TIDMMES
RNS Number : 0252L
Messaging International Plc
01 July 2014
Messaging International Plc ('the Company')
Unaudited Preliminary Results
Messaging International Plc, the AIM traded company and provider
of innovative messaging services, announces its unaudited results
for the year ended 31 December 2013. The Company expects to be in a
position to announce and post to shareholders its audited results
for the year ended 31 December 2013 shortly. Accordingly, pursuant
to AIM Rule 19, trading in the Company's shares has been suspended
as it is not in a position to publish audited accounts for the year
ended 31 December 2013 within the required time frame.
Overview
-- New strategy to be launched in H2/2014, focused on a new
product line geared towards a new market: "Secure Mobile Messaging
for Enterprises".
-- Continued revenue growth - increased by 0.18% to GBP3,775,910 (2012: GBP3,769,263).
-- Pre tax loss for the year - GBP92,073 (2012 Profit:
GBP290,338) with positive cash flow from operations generated
New Strategy for H2/2014: Secure Mobile Messaging for
Enterprises. A messaging-suite for enterprises that replicates the
ease of use of consumer applications such as WhatsApp, Viber and
Facebook while providing all the additional tools that businesses
need in order to stay on top of corporate mobile messages which are
"MANAGED, SECURE, RELIABLE and IT READY".
Enterprise Mobile Messaging in a Nutshell
In today's constantly changing workplace, businesses are turning
to mobile messaging as an alternative to email. Employers embrace
BYOD (Bring Your Own Device) policies, while employees use consumer
messaging applications and SMS to communicate with each other.
While standard SMS/MMS and IP messages are great for personal
communication, they do not provide a way to monitor, secure,
archive or manage messages-common business requirements in an
organization.
Therefore, we've been working hard at TeleMessage to develop an
innovative, all-encompassing messaging-suite for enterprises that
replicates the ease of use of consumer applications, while
providing all the additional tools that businesses need in order to
stay on top of corporate mobile messages.
In short, we are: "Transforming Business Mobile Messaging" into
a service that is "MANAGED, SECURE, RELIABLE and IT READY".
We aim to deliver secure, manageable, and reliable messaging
solutions that include features such as: end-to-end encryption,
message termination, and detailed message delivery status. Our
offering will also include our web portal, Outlook plug-in,
corporate directory, and a range of APIs that connect to the
enterprise IT system.
Our vision is to become the mobile messaging solution preferred
by enterprises.
Our mission is to provide enterprises with messaging solutions
that are manageable, secure, reliable, easy to use and offer
developer friendly APIs.
This new strategy to be launched to the market in H2/2014 will
be marketed primarily via "Inbound Marketing"
Techniques promoting the company through blogs, webinars,
videos, newsletters, whitepapers, SEO, social media marketing and
other forms of content marketing which serve to bring customers
closer to our brand. This will be coincided with a new web site
focused on this new B2B strategy geared towards businesses in North
America.
For further information visit www.telemessage.com or
contact:
Guy Levit Messaging International Tel: + 972 3
Plc 9225252
Mark Percy Cantor Fitzgerald Tel: +44 (0)
Europe 20 7894 7000
Catherine Leftley Cantor Fitzgerald Tel: +44 (0)
Europe 20 7894 7000
About Messaging International Plc
Messaging International Plc joined AIM in August 2005. Its 100%
owned subsidiary, TeleMessage Ltd (www.telemessage.com), delivers
smart and secure messaging seamlessly over any communication
device. Designed specifically for mobile operators and enterprises,
the enterprise and VAS consumer solutions intelligently and
seamlessly handle text, voice, data, and multimedia messages as
well as IP messaging via Smartphone push notifications or RCS over
mobiles, tablets, the web, Office, APIs and IT infrastructure. The
Company has a number of contracts with major blue chip companies
including Sprint, one of the largest wireless providers in the US,
Rogers Wireless, the largest wireless provider in Canada, and many
more.
