and Other
buildings buildings
#000 #000 #000 #000
Annual commitments under non-cancellable
operating leases are as follows:
Operating leases which expire:
Within one year 18 - 19 -
In the second to fifth years inclusive - - - -
Over five years - - - -
18 - 19 -
17 Reconciliation of operating loss to operating cash flows 12 months ended Period from 9
31 December 2003 May to 31
December 2002
#000 #000
Operating loss (742) (428)
Amortisation of intangibles 34 18
Depreciation 8 3
Charge for share based compensation - 126
Charge for share based payments for services - 8
Increase in debtors (265) (15)
Increase in creditors 233 39
Net cash outflow from operating activities (732) (249)
18 Analysis of cash flows 12 months ended 31 Period from 9 May to 31
December 2003 December 2002
#000 #000 #000 #000
Returns on investments and servicing of finance
Interest received 4 1
Net cash inflow for returns on investment and 4 1
servicing of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets 17 13
Net cash outflow for capital expenditure and 17 13
financial investment
Acquisitions and disposals
Purchase of subsidiary undertaking - 103
Net cash outflow for acquisitions and disposals - 103
Management of liquid resources
Cash movements on short term bank deposits 350 (350)
Financing
Issue of ordinary share capital (net of expenses) 3,662 -
Issue of preference share capital 151 742
Net cash inflow from financing 3,813 742
19 Analysis of net funds At 1 Cash flow Non-cash At 31
January movements December
2003 2003
#000 #000 #000 #000
Cash 25 3,418 (6) 3,437
Short term bank deposits 350 (350) - -
Total 375 3,068 (6) 3,437
Included within cash at bank and in hand in the balance sheet at 31 December
2003 were term deposits of #nil (31 December 2002: #350,000), which represent "
liquid resources" for cash flow reporting purposes (note 1).
20 Pension scheme
The group makes no pension contributions on behalf of its staff and directors.
21 Related party transactions
As at 31 December 2003, #225,000 had been advanced by the company to L Abony to
be held by him on behalf of the company and to be used to meet certain group
operating expenses. Ultimately this was not required and subsequent to the year
end the funds in their entirety have been repaid to the company. Accordingly,
#225,000 is shown in the company and group balance sheets at 31 December 2003
within other debtors.
Simon Fielder was appointed director of the company on 27 November 2003. Mr
Fielder is a partner in Osborne Clarke, the group's solicitors, who advised the
group throughout the period, including on the placing and admission to AIM.
Total fees for legal services in the period payable to Osborne Clarke amount to
#160,000 (of which #61,000 are included within share issue costs charged to the
share premium account). The balance due to Osborne Clarke at 31 December 2003
was #nil.
22 Financial instruments
The group's financial instruments comprise trade debtors, trade creditors, cash
and equity shares. The group has not entered into any derivative or other
hedging instruments. The group's policy is to finance its operation and
expansion through the issue of equity share capital.
Financial assets comprise cash at bank and in hand. Financial assets and
financial liabilities exclude short term debtors and creditors. The fair value
of the financial assets and financial liabilities are not materially different
from their carrying values.
Interest rate risk
Cash balances attract a floating rate of interest of LIBOR less 1.5%. The
company does not have any borrowings.
Liquidity risk
All financial liabilities fall due in one year or less. The company has no
material undrawn committed borrowing facilities.
Foreign currency risk
The monetary assets and liabilities of the group that are not denominated in the
functional currency of the operating unit concerned are shown below.
Functional currency of group operations Net foreign currency monetary assets
2003 /(liabilities)
Sterling Canadian dollar
#000 #000
Sterling - -
Canadian dollar 10 -
At 31 December 2002, the group's only functional currency risk comprised a net
Canadian dollar asset of #361,000.
23 Post balance sheet events
Since the balance sheet date of 31 December 2003 the group has entered into a
joint venture shareholders agreement with BETandWIN Interactive Entertainment AG
("betandwin") and the senior management of Ebex to formalise the arrangements
between them in respect of the set up and management and operation of the Ebex
joint venture. As part of the arrangements relating to the joint venture, the
Group has also entered into software licensing and hosting agreements with Ebex
to provide its exchange betting technology to the joint venture. These
agreements replace the framework joint venture agreement with betandwin referred
to in the company's AIM admission document.
Notice is given that the annual general meeting of CES Software Plc (the
"Company") will be held at Hillgate House, 26 Old Bailey, London EC4M 7HW on
29 July 2004 at 10 a m for the following purposes:
Ordinary Business
1. Adoption of audited accounts
To receive and adopt the report of the directors and the audited accounts
of the Company for the financial period ended 31 December 2003 .
2. Ratification of the appointment of Lorne Abony as Director
To ratify the appointment of Lorne Abony as a director of the Company.
3. Ratification of the appointment of Andrew Rivkin as Director
To ratify the appointment of Andrew Rivkin as a director of the Company.
4. Ratification of the appointment of Anatoly Plotkin as Director
To ratify the appointment of Anatoly Plotkin as a director of the Company.
5. Ratification of the appointment of Tim Reeve as Director
To ratify the appointment of Tim Reeve as a director of the Company.
6. Ratification of the appointment of Simon Fielder as Director
To ratify the appointment of Simon Fielder as a director of the Company.
7. Ratification of the appointment of David Lake as Director
To ratify the appointment of David Lake as a director of the Company.
8. Re-appointment of auditors
To re-appoint, KPMG Audit Plc ("KPMG"), as auditors of the Company until
the conclusion of the next annual general meeting.
9. Remuneration of auditors
To authorise the directors to fix the remuneration of KPMG, as auditors.
Special Business
As special business, to consider and, if thought fit, to pass the following
resolutions, of which resolution number 10 shall be proposed as an ordinary
resolution and resolution number 11 as a special resolution.
