RNS Number : 0712X
Payzone plc
19 June 2008
Payzone plc ("Payzone" or the "Company")
Interim results for the six months ended 31 March 2008
Payzone announces the Company's first interim results for the six months ended 31 March 2008.
Highlights:
* Board and executive management strengthened following the merger of alphyra and Cardpoint
* Successful EUR40m equity placing and restructured banking arrangements will allow investment in the business
* Operational issues with UK ATM business, principally related to cash-in-transit provider, have been largely resolved
* Cardpoint's operations in UK and Germany merged with the alphyra entities in those countries
* Strategy of focusing on profitable growth through investment in core activities
* Reporting for the first time under International Financial Reporting Standards
Peter Smyth, Chairman of Payzone, said:
"Despite the difficult period for Payzone following the integration of the Cardpoint and alphyra businesses, we are pleased that the
share placement and restructured banking arrangements have put the Company on a firm financial footing. The alphyra and Cardpoint businesses
have operational synergies which are starting to bring value to the combined Payzone Group. We look forward to investing further in the core
business to drive a profitable return for shareholders going forward."
Contacts
Payzone Tel: + 353 1 207 6000
Mike Maloney / Nigel Bell
Media Enquiries
Powerscourt Tel: +44 20 7250 1446
Paul Durman / Keith Brookbank
Chairman's Statement
Introduction
I am pleased to report the first interim results for Payzone plc for the six months ended 31 March 2008. Payzone was formed on 5
December 2007 following the "merger" of Cardpoint plc ("Cardpoint") and alphyra Holdings Limited ("alphyra").
Combining these two businesses has brought together two transaction-led businesses that are each leaders in their respective industries.
Despite a difficult start for Payzone with various supplier and integration issues, we believe we now have the financial stability to grow
both businesses. Achievements since 5 December include a restructuring of the Board and the operational management team, realisation of cost
synergies through the consolidation of operational facilities in the UK and Germany and the continual development of new products and
services which can be distributed across the enlarged network.
Since 5 December we have re-branded the services offered by the legacy alphyra business as "Payzone" and the Cardpoint business as
"Cashzone". The Payzone service involves the deployment and management throughout Europe of a terminal distribution network which processes
a variety of electronic transaction services. The main products on the network include electronic phone top-up, utility top-up, bill payment
solutions, electronic gift vouchers and Electronic Funds Transfer (EFT) processing. The Cashzone business deploys branded independent ATMs
in the convenience sector in both the UK and Germany.
International Financial Reporting Standards
The results for the first six-month period to 31 March 2008 are presented under International Financial Reporting Standards (IFRS) as
required under AIM rules.
Under IFRS the "merger" is accounted for as a reverse acquisition. As Cardpoint has the power to govern the financial and operating
policies of Payzone, and it is therefore deemed to be the "acquirer" of alphyra and Payzone. Therefore the results reported reflect six
months trading from the Cardpoint businesses and include results from the alphyra businesses since 5 December. Payzone has elected to
present its financial statements in euros.
The balance sheet presented is the consolidated position of Payzone, Cardpoint and alphyra as at 31 March 2008.
The comparative figures presented are those of Cardpoint on a stand-alone basis and where necessary relevant adjustments to IFRS have
been made. These predominately relate to goodwill and financial instruments. This financial information includes a transition document as
an appendix which provides a reconciliation between the previously published UK GAAP figures and the IFRS comparatives. All comparative
figures have been presented in euros.
Trading and profitability
Total revenue for the period, including revenue from the alphyra business from 5 December 2007, was EUR449 million. Revenue for the same
period in 2007 was EUR63 million (which related to the Cardpoint ATM business only).
There have been several operational and market issues which have adversely affected our UK business in the current period. The
operational issues largely relate to inefficiencies within our out-sourced cash-in-transit provider which has led to a shortfall in
available cash within some of the ATMs. The ATM market had an increase in the number of "non-surcharging" ATMs which has created new
competition in high footfall locations. Surcharging ATMs have also been required to advertise the fact that a fee will be charged for cash
withdrawals which has impacted transaction volumes within our surcharging units.
EBITDA increased 12% to EUR16.3 million, including EUR13.3 million being generated by the alphyra businesses in the period from 5
December. Included within EBITDA is an IFRS 2 share option charge of EUR3.8 million of which EUR2.1 million relates to the acceleration of
the vesting period for certain Cardpoint employees as a result of the reverse acquisition of alphyra.
A goodwill impairment review as at 30 September 2007 had indicated an impairment of EUR49 million, and a charge was made which wrote
down the carrying value of goodwill to its recoverable value. A further goodwill impairment review was carried out as at 31 March 2008 and
the carrying value of goodwill was calculated to exceed its recoverable amount by EUR143 million. An impairment charge of EUR143 million
was made in the period. The recoverable amount of goodwill was calculated based on its value-in-use which employs a discounted cashflow
model.
Losses before tax for the period were EUR166.7 million. Before impairment charges and one-time restructuring costs losses before tax for
the period were EUR9.9 million.
Finance costs include all debt interest costs for the period. Finance costs - special items include costs in relation to the termination
of Cardpoint's banking facilities which did not qualify to be deducted against proceeds of new borrowings received as transaction costs.
Since 5 December there has been a significant amount of consolidation activity within the enlarged group with the Cardpoint UK operation
previously based in Blackpool combining with alphyra's UK operating base in Northwich, Manchester. Similarly, we have consolidated the
Cardpoint German business, which was based in Frankfurt, with alphyra's German business, based in Trier. Of the EUR153.9 million
administrative expenses - special items, EUR8.8 million relates to restructuring costs which were incurred in the period in relation to
these consolidation activities. Restructuring costs also include a provision in relation to costs associated with the removal of two
executive directors.
The Payzone Group businesses have performed well in a challenging market and continue to be underpinned by merchant and operator
contracts. Our terminal estate, which includes EPOS and ATMs, totalled 169,000 at the end of March. Our terminals are located at a variety
of convenience locations throughout the UK and Europe.
Growth
Payzone's Group strategy continues to be that of expanding its distribution network into profitable channels as well as growing
transaction volume organically through improving the quality of deployment and offering a broader range of product distribution. We continue
to invest in our core businesses that have demonstrated robust profitability which can drive growth going forward.
Cashflow and borrowings
Payzone entered into a facility agreement on 5 December 2007 with the Royal Bank of Scotland for facilities totalling EUR332 million of
which EUR291M were drawn at 31 March 2008. This debt was used to refinance the existing debt within alphyra and Cardpoint.
Following the trading difficulties discussed above, the Company entered into discussions with its banking syndicate to increase the
flexibility under its facility agreement through a resetting of covenants. These discussions have led to changes to the commercial terms of
the original facility agreement. These changes took place in June 2008 and have added margin to our term facilities.