Chairman's statement
Operational Review
Trading has been solid for Messaging during the entire 2013, as
we continue to focus on developing innovative messaging solutions,
through our subsidiary TeleMessage, to improve the way users manage
messages across various communication mediums. We maintain close
relationships with our blue-chip client base, and our highly
creative R&D team continues to develop messaging solutions
which ensure that the company retains its place as a leading
provider in this sector.
TeleMessage helps operators retain their subscriber base by
enhancing the user experience and assists enterprises achieve
greater efficiency by optimizing their communication capabilities,
TeleMessage seamlessly handles text, voice, data, multimedia and IP
messages over mobiles, tablets, the web, Office, APIs and IT
infrastructure.
Our clients include, among others, companies such as Sprint and
US Cellular in the USA, Rogers, Bell, Telus in Canada and Dhiraagu
in the Maldives. We ensure stable revenues by either hosting
messaging services for a per-message fee or by selling software
licences, which are usually linked to the number of messages that
can be sent through the system or to the number of active
users.
Sales of our 'Messaging Gateway' product to Mobile operators and
directly to enterprises, offering a range of interfaces for content
providers, enterprises and developers, continue to increase. The
product enables enterprises to deliver messages for customers and
employees on a wide scale and uptake is gaining momentum
particularly as more clients understand its convenience and
cost-saving benefits. During the year, we added a few more carrier
clients to these services. We have also added a few corporate
clients such as Discount Bank and Union Bank in addition to
maintaining other customers such as Capital One Bank.
Based on the same technology platform, the company has developed
a new product: "Mobile Emergency Alerts", which is an advanced
messaging platform, triggering emergency alerts via a mobile phone
application. The product is currently sold via Sprint in the USA to
their corporate customers.
In May 2013, the company acquired through a buy back from
shareholders 39,999,999 shares at 1 penny per share. Full details
were provided in a circular to shareholders dated 17 May 2013.
Financial Results
As a result of our decision to further invest in R&D and in
the new strategy, profitability has turned into a small loss.
For the year ended 31 December 2013, we are reporting a pre-tax
loss of GBP92,073 (2012: profit GBP290,338) based on gross revenues
of GBP3,775,910 (2012: GBP3,769,263).
During 2013, the company has continued to receive support from
the Israeli Office of the Chief Scientist (OCS) in relation to some
elements of R&D. In 2013, the resources provided by the OCS net
of royalties were GBP189,495.
The group's cash balances at 31 December 2013 totalled
GBP765,026 (2012: GBP1,069,661).
In June 2013, the company completed the buyback of 39,999,999
ordinary shares in the company from existing shareholders for
GBP400,000. The acquired shares were cancelled leaving the company
with 115,872,148 ordinary shares of 0.5 pence each in issue. Full
details have been provided in a circular to shareholders dated 17
May 2013.
Outlook
We are now changing our focus from purely increasing our
presence within the telecom sector to a strategy where we directly
approach enterprise clients in addition to working with our telecom
partners. We have decided to further invest in both our R&D and
Marketing teams as well as develop new marketing capabilities. Such
investment is important to the execution of our strategy and the
introduction of our new products.
I would like to thank our team for their hard work and
dedication over the past year, and our shareholders for their
continued support. I look forward to reporting another successful
period of trading at our interims.
