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DJ Netalogue Technologies Plc Final Results

 
TIDMNTLP 
 
NETALOGUE TECHNOLOGIES PLC 
 
ANNUAL REPORT 
 
FOR THE YEAR ENDED 
 
31 MARCH 2017 
 
The information contained in this announcement is extracted from the audited 
 
financial statements of the Company. 
 
Chairman's Statement for the year ended 31 March 2017 
 
Dear Shareholder, 
 
A year of two completely different trading periods for Netalogue. Trading 
conditions in the first half of FY17 were challenging principally due to 
exceptional economic uncertainty in Netalogue's target market due to the UK 
voting to leave the EU. By contrast, in the second half of FY17 we witnessed 
one of the strongest selling periods in the company's history during which we 
made up the ground lost in the first half of the year and added significant 
'new names' to the Netalogue order book. 
 
Overall, we exited the year with revenues almost flat year on year, a small net 
loss and a strengthened cash position. 
 
Financially the company is very stable with a strong cash position, no debt 
and valuable Intellectual Property that delivers profitable growth. 
 
Key Highlights 
 
  * Revenue GBP1,043,300  (2016: GBP1,117,000) 
 
  * Operating profit before depreciation and amortisation GBP20,000 (2016: GBP 
    119,000) 
 
  * Net assets of GBP701,000 with a strong cash balance and no borrowing (2016: GBP 
    738,000) 
 
Results commentary 
 
 One of the significant challenges for Netalogue is getting the opportunity to 
meet prospects to explain the virtues of our e-commerce platform. We know we 
have a very strong value proposition when we can get to talk to potential 
buyers; our product is functionally rich and we have an impressively growing 
stable of successful and happy clients. The challenge is simply getting 
attention in a crowded market where "noise" often drowns out more worthwhile 
propositions. 
 
Despite significant investment in additional marketing activity in the first 
six months of FY17 this did not overcome the economic uncertainty that delayed 
many decisions. Sales cycles elongated and the first half year results were not 
due to losing deals but the consequence of unprecedented uncertainty in the 
general market resulting in businesses taking a cautious approach to committing 
to new capital expenditure projects. Many of our target clients who import 
products and distribute them within the UK are directly affected by the 
uncertainty caused by Britain exiting the EU, and possibly the single market. 
The trading position was further hindered by the falling pound against the Euro 
and US dollar. 
 
The second half year was a different story as the market stabilised. We were 
able to convert our pipeline into significant wins, all but making up the 
revenue shortfall from the first half year, and adding 'new name' enterprise 
accounts to our portfolio. During FY17 Netalogue has been successful in winning 
notable new clients such as the Conviviality Group Ltd (Matthew Clarke), 
Hochiki, Enterprise Inns, Pedigree and Marstons. 
 
During FY17 we also started to see the impact of a strategic business review 
focussed on the company's routes to market, forming new alliances and balancing 
the resources dedicated to sales and marketing. The board also made the very 
difficult decision to change the leadership of the company and modify the 
organisational structure due to the necessity for a more technically led team 
where a customer centric focus is combined with a strong technology vision and 
platform roadmap. Andrew Robathan assumed the mantle of Managing Director with 
Richard Condon moving to a Non-Executive director role where his many years of 
experience in this sector will continue to benefit the business. 
 
The Outlook 
 
The results of all our 'strategic moves', noted above, will continue to 'play 
out' through FY18 as we attempt to leverage new relationships, balance our 
sales and marketing investments and add new skills to our employee base. 
 
In previous commentaries I have noted the significant impact delayed deals can 
have on organisations whose revenue are not made based on volume of sales but 
on 'value based' selling. Whilst we always desire to improve our sales volume 
(of deals) we traditionally have been an organisation of low volume but high 
value sales. Our desire is to build long term profitable, strategic, 
relationships with organisations. This is reflected in the revenue peaks and 
troughs when any single trading period is examined. Our goal is to establish a 
more balanced pipeline based upon significant contributions from direct, 
in-direct and partner led selling. 
 
We will continue to strategically assess all areas of the business with a focus 
on industry-led sales and marketing, continued broadening of our channels to 
market and deepening our relationship with a small number of key players. 
Through wider reach and a more diverse spread of prospects the Company can 
better insulate itself from external economic issues. 
 