On 21 February the Company completed a small placement of 12,654,516 ordinary shares (approximately 4.4% of the issued share capital) at
a price of 47.75 pence per share, raising EUR8 million before expenses. The shares were placed with existing shareholders, including
Balderton Capital, and funds were used to fund working capital requirements and to promote support from key trading partners. The same
shareholders that participated in the share placement also committed to make available to the Company further funds in the form of a
shareholder loan. This loan has been partially drawn in the period since 31 March and will be refinanced by the placing approved at the
Extraordinary General Meeting held on 16 June. This offering raised in aggregate gross proceeds of EUR40 million by the placing of 137.3
million ordinary shares at 20p raising EUR34.5 million and 5.5 million new Euro denominated Payzone Convertible Preference Shares raising a
further EUR5.5 million.
Management structure
Since 5 December the Board has reviewed the management structure of the Company and has made several changes to establish a more
efficient and effective operational structure to enable the Group to achieve its objectives. Part of these changes required the calling of
an Extraordinary General Meeting where ordinary resolutions were passed for the removal of John Nagle and John Williamson from their
respective positions as Chief Executive Officer and Chief Finance Officer.
Bob Thian who was Chairman of the incumbent Cardpoint Board served as Chairman of Payzone until 14 April 2008 when he retired and was
replaced by myself. I would like to thank Bob for his important contribution and commitment to the company and to Cardpoint.
On the incorporation of Payzone on 13 September 2007, Mark Evans joined the Board as a non-executive director as the appointed
representative of Balderton Capital.
Lee Ginsberg stepped down from the Board on 31 December 2007 and I would like to thank him for his contribution to Cardpoint's
development over the past four years.
On 1 February 2008 Jerome Misso was appointed as non-executive director of the Board. He was appointed to assist the Board with the
various legal issues in relation to the removal of John Nagle and John Williamson. Jerome is a partner of Balderton Capital Limited. He
retired from the Board on 14 April 2008.
Mike Maloney was appointed CEO on 14 April 2008 with Nigel Bell assuming the role of interim Chief Financial Officer on that date.
There have been further changes to the previous Cardpoint management with the departure of the Chief Operating Officer, Paul Saxton, and
Finance Director, Philip Lanigan. Various one-off costs have been incurred in relation to this reorganisation and are included in special
items as discussed above.
Outlook
The strategy of focussing on profitability and return on assets deployed is key to future growth. This objective will be aided by both
businesses being part of a larger group which will allow for access to new markets as well as delivering operational efficiencies. We are
also engaged in a significant amount of branding activity following the integration of the two businesses.
The Board recognises that there has been a significant impact on Payzone resulting from a challenging trading period and the integration
of the Cardpoint and alphyra businesses. We were pleased to have the suspension of trading on AIM lifted on 20 May 2008 following the
announcement of our trading update.
We are also pleased to experience improvement in the performance and delivery of the out-sourced cash-in-transit provider for our UK
ATM business. The business continues to gain operational synergies which are starting to bring value to the combined Payzone Group.
We remain focussed on re-establishing the financial stability of the Company following a difficult start for Payzone. The new management
team has made a significant contribution to the stability of the Group through negotiating committed banking facilities and the introduction
of new equity into the business. We are committed to investing in the core business as well as exploring opportunities for product and
geographic expansion along with market share growth in the more mature territories. We seek to leverage the asset base across the group as
well as evaluate the opportunities to rationalise where we have sub-scale businesses.
We are grateful to our shareholders for supporting the Company as it addresses the short term supplier, integration and management
issues experienced since 5 December and the Board remains fully focussed and committed to deliver shareholder value.
CONSOLIDATED UNAUDITED INCOME STATEMENT
Six Months Ended 31 March 2008
Notes 6 months to 31 March 6 months to 31 March 12 months to 30
2008EUR'000 2007EUR'000 September
2007EUR'000
Revenue 448,827 63,007 130,970
Cost of sales (411,216) (45,556) (84,158)
Gross profit 37,611 17,451 46,812
Administrative expenses - (31,845) (13,691) (33,177)
excluding amortisation of
intangible assets and special
items
Administrative expenses - 6 (153,997) (2,415) (51,207)
special items
Administrative expenses - (4,690) - (966)
amortisation of intangible
assets
Administrative expenses (190,532) (16,106) (85,350)
Operating (loss)/profit (152,921) 1,345 (38,538)
Finance income 144 - 396
Finance costs - excluding (10,650) (3,598) (8,964)
special items
Finance costs * special items 7 (2,818) - -
Finance costs (13,468) (3,598) (8,964)
Share of losses of associates (526) - -
(Loss) before taxation (166,771) (2,253) (47,106)
Income tax credit/(expense) 322 - (358)
(Loss) for the period (166,449) (2,253) (47,464)
Profits attributable to 110 - -
minority interest
Attributable to equity holders (166,559) (2,253) (47,464)
of the parent
Basic and diluted loss per 8 (89c) (2c) (43c)
share (cent per share)
CONSOLIDATED UNAUDITED BALANCE SHEET
31 March 2008
Note As at31 As at31 As at30 September2007EUR'000
March2008EUR'000 March2007EUR'000
Assets
Non-current assets
Property, plant and equipment 83,569 41,360 53,314
Goodwill and intangible assets 9 316,178 147,693 117,134
Investment in associated 640 - -
companies
Available for sale financial 124 - -
assets
Deferred tax 1,457 - -
Total non-current assets 401,968 189,053 170,448
Current assets
Inventories 24,160 443 652
Trade and other receivables 87,207 8,916 7,822
Derivative financial - 402 304
instrument
Restricted cash 13,154 - -
Cash and cash equivalents 24,762 11,898 12,440
Total current assets 149,283 21,659 21,218
Total assets 551,251 210,712 191,666
Current liabilities
Interest-bearing borrowings 10 (291,171) (11,548) (7,722)
Trade and other payables (192,096) (32,980) (30,156)
Current tax liabilities (1,233) - (353)
Provisions (15,442) - -
Total current liabilities (499,942) (44,528) (38,231)
Non-current liabilities
Deferred tax (18,540) - (1,143)
Interest-bearing borrowings 10 (1,971) (86,073) (109,768)
Provisions (5,343) - (6,494)
Derivative financial (902) - -
instrument
Total non-current liabilities (26,756) (86,073) (117,405)
Total liabilities (526,698) (130,601) (155,636)
Net assets 24,553 80,111 36,030
Equity
Called up share capital 11 4,263 8,260 8,296
Share premium account 11 314,886 132,481 132,617
Other reserve 11 - 522 522
Reverse acquisition reserve 11 12,036 - -
Hedging reserve 11 (902) 402 304
Translation reserve 11 (37,938) (262) (526)
Retained (losses) 11 (268,057) (61,447) (105,338)