H Furman
Chairman
30 June 2014
Consolidated statement of comprehensive income for the year
ended 31 December 2013
2013 2012
GBP GBP
Continuing operations:
Revenues 3,775,910 3,769,263
Cost of revenues (1,411,536) (1,332,419)
------------- ----------------
Gross profit 2,364,374 2,436,844
------------- ----------------
Operating expenses
Research and development (1,188,500) (918,078)
Selling and marketing (739,249) (643,539)
General and administrative (463,304) (540,331)
Total operating expenses (2,391,053) (2,101,948)
------------- ----------------
Operating (loss)/profit (26,679) 334,896
Finance costs (net) (65,394) (44,558)
(Loss)/profit before taxation (92,073) 290,338
Taxation 2,914 (17,740)
Comprehensive (loss)/profit
for the year attributable
to equity holders of the parent
company (89,159) 272,598
============= ================
Other comprehensive (loss)/profit
Re-measurement of loss from
defined benefit plan (5,576) -
Foreign exchange difference
on translation of foreign
operations (3,858) (35,204)
Foreign exchange difference
arising from restating the
carrying value of goodwill
associated with foreign operations (85,286) (155,158)
(94,720) (190,362)
============= ================
Total comprehensive (loss)/profit
attributable to equity holders
of the parent company (183,879) 82,236
============= ================
(Loss)/earnings per share
(Loss)/earnings per share
from operations (0.07)p 0.16p
============== ===================
Diluted (loss)/earnings per
share from operations (0.07)p 0.15p
============== ===================
Statements of changes in equity for the year ended 31 December
2013
Capital Foreign
Share Share redemption exchange Revenue
capital premium reserve reserve reserves (Total
fund
GBP GBP GBP GBP GBP GBP
As at 1
January
2012 1,179,400 4,298,727 - 398,108 (1,194,726) 4,681,509
Capital
reorganisation (400,039) (4,298,727) 400,039 - 4,298,727 -
Share buyback - - - - (127,500) (127,500)
Profit for the
year - - - - 272,598 272,598
Foreign currency
translation
changes
for goodwill - - - (155,158) - (155,158)
Other foreign
currency
translation
changes - - - (35,204) - (35,204)
Share based
payments
for employee
share options - - - - 90,907 90,907
At 31 December
2012 779,361 - 400,039 207,746 3,340,006 4,727,152
Capital
reorganisation (200,000) - 200,000 - - -
Share buyback - - - - (400,000) (400,000)
Loss for the
year - - - - (89,159) (89,159)
Re-measurement
of loss from
defined benefit
plan - - - - (5,576) (5,576)
Foreign currency
translation
changes
for goodwill - - - (85,286) - (85,286)
Other foreign
currency
translation
changes - - - (3,858) - (3,858)
Share based - - - -
payments
At 31 December
2013 579,361 - 600,039 118,602 2,845,271 4.143,273
=============== =============== =============== ================ ============== ==============
Consolidated statement of financial position at 31 December
2013
2013 2012
GBP GBP
Non-current assets
Intangible assets 3,432,759 3,518,045
Property, plant and
equipment 162,655 179,125
Other investments 323,704 275,692
Total non-current
assets 3,919,118 3,972,862
------------ ------------
Current assets
Trade and other receivables 784,654 1,086,271
Cash and cash equivalents 765,026 1,069,661
------------ ------------
Total current assets 1,549,680 2,155,932
------------ ------------
Total assets 5,468,798 6,128,794
------------ ------------
Current liabilities
Trade and other payables (616,701) (520,142)
Borrowings (199,019) (191,985)
------------ ------------
Total current liabilities (815,720) (712,127)
------------ ------------
Non-current liabilities
Other payables (23,618) (48,554)
Provisions (382,190) (329,857)
Borrowings (103,997) (311,104)
------------ ------------
Total non-current
liabilities (509,805) (689,515)
------------ ------------
Total liabilities (1,325,525) (1,401,642)
------------ ------------
Net assets 4,143,273 4,727,152
Equity attributable
to owners of the
parent company
Share capital 579,361 779,361
Share premium - -
Capital redemption
reserve 600,039 400,039
Foreign currency
translation reserve 118,602 207,746
Revenue reserves 2,845,271 3,340,006
Total Equity 4,143,273 4,727,152
============ ============
Consolidated statement of
cash flows for the year
ended 31 December 2013 2013 2012
GBP GBP
Cash flow from operating
activities
Operating (loss)/profit (26,679) 334,896
---------- ----------
Adjustments for:
Share based payments - 90,907
Defined benefit plan (5,576) -
Depreciation and amortisation 64,533 66,245
Foreign currency differences (39,461) (53,186)
---------- ----------
19,496 103,966
---------- ----------
Operating cash flow
before working capital
movements (7,183) 438,862