The board continues to support an 'innovation led' product development approach 
with significant investment in platform enhancement and class leading R&D to 
ensure it complements the increasing number of enterprise users. The product 
platform is very competitive, we feel our pricing is right, and we enjoy a 
close relationship with an impressive base of customers. 
 
As chairman I will continue to review strategies to ensure they drive customer 
satisfaction and in turn, operational efficiency and shareholder value. 
 
Dividend 
 
No decision has been made at the date of this announcement to declare a 
dividend 
 
Nick Barley 
 
Chairman 
 
Netalogue Technologies plc 
 
Consolidated statement of comprehensive income for the year ended 31 March 2017 
 
                                                  2017          2016 
 
                                                  GBP000          GBP000 
 
Turnover                                          1,043         1,117 
 
Cost of sales                                     (67)          (81) 
 
Gross profit                                      976           1,036 
 
Administrative expenses                           (984)         (966) 
 
Operating profit before depreciation and          20            119 
amortisation 
 
Depreciation of tangible assets                   (8)           (9) 
 
Amortisation of intangible assets                 (20)          (40) 
 
Operating (loss) / profit                         (8)           70 
 
Exceptional items-board restructuring costs       (38)          - 
 
(Loss) / profit on ordinary activities            (46)          70 
before taxation 
 
Tax on (loss) /profit on ordinary activities      9             14 
 
(Loss) / profit for the financial year            (37)          84 
 
(Loss) / profit per ordinary share expressed      (0.076)       0.172 
in pence per share - basic 
 
(Loss) / profit per ordinary share expressed      (0.071)       0.162 
in pence per share  - diluted 
 
 
 
 
Total comprehensive (expense) / income for the year 
attributable to: 
 
Owners of the parent company                             (37)             84 
 
Total comprehensive (expense) / income for the year      (37)             84 
 
Consolidated balance sheet at 31 March 2017 
 
                                                      2017       2016 
 
                                                      GBP000       GBP000 
 
Fixed assets 
 
Intangible assets                                     200        133 
 
Tangible assets                                       23         29 
 
                                                      223        162 
 
Current assets 
 
Debtors                                               206        348 
 
Cash at bank and in hand                              614        549 
 
                                                      820        897 
 
Creditors: amounts falling due within                 (336)      (313) 
one year 
 
Net current assets                                    484        584 
 
Total assets less current liabilities                 707        746 
 
Provisions for liabilities                            (6)        (8) 
 
Net assets                                            701        738 
 
Capital and reserves 
 
Called up share capital                               487        487 
 
Share Premium                                         210        210 
 
Profit and loss account                               4          41 
 
Total equity                                          701        738 
 
 1. Summary of accounting policies 
 
    The principal accounting policies applied in the preparation of these 
    financial statements are set out below. These policies have been 
    consistently applied to all the years presented, unless otherwise stated. 
 
    Basis of preparation 
 
    These summary financial statements are prepared on a going concern basis, 
    under the historical cost convention. 
 
The preparation of financial statements in conformity with FRS 102 requires the 
use of certain critical accounting estimates. It also requires management to 
exercise its judgement in the process of applying the group and company's 
accounting policies. The areas involving higher degree of judgement or 
complexity, or areas where assumptions and estimates are significant to the 
financial statements are disclosed in note 2. 
 
Basis of consolidation 
 
The group consolidated financial statements include the financial statements of 
the Company and all of its subsidiary undertakings. 
 
A subsidiary is an entity controlled by the Group. Control is the power to 
govern the financial statements and operating policies of an entity so as to 
obtain benefits from its activities. Where the Group owns less than 50% of the 
voting powers of an entity but controls the entity by virtue of an agreement 
with other investors which give it control of the financial and operating 
policies of the entity it accounts for that entity as a subsidiary. 
 
Intercompany transactions and balances between group companies are eliminated 
on consolidation and the accounting policies of subsidiaries are changed when 

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DJ Netalogue Technologies Plc Final Results -2-

necessary to ensure consistency with group accounting policies. 
 
Going concern 
 
The group meets its day to day working capital requirements through its cash 
reserves. The current economic conditions continue to create uncertainty over 
the level of demand for the group's services. The group's forecasts and 
projections, taking into account of reasonably possible changes in trading 
performance, show that the group should be able to operate within the level of 
its current cash reserves. The directors have a reasonable expectation that the 
company has adequate resources to continue in operational existence for the 
foreseeable future. The group therefore continues to adopt the going concern 
basis in in preparing its financial statements. 
 
