RNS Number:5385K
EmdexTrade PLC
30 April 2003
Company Registration No. 4043020 (England and Wales)
EMDEXTRADE PLC
PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 31 OCTOBER 2002
EMDEXTRADE PLC
CONTENTS
Page
Chairman's Report 1
Managing Director's Report 2 - 3
Notes to the preliminary announcement 4
Consolidated profit and loss account 5
Consolidated balance sheet 6
Consolidated cash flow statement 7
EMDEXTRADE PLC
CHAIRMAN'S REPORT
FOR THE YEAR ENDED 31 OCTOBER 2002
EmdexTrade PLC was incorporated to provide a web-based trading platform for
buyers and sellers of trade receivables. The platform, 'www.emdextrade.com', was
established for use by corporates, financial institutions and intermediaries
-indeed any entity wishing to borrow, lend or trade debt. We remain committed to
maintaining and developing this unique service.
The complexities of developing a bespoke trading platform caused operational
delays and budget overruns. During this development stage EmdexTrade conducted
little trade, which is reflected in the financial results for the year. Group
turnover was #780,449 and the results show a loss of #652,861. However, as
expected, our major shareholder continued to support the group through this
period.
I am pleased to report that the first phase of the trading platform went live in
December 2002 and we are now moving towards phase 2. As with any web-based
platform, it needs continuous updating and development. We have a first class
team supporting the trading platform and maintaining it at the forefront of
available technology.
Whilst the platform was in its final stages of development, the Board
established EmdexTrade DE LLC, a New York based wholly owned subsidiary. The
purpose was to acquire via an indefinite call option, the total activities of
Emerging Markets Securities DE LLC (EMS). EMS specialises in creating and
managing alternative investment funds (Funds) which are geared to and funded by
major financial institutions. Specifically, EMS's expertise lies in developing
Funds whose assets, being trade receivables, are identical to those that the
group wishes to trade over the platform. The group will derive revenues from
EMS's activities at four levels - through sourcing the trade receivables,
closing the sale of the receivables to the Funds over the platform, management
of the Funds and subsequently through the sale of the receivables over the
platform as trading opportunities arise. We expect, therefore, a multiplier
effect on group revenue on closing EMS transactions.
The downside of EMS's activities is that we do not anticipate closing more than
2 or 3 Funds each year and setting up costs are significant. This is especially
true at present, as no Funds have yet closed through EMS since the group's
involvement. However, I am delighted to report that EMS expects to close 2 Funds
this year with a total value of US$300 million of trade receivables. Assuming
trading opportunities continue to exist in the future, this should provide the
group with significant turnover during the life of these Funds and sustainable
long-term income.
Going forward, we are seeking to move in to profit on a month-by-month basis by
the end of December 2003 as a result of the activities highlighted above. The
Board and management will focus on attracting third party trading over the
platform and acquiring or developing new businesses.
The group does not have the immediate need for major capital expenditure (now
that the first phase of the development of the platform has been completed) and
the Board is committed to paying dividends at the earliest opportunity.
I would like to thank the Board, management and employees for their significant
contribution over the last year and look forward with increasing confidence to
the next 12 months and to my next statement to the shareholders.
Ian Salter
Chairman
29 April 2003
-1
EMDEXTRADE PLC
MANAGING DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 OCTOBER 2002
Priorities
The year focused primarily on the continuing development of our website. This
encompassed intense technical work to create a final web-based trading platform
with sufficient functionality to meet the needs of our intended broker base and
for the potential institutional users. As part of this process we had to recruit
additional support staff and hold training sessions to exhaustively test the
site before going live. This process of testing and training resulted in
numerous amendments to the original site design ultimately delaying the initial
launch of the site to December 2002.
Results
Turnover in the year increased to #780,449 (2001 (5 months) - #312,865) and the
loss for the year was #652,861 (2001 (5 months)- #70,178). The loss reflected
costs incurred in funding the development of our New York based subsidiary,
EmdexTrade DE LLC and our investment in infrastructure to strengthen the
business delivery process.
Business delivery process
The approach developed by the company is to offer a 'dating service' model that
is totally focused on preserving anonymity and additionally blending human
experience and value. Registered members have the opportunity to first submit
their trade electronically and if appropriate speak to an EmdexTrade trading
director. This gives users the best of both worlds and potentially access to a
large liquidity pool. Primary access to the website is free with a fee
negotiated for each party initiating a transaction. Registered users can make
contact with the company from anywhere in the world at any time.
The process starts with a user submitting a deal via the site, which is then
vetted by a filter manager. The filter manager then submits the deal to an
experienced trading director for review and ultimately posting on the site. This
only happens if the trading director can verify the authenticity of the deal and
the validity of the seller. Once this is completed, a generic description of the
deal is posted to the website. Similarly, an expression of interest to fund or
purchase an asset is submitted to the site, vetted by the filter manager and
sent to a trading director for follow up action.
If appropriate, the trading director then contacts the buyer directly, either by
e-mail or phone to verify bona fides and start price negotiations and the final
documentation process. The site only shows generic deal details, including the
country of risk, guarantor bank where appropriate, repayment schedule and face
value. As a deal progresses, flags are posted against the transaction showing
the various stages of interest. This leaves the way open for other interested
parties to express interest until such a time as a commitment on both sides of
the transaction is agreed and the sale is ready to settle.
The net effect is that EmdexTrade acts as a facilitator of transactions while
preserving anonymity throughout the process, thus delivering the best
transaction for both buyer and seller.