Decrease in receivables 301,617 58,443
(Decrease)/increase
in payables 71,623 (195,752)
Increase in provisions 52,333 57,176
---------- ----------
425,573 (80,133)
---------- ----------
Cash inflow from operating
activities 418,390 358,729
Investing activities
Interest received 235 727
Investments (48,012) (37,462)
Purchase of tangible
assets (52,405) (130,990)
Repurchase of shares (400,000) (127,500)
---------- ----------
Net cash used in investing
activities (500,182) (295,225)
---------- ----------
Taxation 2,914 (17,740)
Financing activities
Interest and related
costs (25,684) (22,876)
Bank borrowing - 621,118
Bank loan repayments (200,073) (118,029)
Net cash used from
financing activities (225,757) 480,213
---------- ----------
Net change in cash
and cash equivalents (304,635) 525,977
Cash and cash equivalents
and bank overdraft
at the beginning of
the year 1,069,661 543,684
Cash and cash equivalents
and bank overdraft
at the end of the year 765,026 1,069,661
========== ==========
Notes to the group and parent company financial statements
1. General information
Messaging International Plc is a company incorporated and
domiciled in the UK and its activities are as described in the
chairman's statement and directors' report.
2. Basis of Accounting
The consolidated financial statements of the company for the
year ended 31 December 2013 have been prepared on a historical cost
basis and are in accordance with International Financial Reporting
Standards ('IFRS") as adopted by the EU. These have been applied
consistently except where otherwise stated.
The group has adopted the following new and amended IFRSs as of
1 January 2013:
IFRS 10 'Consolidated financial statements'
IFRS 12 'Disclosures of interests in other entities'
IFRS 13 'Fair value measurement'
IAS 19 (revised) 'Employee benefits' (revised)
IAS 27 (revised) 'Separate financial statements'
Amendment to IFRS7, 'Financial instruments: Disclosures -
offsetting financial assets and financial liabilities'
Amendments to IFRS 10, IFRS 11 and IFRS 12 - Transitional
guide
At the date of authorisation of these financial statements, the
following standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases had not been adopted by the EU).
Amendment to IAS 32, 'Financial instruments: Presentation' -
Offsetting financial assets and financial liabilities 1 January
2014
Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment entities
1 January 2014
Amendment to IAS 36, 'Impairment of assets' - Recoverable amount
disclosures for non-financial assets 1 January 2014
Amendment to IAS 39, 'Financial instruments: Recognition and
measurement' - Novation of derivatives and continuation of hedge
accounting 1 January 2014
IFRIC 21, 'Levies' 1 January 2014
IFRS 9, 'Financial instruments' - to be decided
The directors anticipate that the adoption of these standards
and interpretations in future periods will have no material effect
on the financial statements of the group.
3. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the company and entities controlled by the company
(its subsidiaries) made up to 31 December each year. Control is
achieved where the company has the power to govern the financial
and operating policies of any subsidiary undertaking so as to
obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired is
recognised as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to profit and loss in the
period of acquisition.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring the accounting
policies used into line with those used by the group.
Details of subsidiary undertakings are set out in note 15 to the
financial statements.
All intra-group transactions and balances have been eliminated
in preparing the consolidated financial statements.
4. Presentational currency
These financial statements are presented in pounds sterling
because the parent is an AIM traded company on the London Stock
Exchange. The functional currency of the trading subsidiaries is US
dollars.
5. Significant accounting policies
(a) Going concern
These financial statements have been prepared on the assumption
that the group is a going concern.
When assessing the foreseeable future, the directors have looked
at a period of twelve months from the date of approval of this
report. The forecast cash-flow requirements of the business are
contingent upon the ability of the group to retain revenues from
existing contracts and generate future revenues from future
business.
As the directors have reasonable expectations that the group has
adequate resources to continue trading for the foreseeable future
they continue to adopt the going concern basis in preparing the
financial statements.
