DJ Netalogue Technologies Plc Annual Financial Report
TIDMNTLP NETALOGUE TECHNOLOGIES PLC The information set out below is extracted from the Annual Report and Audited Financial Statements of Netalogue Technologies Plc for the year ended 31 March 2013. Chairman's Statement 9 August 2013 Dear Shareholder, In my first half statement I highlighted how strategically important 2012/13 was to the company as we positioned ourselves to target new markets via ERP resellers. Additionally, this year has seen a heavy focus on Netalogue's core activity - further development of our class leading B2B ecommerce platform, with peripheral services such as solution hosting being scaled back. Whilst the year has seen some of the most intensive R&D activity to date, the second half of the year has also seen a 35% increase in revenue compared with the first half. Although the year ended with revenue lower than last year, the year-end was marked with a substantial number of projects of significant value in progress, and we carry our highest ever revenue backlog forward into the current financial year. Key Highlights * Significant investment in the platform and company infrastructure to facilitate future growth of and through the VAR channel. * Partnership agreement with SAP's leading worldwide partner for its B1 product. * GBP817,000 sales, a reduction in revenue of 15% compared with the prior year. * Second-half revenue 35% up on first-half. * Reduction in EBITDA of GBP151,000 to GBP61,000. * Net assets of GBP596,000 with strong cash balances. No borrowings. * Interim dividend of 0.123p per share declared during the year (news released via RNS on 11/07/2012). * GBP120,000 capitalised investment in R&D. * Strongest ever sales order book at year-end. Comments on the results Sales are down by 15% for the year, primarily attributable to some client projects being delayed until later in the year, coupled with our planned reduction in peripheral services such as hosting. New skills essential for delivery of our ERP reseller strategy are reflected in additional headcount and an increased cost base but tight management of cash flow has allowed us to close the year with net assets of GBP596,000 after payment of a dividend to shareholders. Sales revenue via ERP VAR channels has begun to establish itself and the year is important in that it is the first to include revenues from this strategy. Netalogue will continue to forge new relationships within ERP markets with the aim of scaling up the licensing of the NetalogueTM B2B ecommerce platform. Direct sales continue to be an important focus for our target market of manufacturers, distributors and wholesalers who can directly benefit from our state of the art B2B technology, particularly those companies who have outgrown existing ecommerce platforms or who wish to extend their B2B ecommerce operations beyond the function of just selling online. Developments A key strategic decision was taken in 2011 to develop a version of our platform specifically for business partners who would wish to license our solution and resell it, with minimal technical capability, into their client base. We have fruitfully invested a further GBP120,000 in this project and new business opportunities have been identified as a direct result. Our investments in R&D are largely driven by market feedback from our clients, our partners, and both internal and external research. Chairman's Statement (continued) Principal risks and uncertainties The principal risks that the group face are largely the impact of the current economic uncertainty in the UK and Europe. Continued economic stagnation may impact on the group's ability to hit growth targets, which may also increase the credit risks the group faces in its trading activities. The directors consider, however, that the quality of the group's product offering and delivery record, along with its credit monitoring procedures, means that these risks can be effectively managed. The outlook The economic climate remains very challenging, and Netalogue and its customers are not immune to this environment. B2B ecommerce take-up is still growing and it is an emergent sector with the market, yet to fully mature, particularly amongst mid cap companies whose B2B ecommerce requirements are more complex, distributed, and mission critical. Netalogue's B2B ecommerce platform is particularly well suited to such organisations and we believe the desirability of our product to these companies will increase as B2B ecommerce demands more mature solutions, and moves onto the next level of sophistication. Our belief is supported by the fact that the volume increase and value of B2B ecommerce transactions being conducted by our clients is currently in excess of GBP1bn pa. We believe the fresh investments we have made into the Netaloguetm ecommerce platform in 2012/13 will help us scale our solution delivery both directly and via ERP channels to leading manufacturers, distributors and wholesalers, and which should deliver Netalogue a competitive edge in 2014/15 and beyond. The company is confident that its strategies, coupled with investment in its valued employees, will deliver a year of growth. I wish to express my thanks to my fellow directors, and all the team for their efforts throughout what has been both a challenging and rewarding year. I look forward to updating you in due course. Geoff Henderson Chairman Netalogue Technologies plc www.netalogue.com Netaloguetm Ecommerce - B2B for ERP Registered no: 4137677 Consolidated profit and loss account for the year ended 31 March 2013 2013 2012 GBP000 GBP000 Turnover 817 963 Cost of sales (97) (105) Gross profit 720 858 Administrative expenses (695) (672) Operating profit before depreciation and 61 212 amortisation Depreciation of tangible assets (18) (18) Amortisation of intangible assets (18) (8) Operating profit 25 186 Interest payable and similar charges (2) - Profit on ordinary activities before 23 186 taxation Tax on profit on ordinary activities (6) (33) Profit for the financial year 17 153 Profit per ordinary share expressed in 0.032 0.315 pence per share - basic Profit per ordinary share expressed in 0.030 0.296 pence per share - diluted Registered no: 4137677 Consolidated balance sheet at 31 March 2013 2013 2012 GBP000 GBP000 Fixed assets Intangible 144 42 Tangible 51 58 195 100 Current assets Debtors 323 420 Cash at bank and in hand 304 304 627 724 Creditors: amounts falling due within one (218) (175) year Net current assets 409 549 Total assets less current liabilities 604 649 Creditors: amounts falling due after more (3) - than one year Provisions for liabilities and charges (5) (10) Net assets 596 639 Capital and reserves Called up share capital 487 487 Share premium account 210 210 Profit and loss account (101) (58) Total shareholders' funds 596 639 1 Accounting policies Basis of preparation The financial statements have been prepared under the historical cost convention, on the going concern basis and in accordance with applicable Accounting Standards in the United Kingdom and the Companies Act 2006. A summary of the material accounting policies, which have been consistently applied, are set out below. Basis of consolidation The consolidated financial statements include the company and its subsidiary companies. Inter-company sales and profits are eliminated on consolidation. The financial statements of the subsidiary companies are made up to 31 March 2013. Consistent accounting policies are used by all companies in the group. Turnover Turnover, which excludes value added tax, represents the invoiced value of goods and services supplied. Turnover on sales of software products is recognised on the delivery and acceptance of the systems. Turnover on software support is recognised over the period in which the support is available to the customer. Software development costs The costs of software development are capitalised and amortised over the period over which economic benefit is expected to be derived from the software. This period is considered to be 3 years. Fixed asset investments Fixed asset investments in subsidiary undertakings are recorded at cost plus incidental expenses less any provision for impairment. Impairment reviews are performed by the directors when there has been an indication of potential impairment. Tangible fixed assets Tangible fixed assets are included at their purchase cost, together with any incidental expenses of acquisition.
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DJ Netalogue Technologies Plc Annual Financial Report -2-
Depreciation Depreciation is calculated to write off the cost of tangible fixed assets on a reducing balance basis over the expected useful economic lives of the assets concerned. Plant and machinery and computer software is depreciated at the rate of 25% per annum. Goodwill and amortisation Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions is capitalised. Goodwill is amortised on a straight line basis over its estimated useful economic life. The estimated useful economic life is calculated having regard to the period over which the Group expects to derive economic benefits from the assets. The directors consider the estimated useful economic life of the purchased goodwill to be 10 years. 1 Accounting policies (continued) Licences and trademarks Licences and trademarks are capitalised at their purchased cost, together with any incidental costs of acquisition. They are amortised on a straight line basis over their estimated useful economic life. The directors consider the estimated useful life of the licences and trademarks to be 3 years. Stocks Stocks and work in progress are valued at the lower of cost and net realisable value. Deferred taxation Provision for deferred taxation is made in respect of all material timing differences that have originated but not reversed by the balance sheet date. Timing differences represent differences between gains and losses recognised for tax purposes in periods different from those in which they are recognised in the financial statements. No deferred tax is recognised on permanent differences between the company's taxable gains and losses and its results as stated in the financial statements. Deferred tax assets and liabilities are included without discounting. No deferred tax assets are recognised at the end of the financial year since their recoverability is uncertain. Finance and operating leases Costs in respect of operating leases are charged on a straight line basis over the lease term. Leasing agreements which transfer to the group and company substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in tangible fixed assets and the capital element of the leasing commitments is shown as obligations under finance leases. Assets held under finance leases are depreciated over the shorter of the lease terms and the useful lives of equivalent owned assets. Share-based incentives In accordance with FRS20, the fair value of equity-settled share-based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period, based on the group's estimate of shares or options that will eventually vest. In the case of options granted, fair value is measured by a Black-Scholes pricing model. END
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