Equity attributable to equity 24,288 79,956 35,875
holders of the parent
Minority interest 11 265 155 155
Total equity 24,553 80,111 36,030
CONSOLIDATED UNAUDITED CASH FLOW STATEMENT
Six Months Ended 31 March 2008
Six monthsended31 Six monthsended31 Yearended30
March2008EUR'000 March2007EUR'000 September2007EUR'000
Cash (outflow)/inflow from
operating activities
Loss before taxation (166,771) (2,253) (47,106)
Depreciation and amortisation 17,274 5,242 12,311
Goodwill impairment 143,081 - 49,140
Share of losses from 526 - -
associates
Finance income (144) - (396)
Finance costs 13,468 3,598 8,964
(Profit)/loss on sale of - (68) 408
property, plant and equipment
Loss on business closures and - 2,415 2,067
disposals
Equity settled share based 3,840 1,092 2,412
payment charge
Net cash inflow from operating 11,274 10,026 27,800
activities before changes in
working capital and provisions
(Increase)/decrease in 4,402 64 (80)
inventories
Decrease in trade and other 1,159 939 1,994
receivables
(Decrease)/increase in trade (45,095) (24) (10,859)
and other payables
Increase in provisions 14,192 - (870)
Cash (outflow)/inflow from the (14,068) 11,005 17,985
operations
Income tax expense (189) - -
Finance cost paid (10,169) (3,525) (9,124)
Net cash flow from operating (24,426) 7,480 8,861
activities
Cash flows from investing
activities
Acquisition of subsidiaries, 10,982 (670) (2,441)
net of cash acquired
Acquisition of property, plant (3,069) (8,545) (15,554)
and equipment
Acquisition of intangible (3,133) - -
assets
Payments in relation to - - (707)
closure of business
Proceeds from sale of - 4,550 4,802
subsidiaries, net of cash
disposed of
Proceeds from sale of - 1,085 1,244
property, plant and equipment
Finance income received 144 - 396
Net cash flow (used in)/from 4,924 (3,580) (12,260)
investing activities
Cash flows from financing
activities
Proceeds from issuance of 9,251 2,487 2,659
ordinary shares
Repayment of borrowings (267,648) (6,324) (23,061)
Proceeds from borrowings 290,981 - 24,701
Net cash flow from/(used in) 32,584 (3,837) 4,299
financing activities
Net increase/(decrease) in 13,082 63 900
cash and cash equivalents
Cash and cash equivalents at 12,440 11,875 11,875
beginning of period
Exchange gains and losses on (760) (40) (335)
cash and cash equivalents
Cash and cash equivalents at 24,762 11,898 12,440
end of period
CONSOLIDATED UNAUDITED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six Months Ended 31 March 2008
Six monthsended31 Six monthsended31 Yearended30
March2008EUR'000 Mrch2007EUR'000 September2007EUR'000
Exchange differences on (37,412) (262) (526)
foreign currency net
investment
Cash flow hedges - net of tax (1,206) (91) (189)
Net income/(loss) recognised (38,618) (353) (715)
directly in equity
Loss for the period (166,449) (2,253) (47,464)
Total recognised income and (205,067) (2,606) (48,179)
expense for the period
Attributable to:
Equity holders of the parent (205,177) (2,606) (48,179)
Minority interest 110 - -
Total recognised income and (205,067) (2,606) (48,179)
expense for the period
NOTES TO THE FINANCIAL INFORMATION
1 General information
The principal activity of Payzone Plc and its subsidiary undertakings (the group) is the deployment of a network of Payzone owned
terminals and ATM machines, which process a variety of electronic transaction services. The main products on the network include electronic
phone top up, utility top up, EFT processing and ATM cash withdrawal. The group operates in 21 countries across Europe, with the group
headquarters based in Dublin. There are approximately 776 people employed within the group.
The company is a public limited liability company incorporated and domiciled in the Republic of Ireland. The address of its registered
office is 4 Heather Road, Sandyford Industrial Estate, Dublin 18.
The company has its primary listing on the AIM stock exchange in London.
2 Transition to IFRS
From 1 October 2007, in accordance with AIM rules, the group is required to present its annual consolidated financial statements in
accordance with IFRS adopted for use in the EU.
Payzone plc was incorporated in September 2007. On 5 December 2007, it acquired the share capital of Cardpoint plc ("Cardpoint") and
alphyra Holdings Limited ("alphyra"). Immediately prior to the acquisition Cardpoint plc had been listed on AIM in the United Kingdom and
prepared its financial statements in accordance with accounting policies generally accepted in the United Kingdom (UK GAAP). alphyra was a
privately owned company which prepared its financial statements in accordance with accounting policies generally accepted in Ireland (Irish
GAAP).
The acquisition of the entire issued share capital of alphyra represents a reorganisation of the alphyra group. The shareholders in
alphyra exchanged their shares for 174,680,273 newly issued shares in Payzone. Payzone then became the ultimate parent in the group.
Notwithstanding the new legal parent this transaction has been accounted for as a reverse acquisition and the financial information is based
on Payzone having been acquired by alphyra. Payzone was incorporated to effect this transaction and was a 'shell' company on 5 December.
The transaction is a "common" control transaction and has been accounted for as a reverse acquisition and therefore the application of IFRS
3 "Business Combinations" to this transaction did not result in the recognition of goodwill or fair value adjustments to the net
identifiable assets of Payzone.
Immediately thereafter, in consideration for the issue to Cardpoint's shareholders of 115,867,928 ordinary shares, Payzone acquired the
entire issued and to be issued share capital of Cardpoint. Payzone then became the ultimate legal parent of the combined Cardpoint and
alphyra group. Notwithstanding the new legal parent, this transaction has been accounted for as a reverse acquisition. The financial
information is based on alphyra and Payzone having been acquired by Cardpoint, as Cardpoint controls alphyra and is deemed to have the power
to govern the financial and operating policies of the entire group to obtain benefits from its activities.
The financial information is prepared on the basis of Cardpoint acquiring the revised alphyra group on the 5 December 2007. IFRS 3
"Business Combinations" has been applied to this transaction (note 9).
The financial statements for the year ended 30 September 2008 will include the separate financial statements of the legal parent,
Payzone plc together with the consolidated financial statements of Payzone plc. The consolidated financial statements will show the full
year results of Cardpoint and the results of the alphyra group (which includes Payzone) from the 5 December 2007.
The transition date for the implementation of IFRS for the group is 1 October 2006. The financial information of Cardpoint plc for the
six months ended 31 March 2007 and for the year ended 30 September 2007, which were prepared in accordance with UK GAAP, have been restated
under IFRS with effect from the transition date. It is this financial information that is presented as comparative figures in this
document. This interim financial information for the six months ended 31 March 2008 includes the financial information of Cardpoint plc for
the entire period and that of alphyra Holdings Limited from the date of acquisition, being 5 December 2007.