Were the group unable to continue as a going concern,
adjustments would have to be made to the statement of financial
position of the group to reduce the value of assets to their
recoverable amounts, to provide for future liabilities that might
arise and to reclassify non-current assets and long-term
liabilities as current assets and liabilities.
(b) Revenue recognition
The company's trading subsidiaries generate revenues primarily
from sales of messaging services to mobile operators and
corporations for use by end - customers (such as SMS to
Landline).
Revenues are recognised when the revenues can be measured
reliably, it is probable that the economic benefits associated with
the transaction will flow to the company and the costs incurred or
to be incurred in respect of the transaction can be measured
reliably. Revenues are measured at the fair value of the
consideration received less any trade discounts, volume rebates and
returns.
Deferred revenue includes amounts received from customers for
which revenue has not yet been recognised.
(c) Research and development costs
Research expenditures are recognised in profit or loss when
incurred. An intangible asset arising from development or from the
development phase of an internal project is recognised if the
company can demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale; the
company's intention to complete the intangible asset and use or
sell it; the company's ability to use or sell the intangible asset;
how the intangible asset will generate future economic benefits;
the availability of adequate technical, financial and other
resources to complete the intangible asset; and the company's
ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The asset is measured at cost less any accumulated amortisation
and any accumulated impairment losses. Amortisation of the asset
begins when development is complete and the asset is available for
use.
In the years ended 31 December 2013 and 2012, no development
costs were capitalised.
(d) Goodwill and impairment
The carrying amounts of assets are reviewed at each reporting
date to determine whether there is any indication of
impairment.
If any such indication exists then the asset's recoverable
amount is estimated. For goodwill that has an indefinite useful
life, recoverable amount is estimated at each reporting date or
more frequently when indications of impairment are identified.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount
unless the asset is carried at a revalued amount, in which case the
impairment loss is recognised directly against any revaluation
surplus for the asset to the extent that the impairment loss does
not exceed the amount in the revaluation surplus for that same
asset. A cash-generating unit is the smallest identifiable asset
group that generates cash flows that are largely independent from
other assets and groups. Impairment losses are recognised in the
income statement in the period in which it arises. Impairment
losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to
the units and then to reduce the carrying amount of the other
assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
Impairment loss on goodwill is not reversed in a subsequent
period. An impairment loss for an asset other than goodwill is
reversed if, and only if, there has been a change in the estimates
used to determine the asset's recoverable amount since the last
impairment loss was recognised. The carrying amount of an asset
other than goodwill is increased to its revised recoverable amount,
provided that this amount does not exceed the carrying amount that
would have been determined (net of amortisation or depreciation)
had no impairment loss been recognised for the asset in prior
years. A reversal of impairment loss for an asset other than
goodwill is recognised in the income statement unless the asset is
carried at revalued amount, in which case, such reversal is treated
as a revaluation increase.
(e) Investment in subsidiary undertakings
The investment in subsidiary undertakings is stated in the
balance sheet at cost less any provision for impairment. Impairment
is recognised immediately in the income statement and is not
subsequently reversed.
(f) Property, plant and equipment
Property, plant, and equipment are stated at cost net of
accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets
at the following annual rates:
%
Computers 33
Electronic equipment 15-25
Furniture and office equipment 7-15
Leasehold improvements Over the term
of the lease
The carrying value of property plant and equipment is reviewed
for impairment when events or changes indicate the carrying value
may not be recoverable. If any such indication exists and carrying
values exceed recoverable amounts such assets are written down to
their recoverable amounts.
(g) Operating leases
Rentals applicable to operating leases, where substantially all
of the benefits and risks of ownership remain with the lessor, are
charged against income as and when incurred.
(h) Share options:
Employee share options
The group has applied the requirements of IFRS 2 "Share-based
Payments".
The group issues equity-settled and cash-settled share-based
payments to certain employees. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair value
determined at the grant date is expensed on a straight-line basis
over the vesting period, based on the group's estimate of shares
that will eventually vest.