Foreign currency 
 
 1. Functional and presentation currency 
 
The group financial statements are presented in pound sterling. 
 
Revenue recognition 
 
Revenue is measured at the fair value of the consideration received or 
receivable and represents the invoiced value of the sale of B2B ecommerce 
software solutions and support services. Turnover on sales of software products 
is recognised on the delivery and acceptance of the systems. Turnover on 
software licences and support is recognised over the period in which the 
licence or support is available to the customer. 
 
 1. Summary of significant accounting policies (continued) 
 
Employee benefits 
 
The group provides a range of benefits to employees, including annual bonus 
arrangements, paid holiday arrangements and defined contribution pension plans. 
 
 1. Short term benefits 
 
    Short term benefits, inducing holiday pay and other similar non-monetary 
    benefits, are recognised as an expense in the period in which the service 
    is received. 
 
Taxation 
 
Taxation expense for the period comprises current and deferred tax recognised 
in the reporting period. Tax is recognised in the profit and loss account, 
except to the extent that it relates to items recognised in other comprehensive 
income or directly in the equity. 
 
Current or deferred taxation assets and liabilities are not discounted. 
 
 1. Current tax 
 
    Current tax is the amount of income tax payable in respect of the taxable 
    profits for the year or prior years. Tax is calculated on the basis of tax 
    rates and laws that have been enacted or substantively enacted by the 
    period end. 
 
 2. Deferred tax 
 
    Deferred tax arises from timing differences that are differences between 
    taxable profits and total comprehensive income as stated in the financial 
    statements. These timing differences arise from the inclusion of income and 
    expenses in tax assessments in the periods different from those in which 
    they are recognised in financial statements. 
 
Deferred tax is recognised on all timing differences at the reporting date 
except for certain exceptions. Unrelieved tax losses and other deferred tax 
assets are only recognised when it is probable that they will be recovered 
against the reversal of deferred tax liabilities or other future taxable 
profits. 
 
Deferred tax is measured using tax rates and laws that have been enacted or 
substantively enacted by the period end and that are expected to apply to the 
reversal of the timing difference. 
 
Business combinations and goodwill 
 
Business combinations are accounted for by applying the purchase method. 
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. 
 
Intangible assets 
 
Intangible assets relates to software development costs. The costs of software 
development are stated at cost less accumulated amortisation and accumulated 
impairment losses. This period is considered to be 3-5 years. 
 
 1. Summary of significant accounting policies (continued) 
 
Tangible assets 
 
Tangible assets are stated at cost (or deemed cost) less accumulated 
depreciation and accumulated impairment losses. Cost includes the original 
purchase price, costs directly attributable to bringing the asset to its 
working condition for its intended use. 
 
 1. Computer software 
 
    Computer software is stated at cost less accumulated depreciation and 
    accumulated impairment losses. 
 
 2. Plant and machinery 
 
    Plant and machinery are stated at costs less accumulated depreciation and 
    accumulated impairment losses. 
 
 3. Depreciation 
 
    Depreciation on tangible assets is calculated to write off the cost of the 
    assets concerned on a reducing balance basis as follows: 
 
 4. Computer software- 25% 
 
 5. Plant and machinery- 25% 
 
    vi)    Derecognition 
 
    Tangible assets are derecognised on disposal or when no future economic 
    benefits are expected. On disposal, the difference between the net disposal 
    proceeds and the carrying amount is recognised in profit and loss and 
    included in 'Other operating (losses)/gains'. 
 
Leased assets 
 
 1. Operating leased assets 
 
    Leases that do not transfer all the risks and rewards of ownership are 
    classified as operating leases. Payments under operating leases are charged 
    to the profit and loss account on a straight-line basis over the period of 
    the lease. 
 
Cash and cash equivalents 
 
Cash and cash equivalents includes cash in hand. Bank overdrafts, when 
applicable, are shown within borrowings in current liabilities. 
 
Financial instruments 
 
The company enters into basic financial instruments transactions that result in 
the recognition of financial assets and liabilities like trade and other 
accounts receivable and payable and loans to related parties. 
 