In preparing this financial information, management has used its best knowledge of the expected standards and interpretations, the
current facts and circumstances and accounting policies that the group expects to apply in preparing its first set of financial statements
in accordance with IFRS issued by IASB and adopted for use in the EU as of 30 September 2008.
As a result, although this financial information is based on management's best knowledge of expected standards and interpretations, and
current facts and circumstances, this may change. For example, IFRS standards and IFRIC interpretations are subject to ongoing review and
possible amendment or interpretative guidance and therefore are still subject to change.
Therefore, until the group prepares its first set of financial statements in accordance with international accounting standards adopted
for use in the EU, the possibility cannot be excluded that the accompanying financial information may have to be adjusted.
The rules for first time adoption of IFRS are set out in IFRS 1 "First time adoption of International Financial Reporting Standards".
IFRS 1 states that an entity should use the same accounting policies in its opening IFRS balance sheet and throughout all periods
presented in it's first IFRS financial statements. In preparing this financial information, the group has applied the mandatory exceptions
and certain of the optional exemptions from full retrospective application of IFRS. Details in relation to these exemptions and the group's
transition to IFRS are set out in Appendix 1.
Appendix 1 also sets out details of the impact of the change to IFRS on the financial information for March 2007 and for September 2007
periods, and includes applicable reconciliations between IFRS and UK GAAP, for the six-month period to 31 March 2007 and the year to 30
September 2007, and as at 1 October 2006, 31 March 2007 and 30 September 2007.
3 Basis of preparation
This financial information, has been prepared in accordance with the group's accounting policies under IFRS. As described in note 2, the
transition date for implementation of IFRS by the Group was 1 October 2006. The financial information for the six months ended 31 March 2007
and the relevant extracts from the financial statements for the year ended 30 September 2007, which were prepared in accordance with UK
GAAP, have been restated under IFRS with effect from the transition date.
The financial information is presented in euro rounded to the nearest thousand, being the presentation currency for the consolidated
financial information of Payzone plc. Full details of the accounting policies adopted by the group on implementation of IFRS are set out in
note 5 and the impact on the reported results and balance sheet of the group on transition to IFRS, are set out in Appendix 1.
This financial information is for the six months ended 31 March 2008. It is subject to the provisions of IFRS 1, First-time Adoption of
IFRS, because it is part of the period covered by the group's first IFRS financial statements for the year ended 30 September 2008. It has
not been prepared in accordance with IAS 34, Interim Financial Reporting, as the company is not listed on a regulated market. The financial
information has been prepared under the historical cost convention, as modified by the measurement of the fair value of share options
available for sale financial assets and derivative financial instruments.
IFRS applied by the group in the preparation of this financial information is that which is expected to be effective at 30 September
2008. The following provides a brief outline of the likely impact on future financial statements of relevant IFRS which are not yet
effective and have not been early adopted in this financial information:
IFRS 8 - Operating segments (effective for accounting periods beginning on or after 1 January 2009). IFRS 8 sets out the requirements
for disclosure of financial and descriptive information about an entity's operating segments and also about the entity's products and
services, the geographical areas in which it operates, and its major customers. The IFRS replaces IAS 14 Segment Reporting. Management is
currently considering the impact of this standard on its disclosures but do not anticipate that this will have a major impact on the group.
IAS 23 - (Amendment), Borrowing Costs (effective for annual periods beginning on or after 1 January 2009). The Amendment to IAS 23
requires that an entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset as part of the cost of that asset. The previous version of IAS 23 allowed an option as to whether this expenditure was
capitalised or directly expensed. The group will apply IAS 23 (Amendment) from the effective date but does not consider that it will have a
significant impact on the group's accounts.
IFRIC 12 - Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008). Service concessions are
arrangements whereby a government or other public sector entity grants contracts for the supply of public services - such as roads,
airports, prisons and energy and water supply and distribution facilities - to private sector operators. As the group is not a service
concession operator IFRIC 12 is currently not relevant to the group's activities.
IFRIC 13 Accounting for Customer Loyalty Programmes - IFRIC 13 creates consistency in accounting for customer loyalty plans. The
interpretation is applicable to all entities that grant awards as part of a sales transaction (including awards that can be redeemed for
goods or services not supplied by the entity). The interpretation is effective for annual periods beginning on or after 1 July 2008, and is
currently not expected to have an impact on the group's accounts.
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction - IFRIC 14 provides some principles on
the application of the asset ceiling under IAS 19 defined benefit accounting. The interpretation is effective for annual periods beginning
on or after 1 January 2008, and is currently not expected to have an impact on the group's accounts.
IAS 1 (Amendment) Presentation of Financial Statements - The main objective of the amendment to IAS 1 was to aggregate information in
the financial statements on the basis of shared characteristics. The amendment also introduces a "Statement of Comprehensive Income". The
amendment is effective for annual periods beginning on or after 1 January 2009, and will result in a revised layout of some aspects of the
group's financial statements when adopted from its effective date.
IFRS 2 'Vesting conditions and cancellations - Amendment to IFRS 2 Share-based Payment', (effective for annual periods beginning on or
after 1 January 2009). The amendment addresses two matters. It clarifies that vesting conditions are service conditions and performance
conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by
the entity or by other parties, should receive the same accounting treatment. The Group will apply this revised standard from the effective
date and is currently assessing the impact on the Group's financial statements.
IAS 32 and IAS 1 (Amendment) 'Puttable financial instruments and obligations arising on liquidation', (effective for annual periods
beginning on or after 1 January 2009). The amendments require some puttable financial instruments and some financial instruments that
impose on the entity an obligation to deliver to another party a pro rata share of net assets of the entity only on liquidation to be
classified as equity. The Group will apply the amendments from the effective date and currently do not anticipate that the amendments will
have any impact on the Group's financial statements.
IFRS 3 (Revised), "Business combinations', (effective for annual periods beginning on or after 1 July 2009). The standard continues to
apply the acquisition method to business combinations, with some significant changes. These changes include a requirement that all payments
to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently re-measured
through income. Goodwill may be calculated based on the parent's share of net assets or it may include goodwill related to minority
interest. All transactions costs will be expensed. The Group will apply this revised standard from the effective date and is currently
assessing the impact on the Group's financial statements.
IAS 27 (Revised), 'Consolidated and separate financial statements', (effective for annual periods beginning on or after 1 July 2009).
IAS 27 (revised) requires the effect of all transactions with non-controlling interests to be recorded in equity if there is no change in
control. They will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any
remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The Group will apply this
revised standard from the effective date and is currently assessing the impact on the Group's financial statements.