10. Directors power to allot relevant securities - Ordinary Resolution
That the directors be and they are generally and unconditionally authorised
pursuant to section 80 of the Companies Act 1985 ("the Act") to exercise
all powers of the Company to allot relevant securities (as defined in
section 80(2) of the Act) provided that:
a) this authority shall be in substitution for any equivalent authority which
may have been given to the directors prior to the date of the passing of
this resolution;
b) this authority shall be limited to relevant securities up to an aggregate
nominal amount of #325,900;
c) unless previously renewed, revoked, varied or extended, this authority
shall expire at the earlier of the date which is 15 months from the date of
the passing of this resolution and the conclusion of the next annual
general meeting of the Company except that the Company may at any time
before such expiry make an offer or agreement which would or might require
relevant securities to be allotted after such expiry and the directors may
allot relevant securities in pursuance of such an offer or agreement as if
this authority had not expired; and
d) in relation to the grant of any right to subscribe for, or convert any
security into, shares in the capital of the company, the reference in this
resolution to the maximum amount of relevant securities that may be
allotted is to the maximum amount of shares which may be allotted pursuant
to such right.
11. Disapplication of pre-emption rights - Special Resolution
That the directors be and they are empowered pursuant to section 95(1) of
the Act to allot equity securities (as defined in section 94(2) of the Act)
of the Company for cash pursuant to the authority of the directors under
section 80 of the Act conferred by resolution 10 as if section 89(1) of the
Act did not apply to such allotment provided that:
a) the power conferred by this resolution shall be limited to:
i) the allotment of equity securities in connection with an invitation or
offer of equity securities to the holders of ordinary shares in the capital
of the Company in proportion to their respective holdings of such shares or
in accordance with the rights attached to such shares but subject to such
exclusions or other arrangements as the directors may deem necessary or
expedient in relation to fractional entitlements or as a result of legal or
practical problems under the laws of, or the requirements of any regulatory
body or any stock exchange in any territory; and
ii) the allotment, otherwise than pursuant to paragraph (a)(i) above, of equity
securities up to an aggregate nominal value equal to #48,885 representing
approximately 5 per cent. of the nominal value of the issued ordinary share
capital of the Company at the date of this notice;
b) unless previously renewed, revoked, varied or extended this power shall
expire on the earlier of the conclusion of the next annual general meeting
of the Company and the date falling 15 months after the date of the passing
of this resolution except that the Company may before the expiry of this
power make an offer or agreement which would or might require equity
securities to be allotted after such expiry and the directors may allot
equity securities in pursuance of such offer or agreement as if this power
had not expired;
c) in this resolution the nominal amount of any securities should be taken to
be, in the case of a right to subscribe for or convert any securities into
shares in the capital of the Company, the nominal amount of the shares
which may be allotted pursuant to such right.
Registered office: Hillgate House, 26 Old Bailey, London EC4M 7HW
29 June 2004
By order of the Board
Simon Fielder
Secretary
Notes:
1. All members who hold ordinary shares are entitled to attend and vote at the
meeting. Members who are entitled to attend and vote may appoint one or
more proxies to attend and, on a poll, vote instead of him, and a proxy
need not also be a member. A form of proxy accompanies this notice. If
you do not intend being present at the meeting please sign and return it so
as to reach the Company's registrar, Capita Registrars, at least 48 hours
before the meeting. The return by a member of a duly completed form of
proxy will not preclude any such member from attending in person and voting
at the meeting.
2. The register of directors' interests in the shares of the Company and
copies of the directors' service contracts, other than those expiring or
determinable without payment of compensation within one year, are available
for inspection at the registered office of the Company during the usual
business hours on any weekday (Saturday and public holidays excluded) from
the date of this notice until the annual general meeting and will be
available for inspection at the place of the annual general meeting for at
least 15 minutes prior to and during the meeting.
3. The Company pursuant to regulation 41 of the Uncertificated Securities
Regulations 2001, specifies that only those shareholders registered in the
register of members of the Company at the close of business on 27 July 2004
shall be entitled to attend and vote at the aforesaid general meeting in
respect of the number of shares registered in their name at that time. Any
changes to the register of members after such time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
4. In the case of joint holders, the signature of only one of the joint
holders is required on the form of proxy, but the vote of the senior (by
order in the register of members) who tenders a vote will be accepted to
the exclusion of the others.
Explanatory notes on certain business of the annual general meeting
Resolution 10
Directors' power to allot securities
Resolution 10 grants the Directors authority to allot shares in the capital of
the Company up to an aggregate nominal value of #325,900 representing
approximately one third of the nominal value of the issued ordinary share
capital of the Company as shown in the latest audited accounts of the Company.
The Directors do not have any present intention of exercising this authority but
they consider it desirable that the specified amount of authorised but unissued
share capital is available for issue so that they can more readily take
advantage of possible opportunities. Unless renewed, revoked, varied or
extended, this authority will expire at the end of 15 months from the date of
passing of the Resolution or at the conclusion of the next AGM of the Company,
whichever is the earlier.
Resolution 11
Disapplication of pre-emption rights
Resolution 11 empowers the Directors to allot equity shares for cash other than
in accordance with the statutory pre-emption rights which require a company to
offer all allotments of equity shares for cash first to existing shareholders in
proportion to their holdings, in connection with a rights issue and other
pre-emptive offers and otherwise up to a maximum nominal amount of #48,885,
representing approximately 5 per cent. of the nominal value of the issued share
capital of the Company as shown in the latest audited accounts of the Company.
Unless renewed, revoked, varied or extended, this authority will expire at the
end of 15 months from the date of passing of the Resolution or at the conclusion
of the next AGM of the Company, whichever is the earlier.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKKEDFELEFE
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