Debt instruments (other than those wholly repayable or receivable within one 
year), including loans and other accounts receivable and payable, are initially 
measured at present value of the future cash flows and subsequently at 
amortised cost using the effective interest method. Debt instruments that are 
payable or receivable within one year, typically trade payables or receivables, 
are measured, initially and subsequently, at the undiscounted amount of the 
cash or other consideration, expected to be paid or received. However, if the 
arrangements of a short-term instrument constitute a financing transaction, 
like the payment of a trade debt deferred beyond normal business terms or 
financed at a rate of interest that is not a market rate or in case of an 
out-right short-term loan not at market rate, the financial asset or liability 
is measured, initially, at the present value of the future cash flow discounted 
at a market rate of interest for a similar debt instrument and subsequently at 
amortised cost. 
 
Financial assets that are measured at cost and amortised cost are assessed at 
the end of each reporting period for objective evidence of impairment. If 
objective evidence of impairment is found, an impairment loss is recognised in 
the Statement of Comprehensive Income. 
 
For financial assets measured at amortised cost, the impairment loss is 
measured as the difference between an asset's carrying amount and the present 
value of estimated cash flows discounted at the asset's original effective 
interest rate. If a financial asset has a variable interest rate, the discount 
rate for measuring any impairment loss is the current effective interest rate 
determined under the contract. 
 
For financial assets measured at cost less impairment, the impairment loss is 
measured as the difference between an asset's carrying amount and best 
estimate, which is an approximation of the amount that the company would 
receive for the asset if it were to be sold at the balance sheet date. 
 
Financial assets and liabilities are offset and the net amount reported in the 
Balance sheet when there is an enforceable right to set off the recognised 
amounts and there is an intention to settle on a net basis or to realise the 
asset and settle the liability simultaneously. 
 
Share capital 
 
Ordinary shares are classified as equity. Incremental costs directly 
attributable to the issue of new ordinary shares are shown in equity as a 
deduction, net of tax, from the proceeds. 
 
Distribution to equity holders 
 
Dividends and other distributions to the Group's shareholders are recognised as 
a liability in the financial statements in the period in which the dividends 
and other distributions are approved by the shareholders. These amounts are 
recognised in the statement of changes in equity. 
 
Related party transactions 
 
The group discloses transactions with related parties which are not wholly 
owned within the same group. It does not disclose transactions with members of 
the same group that are wholly owned. 
 
 1. Critical judgements in applying the entity's accounting policies 
 
Estimates and judgements are continually evaluated and are based on historical 
experience and other factors, including expectations of future events that are 
believed to be appropriate and reasonable in the circumstances. 
 
a) Critical judgements in applying the company's accounting policies 
 
The directors do not consider there to be any critical accounting judgments to 
the financial statements. 
 
b) Key accounting estimates and assumptions 
 
The group makes estimates and assumptions concerning the future. The resulting 
accounting estimates will, by definitions, seldom equal the related actual 
results. The estimates and assumptions that have a significant risk of causing 
a material adjustment to the carrying value amounts of assets and liabilities 
within the next financial year are addressed below. 
 
 1. Useful economic lives of tangible and intangibleassets 
 

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    The annual depreciation charge for tangible assets and amortisation charge 
    for intangible assets are sensitive to changes in the estimated useful 
    economic lives of the assets. The useful economic lives are re-assessed and 
    amended when necessary to reflect current estimates, based on technological 
    advancement, future investments, economic utilisation and physical 
    condition of the assets. 
 
 2. Impairment of debtors 
 
    The group makes an estimate of the recoverable value of trade and other 
    debtors. When assessing impairment of trade and other debtors, management 
    considers factors including the current credit rating of the debtor, the 
    ageing profile of debtors and historical experience. 
 
    Non-statutory accounts 
 
    The information above represents non-statutory accounts as set out in 
    section 435 Companies Act 2006. Statutory accounts for the year ended 31 
    March 2017 will be delivered to the Registrar of Companies in due course. 
    An auditor's report has been made on the accounts for the year ended 31 
    March 2017. The audit report was unqualified  and contained no reference to 
    any matters to which the auditor drew attention by way of emphasis without 
    qualifying the report and contained no statement under section 498(2) 
    (accounting records or returns inadequate or accounts not agreeing with 
    records or returns) or section 498 (3) (failure to obtain necessary 
    information and explanation). 
 
    END 
 
 
 
END 
 

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