Amendments to IFRS 1 'First-time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements - cost of an investment in
a subsidiary, jointly controlled entity or associate', (effective for annual periods beginning on or after 1 January 2009). First-time
adopters are permitted to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the
initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment
also removed the definition of the cost method from IAS 27 and replaced it with a requirement to present dividends - as income in the
separate financial statements of the investor. The Group will apply this revised standard from the effective date and is currently
assessing the impact on the Group's financial statements.
Improvements to IFRS, (most of the amendments effective for annual periods beginning on or after 1 January 2009). The Improvements to
IFRS represent a number of 'non-urgent' amendments to IFRSs that involve accounting changes for presentation, recognition and measurement,
and terminology or editorial changes with minimal effect of accounting. The Group will apply these improvements from their relative
effective dates and is currently assessing the impact on the Group's financial statements.
The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, events
or actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial information are disclosed in note 4.
This financial information does not constitute a set of statutory accounts that are required under the Companies (Amendment) Act 1986 to
be annexed to the company's Annual Return. Payzone plc's auditors, PricewaterhouseCoopers, have not yet made a report under Section 193 of
the Companies Act 1990 in respect of the accounts of the Company, which relate in any part to the year ending 30 September 2008.
The financial statements of Cardpoint plc for the year end 30 September 2007 which received an unqualified opinion were annexed to that
company's Annual Return which was filed on 30 April 2008.
4 Critical accounting estimates and judgements
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 reasonable under the circumstances.
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are outlined below:
(a) Estimated impairment of goodwill
The group tests at least annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in, note
5. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations, and these calculations require
the use of estimates.
(b) Capitalisation of development costs
Costs incurred on development projects are recognised as intangible assets when the criteria in the development expenditure accounting
policy in Note 5 are achieved. A degree of judgement is involved in assessing the achievement of the criteria.
(c) Establishing useful lives for amortisation purposes of tangible and intangible assets
The directors regularly review these asset lives and change them as necessary to reflect current thinking on remaining lives and the
expected pattern of consumption of the future economic benefits embodied in the asset. Changes in asset lives can have a significant impact
on depreciation and amortisation charges for the period.
Detail of the useful lives of the various classes of property, plant and machinery and intangible assets are included in note 5.
(d) Fair value of business combinations
Goodwill only arises in business combinations. The amount of goodwill initially recognised is the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition.
The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management's judgement and
estimates.
Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite
lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to
indefinite lived and finite lived intangible assets.
On acquisition, the identifiable intangible assets may include customer bases and brands. The fair value of these assets is determined
by discounting estimated future net cash flows generated by the asset, assuming no active market for the assets exist. The use of different
assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets, and
consequently the level of recognised goodwill.
(e) Fair value of share options
The group has issued equity-settled share-based payments to employees. Equity-settled share-based payments are measured at fair value
(excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed as services rendered over the vesting period, based on the group's estimate of the shares
that will eventually vest and adjusted for the effect of non-market based vesting conditions.
The fair value of share-based payments is calculated using the Black-Scholes option pricing model. The group is required to make a best
estimate of a number of inputs into this model to determine the grant date fair value of such arrangements. These inputs include:
* Weighted average share price on grant date,
* Weighted average share price on valuation date,
* Weighted average exercise price,
* Volatility,
* Dividend yield,
* Risk-free interest rate.
In 2008, an expense for share-based compensation was recognised of EUR3.8m (2007: EUR2.4m).
(f) Cardpoint as acquirer
As described in Note 2 the acquisition of the entire share capital of Cardpoint and alphyra has been accounted for as a reverse
acquisition of the combined Payzone and alphyra group by Cardpoint plc. The determination of the acquirer in this transaction is seen as a
critical judgement as any change in this judgement can have a significant impact on the accounting for the business combination. Management
gave detailed consideration to the terms, conditions, facts and circumstances surrounding the transaction together with the guidance in IFRS
3 in relation to identifying the acquirer in a business combination. Ultimately Cardpoint plc was seen as the acquirer as it is judged to
control alphyra due to its:
* power to govern the financial and operating policies of alphyra;
* power to appoint or remove the majority of the members of the board of directors or equivalent governing body of the other entity;
and
* power to cast the majority of votes at meetings of the board of directors.
5 Accounting policies
The principal accounting policies applied in the preparation of this consolidated financial information are set out below. These
policies have been applied consistently to all periods presented, unless stated otherwise.
Basis of consolidation
Payzone Plc is the legal parent and acts as a holding company. Cardpoint in the accounting parent. The group accounts consolidate the
accounts of the company and entities controlled directly and indirectly by the company (its subsidiaries) drawn up to September each year.
Control is achieved where the group has the power to govern the financial and operating policies of an entity in which it invests, so as to
obtain benefits from its activities. This usually accompanies a shareholding of more than one half of the voting rights.
The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. All
intragroup transactions, balances, income and expenses are eliminated on consolidation.
(a) Subsidiaries
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group in
exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquired identifiable assets,
liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the acquisition date.
The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as
goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised
losses are also eliminated unless cost cannot be recovered and are also considered to be an indicator of impairment of the transferred
asset.
In case of acquisitions of subsidiaries from entities under common control the assets and liabilities of the acquired subsidiaries are
initially included in the consolidated financial statements at their book values at the date of acquisition. The difference between the cost
of acquisition and the share of the book value of net assets of the subsidiary acquired is recorded directly in equity, in a reverse
acquisition reserve.
(b) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially
recognised at cost, including any goodwill attributable to the interest acquired.
The Groups share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the
carrying amount of the investment.
When the group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the groups interest in the
associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting polices of the associates have been changed where necessary to ensure consistency with the accounting policies adopted by the
Group.
(c) Transactions and minority interests
The group applies a policy of treating transactions with minority interests as transactions with parties external to the group.
Disposals to minority interests result in gains and losses for the group that are recorded in the income statement. Purchases from minority
interest result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of
net assets of the subsidiary.
Property, plant and equipment
Property, plant and equipment are stated at historical cost being, expenditure directly attributable to the acquisition of the
asset, less accumulated depreciation.
The charge for depreciation is calculated to write down the cost of property, plant and equipment to their estimated residual values by
equal annual installments over their expected useful lives, which are as follows:
Computer equipment rates between 20% and 33.3%
Property and leasehold premises 12.5%
Payphone equipment rates between 15% and 20%
Credit card terminals rates between 15% and 20%
Motor vehicles rates between 20% and 33.3%
Fixtures and fittings and equipment rates between 15% and 33.3%
Leased assets over the unexpired term of the lease or estimated useful
life,if shorter
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the
financial period in which they are incurred.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
The assets' carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income
statement.
Non current assets held for sale
Non current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less
costs to sell.
Non current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset
(or disposal group) is available for immediate sale in its present condition. Management must be committed to the plan to sell and the sale
should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of
the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of associates is included in "investments in
associates" and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment
and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the disposed of entity.