-2-
EMDEXTRADE PLC
MANAGING DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 OCTOBER 2002
New York operations
Apart from the work associated with getting the website up and running, our team
in New York has been working on the finalisation of a number of specialised
trade paper funds that will be managed by our associated broker dealer company,
Emerging Markets Securities DE LLC. It is hoped that at least two of these new
Funds with a total face value or USD 300 million will be launched during 2003.
One of the funds will have a 5-year maturity and the other a 3-year maturity.
Each fund will be investing in specific types of trade paper covering many
different types of credit risks and maturity patterns. The funds will be
actively managed to gain the most efficient use of their cash balances and to
reinvest where appropriate.
We anticipate that significant synergies will be generated from the need of the
funds to initially purchase specific types of trade paper and also to find
assets for reinvestment purposes. Furthermore our website will enhance our
ability to attract sellers of the necessary paper for the funds. A major
priority for 2003 is to bring all these elements together to the ultimate
benefit of the company.
Ken Mackay
Managing Director
29 April 2003
-3-
EMDEXTRADE PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2002
1 Notes to the preliminary announcement
Basis of preparation and going concern
The financial statements continue to be prepared on a going concern basis on
the assumption that the majority shareholder will continue to support the
company. In this respect he has arranged for a company he controls to extend
continuing financial support to the company in the form of short term working
capital under terms to be agreed from time to time, subject, to financial
performance, for a period of up to one year from 29 April 2003. In addition,
the majority shareholder has committed to using his best endeavours to ensure
that sufficient deals are directed through the company to enable it to trade
as a going concern. Without the support of the majority shareholder, the
company might, not be a going concern. If the company were not to be a going
concern then adjustments would be required to reduce the carrying value of
assets to their recoverable amounts and to provide for the costs of closure.
The company's independent auditors have advised the Board that they expect to
state in their audit report that they have been unable to ascertain which
company will provide the financial support, and therefore have been unable to
make an assessment as to whether the available financial resources in that
entity are sufficient to meet the on-going working capital requirement of
EmdexTrade PLC. Accordingly they believe that they have not obtained all the
information and explanations that they considered necessary for the purpose
of their audit and that the report they expect to issue will be a qualified
audit opinion arising from the limitation of audit scope.
Statement made under Section 240 of the Companies Act 1985
This preliminary statement is not the company's statutory accounts. The
statutory accounts for the period ended 31 October 2001 have been delivered
to the Registrar of Companies and received an audit report which was
unqualified and did not contain statements under sections 237 (2) and (3) of
the Companies Act 1985. The statutory accounts for the year ended
31 October 2002 have not yet been approved, audited or filed.
-4-
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2002
Year Five months
ended ended
31 October 31 October
2002 2001
# #
Turnover 780,449 312,865
Cost of sales (663,373) (100,617)
_______ _______
Gross profit 117,076 212,248
Administrative expenses (795,351) (302,539)
_______ _______
Operating loss
Continuing operations (630,494) (90,291)
Discontinued activities (47,781) -
_______ ______
(678,275) (90,291)
Other interest receivable and
similar income 24,589 20,938
_______ ______
Loss on ordinary activities
before taxation (653,686) (69,353)
Tax on loss on ordinary
activities 825 (825)
_______ ______
Loss on ordinary activities
after taxation (652,861) (70,178)
_______ ______
Basic and Diluted loss per
ordinary share (1.63)p (0.49)p
_______ ______
The corresponding amounts for 2001 are for the company alone.
There are no recognised gains and losses other than those passing through the
profit and loss account.
-5-
CONSOLIDATED BALANCE SHEET
AS AT 31 OCTOBER 2002
2002 2001
# #
Fixed assets
Tangible assets 414,457 2,750
Current assets
Debtors 60,165 56,222
Cash at bank and in hand 103,100 1,111,558
_______ _________
163,265 1,167,780
Creditors: amounts falling due
within one year (144,754) (83,876)
_______ _________
Net current assets 18,511 1,083,904
_________ _________
Total assets less current
liabilities 432,968 1,086,654
Provisions for liabilities
and charges - (825)
_________ _________
432,968 1,085,829
_________ _________
_________ _________
Capital and reserves
Called up share capital 1,000,000 1,000,000
Share premium account 156,007 156,007
Profit and loss account (723,039) (70,178)
_________ _________
Shareholders' funds 432,968 1,085,829
_________ _________
_________ _________
Equity interests (167,032) 485,829
Non-equity interests 600,000 600,000
_________ _________
432,968 1,085,829
_________ _________
_________ _________
The corresponding amounts for 2001 are for the company alone.
-6-
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 2002
Year Five months
ended ended
31 October 31 October
2002 2001
# # # #
Net cash outflow from operating (619,486) (62,438)
activities
Returns on investments and servicing
of finance
Interest received 24,589 20,938
_______ ______
Net cash inflow for returns on
investments and servicing of
finance 24,589 20,938
Capital expenditure
Payments to acquire tangible assets (413,561) (2,949)
_______ ______
Net cash outflow for capital
expenditure (413,561) (2,949)
_________ ______
Net cash outflow before
management of liquid resources
and financing (1,008,458) (44,449)
Management of liquid resources
Cash placed on deposit account - (964,891)
_______ _______
- (964,891)
Financing
Issue of ordinary share capital - 1,399,600
Cost of share issue - (243,593)
_______ _________
Net cash inflow from financing - 1,156,007
_________ _________
(Decrease)/increase in cash
in the year (1,008,458) 146,667
_________ _________
- 7-
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