Fair value is measured by use of a Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
A liability equal to the portion of the goods or services
received is recognised at the current fair value determined at each
balance sheet date for cash-settled share-based payments.
Other share options and equity instruments:
Where equity instruments are granted to persons other than
employees the income statement is charged with the fair value of
services received.
This policy has been applied to share options granted to Pacific
Continental on the buyback of their shares in February 2012. The
share based cost of warrants issued to Mizrahi Tefahot Ltd in June
2012 as part of their loan agreement with the company's subsidiary
undertaking in Israel is written off to as part of the company's
cost of finance over the term of the loan.
(i) Severance pay
Pursuant to Israel's severance pay law, employees of more than
one year are entitled to one month's salary for each year employed
or a portion thereof. The cost of providing severance pay is
determined using an independent actuary. Actuarial gains and losses
are recognised immediately in the income statement in the period in
which they occur.
The value of deposited funds is based on the cash surrender
value of the insurance policies. The deposited funds include
profits accumulated up to the balance sheet date. The deposited
funds may be withdrawn only upon fulfilment of the severance pay
obligation, pursuant to Israel's severance pay law or labour
agreements.
(j) Government grants
Government grants are recognised when there is reasonable
assurance that the grants will be received and the company will
comply with the attached conditions. Government grants received
from the Office of the Chief Scientist ("OCS") are recognized upon
receipt as a liability if future financial benefits are expected
from the project that will result in royalty-bearing sales.
A liability for the loan is first measured at fair value using a
discount rate that reflects a market rate of interest. The
difference between the amount of the grant received and the fair
value of the liability is accounted for as a Government grant and
recognised as a reduction of research and development expenses.
After initial recognition, the liability is measured at amortised
cost using the effective interest method. Royalty payments are
treated as a reduction of the liability. If no economic benefits
are expected from the research activity, the grant receipts are
recognised as a reduction of the related research and development
expenses. In that event, the royalty obligation is treated as a
contingent liability in accordance with IAS 37.
In each reporting date, the company evaluates whether there is
reasonable assurance that the royalty liability, in whole or in
part, will or will not be settled based on the best estimate of
future sales. If the estimate of future sales indicates that there
is no such reasonable assurance, the appropriate liability
reflecting the anticipated royalty payments is recognised with a
corresponding charge to research and development expenditure.
(k) Taxation
Income tax expense represents the sum of the current tax payable
and the deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the same
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The company's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to income statement,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the company intends to settle
its current tax assets and liabilities on a net basis.
(l) Foreign currency
Transactions in foreign currency are recorded at the rate of
exchange prevailing at the date of the transaction. All differences
are taken to the income statement. Assets and liabilities
denominated in foreign currency are translated into sterling at the
rate of exchange prevailing at the balance sheet date.
On consolidation, income and expenditure of subsidiary
undertakings are translated into sterling at average rates of
exchange in the period. Assets and liabilities are translated into
sterling at the rate of exchange ruling at the balance sheet date.
Exchange differences arising from the use of average rates for
translating the results of foreign subsidiaries or from the
translation of net assets on the acquisition of foreign subsidiary
undertakings are taken to the group's translation reserves.
(m) Investments
Investments represent funds invested in insurance policies in
order to meet severance pay obligations pursuant to Israeli
severance pay law and staff contracts of employment relevant to the
company's principal subsidiary undertaking in Israel.
(n) Trade receivables
Trade receivables are recognised at fair value. A provision for
impairment of trade receivables is established where there is
objective evidence that the company or group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or liquidation
and default or delinquency of payments are considered indicators
that the trade receivable is impaired. The amount of the provision
is the difference between the asset's carrying amount and the
present value of estimated future cash flows discounted at the
original rate of interest. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of
the loss is recognised in the income statement within
administrative expenses. When a trade receivable is uncollectable
it is written off against the allowance account for trade
receivables.
(o) Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
on call with banks. Bank overdrafts are shown as borrowings within
current liabilities.