Goodwill is allocated to the cash generating units for the purpose of impairment testing. The allocation is made to those cash
generating units or groups of cash generating units that are expected to benefit from the business combination in with the goodwill arose.
(b) Trademarks, licences and brands
Acquired trademarks, licences and brands are shown at historical cost. Trademarks and licenses have a finite useful life and are carried
at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of trademarks and
licences over their estimated useful lives (6 years)
(c) Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated useful lives (three to five years).
Costs associated maintaining computer software programmes and software are recognised as an expense as incurred. Costs that are directly
associated with the development of identifiable and unique software products controlled by the group, and that will probably generate
economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include employee costs incurred as a result of
developing software and an appropriate portion of the relevant costs.
Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding 6 years).
(d) Customer related intangible assets
Customer related intangible assets recognised as part of a business combination are initially recognised at fair value and are
subsequently carried at original cost less accumulated amortisation.
Acquired customer related intangible assets are amortised on a straight line basis over their estimated useful lives (not exceeding 6
years).
(e) Development expenditure
An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if,
an entity can demonstrate all of the following:
(a) The technical feasibility of completing the intangible asset so that it will be available for use or sale.
(b) An intention to complete the intangible asset and use or sell it.
(c) An ability to use or sell the intangible asset.
(d) How the intangible asset will generate probable future economic benefits.
(e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset.
(f) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Other development expenditure that do not meet these criteria are recognised as an expense as incurred.
Impairment of non financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating
units). Non financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
Derivative financial instruments and hedge activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at
their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as either:
(a) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge)
(b) Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow
hedge); or
(c) Hedges of a net investment in a foreign operation (net investment hedge).
The group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its
risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged
item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss
relating to the effective portion of interest rate swaps hedging fixed rate borrowings is recognised in the income statement within "finance
costs". The gain or loss relating to the ineffective portion is recognised in the income statement within "other losses". Changes in the
fair value of the hedged fixed rate borrowings attributable to interest rate risk are recognised in the income statement within 'finance
costs'.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the
effective interest method is used is amortised to profit or loss over the period to maturity.
The group has not entered into any fair value hedges.
(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss (for
example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps
hedging variable rate borrowings is recognised in the income statement within 'finance costs'. However, when the forecast transaction that
is hedged results in the recognition of a non-financial asset (for example, inventory or property, plant and equipment) the gains and losses
previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred
amounts are ultimately recognised in cost of sales in case of inventory or in depreciation in case of property, plant and equipment.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the income statement.
(c) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss
relating to the ineffective portion is recognised immediately in the income statement within 'other losses'.
Gains and losses accumulated in equity are included in the income statement when the foreign operation is either partially or fully
disposed of or sold.
The group has not entered into any net investment hedges.
(d) Derivatives at fair value through profit or loss and accounted for at fair value through profit or loss
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any such derivative instruments are
recognised immediately in the income statement within administrative expenses.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in first-out (FIFO) basis. Cost in
the case goods for resale, is defined as the aggregate cost of acquiring such inventories from third parties. Net realisable value is based
on normal selling price, less further costs expected to be incurred to disposal.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that
the 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 financial reorganisation, and default or delinquency in
payments (more than 30 days overdue) 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 effective
interest rate. 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 uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts
previously written off are credited against administrative expenses in the income statement.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less. Bank overdrafts are shown within current liabilities on the balance sheet. For the purpose of
the cash flow statement, cash and cash equivalents comprise cash at bank and in hand and short-term deposits maturing within 3 months and
are subject to insignificant risk of changes in value; less bank overdrafts.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost: any difference between the proceeds (net of transaction cost) and the redemption value is recognised in the income statement over the
period of the borrowings using the effective interest rate.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Provisions
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the
unavoidable costs of meeting its obligations under the contract (onerous contracts). A provision for onerous contracts is recognised e.g.
when the group has entered a binding lease for rental of premises that is no longer used by the group or a binding agreement with a customer
which is loss making and therefore a provision is recognised for the best estimate of the costs to terminate such an agreement.
Provisions for restructuring costs and legal claims are recognised when: the group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not
recognised for future operating losses.
Provisions - continued
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item
included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as interest expense.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds.
Where any group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company's equity holders until the shares
are cancelled or reissued. Where such shares are subsequently reissued, any consideration received (net of any directly attributable
incremental transaction costs and the related income tax effects) is included in equity attributable to the Company's equity holders.
Foreign currency
(a) Functional and presentation currency
Items included in the financial statements of each of the groups entities are measured using the currency of the primary economic
environment in which the entity operates ('the functional currency'). Payzone plc's functional currency is Euro. Cardpoint plc's functional
currency is sterling. The presentation currency for the consolidated financial statements is Euro.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
(c) Group companies
The results and financial position of all the group entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
* Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
* Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the rate on the dates of the transactions); and
* All resulting exchange differences are recognised as a separate component of equity.
(c) Group companies - continued
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and
other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is partly disposed of or
sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in
the countries where the company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing
of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Leases
Assets held under finance leases, which confer rights and obligations similar to those attached to owned assets, are capitalised as
property, plant and equipment or intangible assets and are depreciated over the shorter of the lease terms and their useful lives. The
capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the income statement
over the period of the leases to produce a constant rate of charge on the remaining balance of liability.
All other leases are operating leases. Rentals under operating leases are charged on a straight-line basis over the lease term, even if
the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread
on a straight line basis over the lease term, except where the period to the review date on which the rent is first expected to be adjusted
to the prevailing market rate is shorter than the full lease term, in which case the shorter period is used.
Rentals received for terminals from retail agents under operating leases are credited to income on a straight line basis over the lease
term.
Employee benefits
(a) Pension obligations
The pension entitlements of employees arise under defined contribution plans. Contributions to the group's defined contribution pension
plans are charged to the income statement as incurred.
(b) Bonus plans
The group recognises a liability and an expense where contractually obliged or where there is a past practice that has created a
constructive obligation of making bonus payments.
(c) Share based compensation
The group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for
the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to
the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable.
It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
(d) Termination benefits
Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to
either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing
termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 month after the
balance sheet date are discounted to their present value.
Revenue
Revenue comprises the fair value of consideration received in respect of services and prepaid credits for cellular phones, utilities
sold to third parties and ATM transactions exclusive of value added tax. Revenue of the group is earned from prepaid cellular top-up and
prepaid utilities sold to third parties, installation and maintenance services, electronic payment services and debit and credit card
processing and ATM transactions. Revenue is recognised in the period earned by rendering of services or sale of products.
Revenue from prepaid credits for cellular top up and utilities is recognised on a gross basis as the group acts as a principal in
relation to these transactions.
Revenue in respect of maintenance contracts is deferred and recognised ratably over the period of the contract.
