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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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