(p) Provisions
A provision in accordance with IAS 37 is recognised when the
Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. If the effect is material, provisions are measured
according to the estimated future cash flows discounted using a
pre-tax interest rate that reflects the market assessments of the
time value of money and, where appropriate, those risks specific to
the liability.
(q) Financial liabilities and equities
Financial liabilities and equities instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the group after deducting all of
its liabilities.
Ordinary shares are classified as equity. Incremental costs
directly attributable to new shares are shown in equity as a
deduction from the proceeds.
Share premium represents funds raised from shareholders in
excess of their nominal value net of issue costs.
Revenue reserves represent the cumulative net gains and losses
of the group along with increases in equity for services received
in equity settled share-based transactions.
Borrowings represent bank borrowings and are measured at
amortised cost.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
(r) Borrowing costs
Borrowing costs are expensed to the comprehensive income
statement in the period incurred.
(s) Managing capital
The group's objectives when managing capital are to safeguard
the group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debt.
6. Critical accounting judgements and key sources of estimation uncertainty
The key assumptions made in the financial statements concerning
uncertainties at the date of financial position and the critical
estimates computed by the group that may cause a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Share based payments
The group has made awards of options over its unissued share
capital to certain directors, employees as part of their
remuneration package, Mizrahi Tefahot Ltd, bankers to TeleMessage
Ltd and Pacific Continental as part of a share buyout package.
The valuation of share options and warrants involve making a
number of critical estimates relating to price volatility, future
dividend yields, expected life of the options and forfeiture rates.
The assumptions have been described in more detail in notes 23 and
29 to the financial statements.
Employee benefits liability
The measurement of the liability in respect of the defined
benefit pension plans is determined using actuarial valuations. The
actuarial valuation involves making assumptions about, among
others, discount rates, expected rates of return on assets, future
salary increases and mortality rates. Due to the long term nature
of these plans, such estimates are subject to significant
uncertainty. Further details are given in Note 21 to the financial
statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating units to which the
goodwill has been allocated. The value in use calculation requires
the entity to estimate the future cash flows expected to arise from
the cash generating unit and a suitable discount rate in order to
calculate present value.
The carrying amount of goodwill at the year end has not required
impairment. However after taking into account exchange rate
fluctuations, the carrying value at 31 December 2013 was
GBP3,432,759 (2012: GBP3,518,045).
Property, plant and equipment
The costs of property, plant and equipment of the group are
depreciated on a straight-line basis over the useful lives of the
assets. Management estimates the useful lives of the property,
plant and equipment to be within 3 to 5 years. These are common
life expectancies applied in the industry. Changes in the expected
level of usage and technological developments could impact the
economic useful lives and the residual values of these assets,
therefore future depreciation charges could be revised. The
carrying amounts of the group's property, plant and equipment as at
31 December 2013 are disclosed in Note 16 to the financial
statements.
8 Basic and diluted loss per share
Basic loss/earnings per share has been calculated on the group's
loss attributable to equity holders of the parent company of
GBP89,159 (2012: profit GBP272,598) and on the weighted average
number of shares in issue, which was 134,064,000 (2012:
166,832,000).
In view of the group loss for the year, share warrants and
options to subscribe for shares in the company are anti-dilutive
and therefore diluted earnings per share is the same as basic loss
per share.
Diluted earnings per share for 2012 was calculated on the
group's profit of GBP272,598 and 179,784,836 shares which included
a further 12,952,836 shares arising from the exercise of future
share options and warrants.
9 Share buyback and capital reorganisation - effect on reserves.
In May 2013, the board decided that it would be appropriate to
offer all shareholders the opportunity to realise some of their
investment in the company by means of a tender offer which
completed in June with the buyback 25.7% of the called up share
capital of the company representing 39,999,999 ordinary shares from
shareholders at 1 penny per share equating to GBP400,000. The
acquired shares were cancelled following approval by the High Court
leaving the company with 115,872,148 ordinary shares of 0.5 pence
each in issue.
The nominal value of the shares cancelled of GBP200,000 was
taken to a capital redemption reserve.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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