Annual service charges consist of subscriber billings for service not yet rendered. These are deferred and taken into income as earned.
The maximum period for which subscribers are billed in advance is generally one year.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in providing products or services within a
particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic
environments.
Deferred revenues
Deferred revenue comprises service and maintenance charges billed in advance.
Cost of sales
Cost of sales includes agents' commission, the cost of mobile top-ups where Payzone acts as principal in their purchase and sale,
consumables, communications, maintenance, depreciation and external processing charges levied by acquiring banks. All other costs are
allocated to administrative costs.
Finance income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net
carrying amount.
Finance costs
Finance costs comprise interest on borrowings, interest component of finance leases, bank charges and amortised debt transaction costs.
Interest payable on borrowings and the interest expense component of finance lease payments is calculated using the effective interest
rate method.
Special items
Special items are material non recurring items that derive from events or transactions that fall within the ordinary activities of the
group and which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their size or incidence. Such
items may include non-current assets impairment, restructuring costs, gains/losses on business disposals and closures, costs incurred as a
result of business combinations effected that do not qualify for recognition as assets, share option charges arising from the acceleration
of vesting periods of as a result of business combinations, borrowing costs incurred as a result of a business combination that do not
qualify to be treated as a reduction of the liability.
Judgement is used by the group in assessing the particular items which should be disclosed in the income statement and related notes as
special items.
6 Administrative expenses - 6 monthperiod 6 monthperiod Yearended30
special items ended31 ended31 September2007EUR'000
March2008EUR'000 March2007EUR'000
Restructuring(a) 8,808 - -
Share option charge(b) 2,108 - -
Goodwill impairment(c) 143,081 - 49,140
Loss on disposal of - 2,415 2,067
subsidiaries
153,997 2,415 51,207
(a) Restructuring costs
Restructuring costs relate to the costs incurred in the closure of Cardpoint offices in Blackpool and Frankfurt and consultancy costs in
relation to the integration of both businesses since 5 December. It also includes redundancy costs incurred during the period relating to
both voluntary and involuntary redundancies. The cost includes related legal and professional fees relating to such redundancies.
(b) Share option charge
Share option charge relate to the acceleration of the vesting period of Cardpoint share options as a result of the reverse acquisition
of alphyra by Cardpoint.
(c) Goodwill impairment
The Group tests for impairment annually and also if there is an indication that assets might be impaired. The Group identified the
falling share price and difficult trading conditions as an indicator of impairment and performed an impairment review across all CGUs.
The recoverable amount of the CGUs is determined based on a value in use computation. Where the value in use exceeds the carrying value
of the CGU the asset is not impaired; where the carrying amount exceeds the value in use impairment is recognised. Estimates used in this
process are key judgmental estimates in the financial statements.
The CGUs represent the lowest level within the group at which goodwill is monitored for internal management purposes and are not larger
than the primary and secondary segments determined in accordance with IAS 14"Segment Reporting".
The cash flow forecasts employed for the value in use computation are extracted from management's budgets and forecasts for a five year
period approved by senior management and the Board of Directors.
A growth rate of 2%-3% has been used in determining value in use beyond the period covered buy the budgets and forecasts. This
assumption is made based on the trading conditions which the Group expects to experience.
The recoverable amount stemming from this exercise represents the present value of the future cash flows inclusive of the terminal value
discounted at an appropriate discount rate to the CGU being assessed for impairment; discount rates of 11.6% - 12.3% were used.
Applying the above techniques, an impairment of goodwill of EUR143.081 million (2007: EUR49.140 million) has been recognised.
The values applied to each of the key assumptions are derived from a combination of internal and external factors based on historical
experience and take into account the stability of cash flows typically associated with these businesses. Key assumptions include
managements':
* estimates of future profitability;
* trade working capital investment needs and;
* expected capital expenditure in the normal course of business.
7 Finance costs - special 6 monthperiod 6 monthperiod ended31 Yearended30 September2007EUR'000
items ended31 March2007EUR'000
March2008EUR'000
Bank arrangement fees 2,385 - -
Bank hedging fees 433 - -
2,818 - -
The above costs relate to fees incurred in relation to the early termination of Cardpoint's banking arrangements, which include
penalties on the early termination of derivative financial instruments.
8 Earnings per share
Basic and diluted
Basic earnings per share are calculated by dividing the profit/(loss) attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the period.
6 monthperiod 6 monthperiod Yearended30
ended31 March2008 ended31 March2007 September2007
Loss attributable to equity (166,559) (2,253) (47,464)
holders of the company
(EUR'000)
Weighted average number of 186,431 109,993 111,074
ordinary shares in issue
('000)
Basic and diluted loss per (89c) (2c) (43c)
share (cent per share) *
* None of the group's contingently issuable shares were dilutive as they would have decreased the loss per share in all periods.
9 Business combinations
On 5 December 2007, Payzone plc acquired 100% of the share capital of alphyra holdings Limited and 100% of Cardpoint plc. As described
in note 2 the acquisition of 100% of the share capital of alphyra represents a "common" control transaction that is outside of the scope of
IFRS 3 and has not resulted in the recognition of fair value adjustments or goodwill in the consolidated balance sheet of Payzone plc. The
acquisition of 100% of Cardpoint was accounted for as a reverse acquisition of the combined Payzone and alphyra group by Cardpoint plc based
on the guidance in IFRS 3. alphyra is engaged in the deployment of a network of terminals which process a variety of electronic transaction
services, such as electronic phone top-up, utility top-up and EFT processing, operating in a number of countries across Europe. The acquired
business contributed revenues of EUR396.3 million and net loss of EUR1.4 million to the group for the period from 5 December 2007 to 31
March 2008. If the acquisition had occurred on 1 October 2007, group revenue would have been EUR643.8 million and net loss after tax for the group would have been EUR168.1 million.
These amounts have been calculated using the group's accounting policies and by adjusting the results of the subsidiary to reflect the
additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment
and intangible assets had applied from 1 October 2007, together with the consequential tax effects.
Details of net assets acquired and goodwill are as follows:
EUR*000
Purchase consideration:
Fair values of shares issued 186,982
Directs costs relating to the acquisition 17,207
Total purchase consideration 204,189
Fair value of net liabilities acquired 104,972
Goodwill 309,161
The goodwill is attributable to the workforce of the acquired business, non contractual customer relationships that did not qualify for
separate recognition as intangible assets and the significant synergies expected to arise after the acquisition of alphyra.
The fair value of the shares issued was based on the quoted market price on 5 December 2007.
The assets and liabilities as of 5 December 2007 arising from the acquisition are as follows:
CarryingamountEUR' Fair valueadjustmentEUR'000 Fair value EUR'000
000
Cash and cash equivalents 10,982 - 10,982
Property, plant and equipment 39,813 (43) 39,770
Customer relationship - 30,625 30,625
(included in intangibles)
Brand (included in - 3,119 3,119
intangibles)
Software (included in 3,117 35,451 38,568
intangibles)
Deferred tax assets 1,607 - 1,607
Available for sale financial 124 - 124
asset
Investment in associate 421 - 421
company
Inventories 28,338 (878) 27,460
Trade and other receivables 83,704 (2,788) 80,916
Borrowings (159,405) - (159,405)
Trade and other payables (160,227) - (160,227)
Deferred tax liabilities (417) (18,515) (18,932)
Net liabilities (151,943) 46,971 (104,972)
Purchase consideration settled -
in cash
Cash and cash equivalent in 10,982
subsidiary acquired
Cash flow on acquisition 10,982
10 Classification of borrowings as current liabilities
As a result of a breach of banking covenants as at 31 March 2008 IAS 1 "Presentation of Financial Statements" requires the group's debt
to be classified as current. Negotiations with the bankers were ongoing at the time and the bankers subsequently agreed to waive the default
existing at 31 March 2008. In June 2008 the bank facility was re-negotiated and the banking covenants re-set.
11Reconciliation of changes in Sharecapital EUR'000 Sharepremium EUR'000 Otherreserve EUR'000 Reverseacquisitionre
Hedgingreserve Translationreserve Retainedlosses Minorityinterests Total EUR'000
equity serveEUR*000
EUR'000 EUR'000 EUR'000 EUR'000
At 1 October 2006 7,786 130,468 522 -
493 - (60,286) 155 79,138
Issue of share capital 474 2,013 - -
- - - - 2,487
Cash flow hedge - - - -
(91) - - - (91)
Loss for the financial period - - - -
- - (2,253) - (2,253)
Credit for equity settled - - - -
- - 1,092 - 1,092
share based payments
Exchange differences on - - - - -
(262) - - (262)
foreign currency net
investment
At 31 March 2007 8,260 132,481 522 -
402 (262) (61,447) 155 80,111
Issue of share capital 36 136 - -
- - - - 172
Cash flow hedge - - - -
(98) - - - (98)
Loss for the financial period - - - -
- - (45,211) - (45,211)
Credit for equity settled - - - -
- - 1,320 - 1,320
share based payments
Exchange differences on - - - - -
(264) - - (264)
foreign currency net
investment
At 30 September 2007 8,296 132,617 522 -
304 (526) (105,338) 155 36,030
11Reconciliation of changes in Sharecapital EUR'000 Sharepremium EUR'000 Otherreserve EUR'000 Reverseacquisitionre
Hedgingreserve Translationreserve Retainedlosses Minorityinterests Total EUR'000
equity * continued serveEUR*000
EUR'000 EUR'000 EUR'000 EUR'000
At 30 September 2007 8,296 132,617 522 -
304 (526) (105,338) 155 36,030
Issue of shares *Cardpoint plc 244 868 - -
- - - -- 1,112
Exchange differences on - - - -
- (43,895) - - (43,895)
foreign currency net
investment
Transfer to reverse (8,540) (133,485) (522) 136,064
- 6,483 - - -
acquisition reserve
Issue of shares * Payzone plc 4,263 314,886 - (124,028)
- - - - 195,121
Credit for equity settled - - - -
- - 3,840 - 3,840
share based payments
Cash flow hedge - - - -
(1,206) - - - (1,206)
Loss for the financial period - - - - -
- (166,559) 110 (166,449)
At 31 March 2008 4,263 314,886 - 12,036
(902) (37,938) (268,057) 265 24,553
12 Post balance sheet events
The Placing to raise aggregate gross proceeds of EUR40.0 million has been undertaken by way of a placing of 137.3 million new Payzone
Ordinary Shares of �0.01 each nominal value (the "New Ordinary Shares") at a price of �0.20 per New Ordinary Share, raising �27.5 million
(EUR34.5 million) and 5.5 million new Euro denominated Payzone Convertible Preference Shares of EUR0.01 each nominal value, issued at
EUR1.00 each (the "New Convertible Preference Shares") and convertible into Ordinary Shares for the paid up value at a price of �0.25 per
Ordinary Share with the Euro paid up amount convertible into Sterling at the fixed rate of EUR1.2565 equal to �1.00, raising EUR5.5 million.
The New Ordinary Shares will represent 45% of Payzone's current issued Ordinary share capital and further 6% ordinary shares of 1 pence each
("Ordinary Shares") would arise upon immediate conversion of the New Convertible Preference Shares.
Application was made for the New Ordinary Shares to be admitted to trading on AIM and dealings commenced on 17 June 2008. The New
Convertible Preference Shares will not be admitted to trading.
The net proceeds from the Placing will be used to strengthen the business following its recent operational issues arising from the
integration of the Cardpoint and alphyra businesses and allow for investment to support future growth. The Board believes that the funds to
be raised by the Placing are sufficient to allow the Company to fund its immediate working capital requirements and its medium term capital
expenditure plans.
As previously announced on 21 February 2008, certain Payzone's shareholders, including Balderton Capital, have provided the Company with
a EUR10 million subordinated loan facility at a 20% annual payment in kind ("PIK") interest rate (the "Subordinated Loan"). The facility
has been partially drawn down and will be refinanced by the equity raised as outlined above.
APPENDIX 1 - TRANSITION TO IFRS
IFRS 1 - Transition
The group has applied of the provisions of IFRS 1 in arriving at appropriate opening balances, for the purposes of the financial
information in this document. The significant decisions taken in respect of availing, or otherwise, of the exemptions available are as
follows:
(a) Business Combinations
The group has availed of this exemption and has not applied IFRS 3 "Business combinations" retrospectively to business combinations
prior to the date of transition. Goodwill arising on acquisitions prior to 1 October 2006 is not amortised from the transition date but is
subject to annual impairment testing or more frequently if events or circumstances indicate that goodwill may be impaired.
(b) Fair value as deemed cost
The group has not availed of this exemption and as a consequence the value of the group's property, plant and equipment at the date of
transition is stated as its historical carrying value (being historical cost less accumulated depreciation and impairment) as permitted by
IFRS 1. The group has elected not to apply a policy of revaluation going forward.
(c) Share based payment transactions
IFRS 2 need not be applied to grants before 7 November 2002, or to grants after 7 November 2002 but which had vested before the
transition date. The group has availed of this exemption and has only applied IFRS 2 to those options that were outstanding and that had
not vested on 1 October 2006.
(d) Currency translation reserve
The Group has availed of the IFRS 1 exemption allowing it to deem all cumulative translation differences that have arisen up to
transition date to be equal to zero. These translation differences will therefore remain written off against revenue reserves and will no
longer be separately disclosed in the notes to the accounts.
Mandatory exceptions
Derecognition of financial assets and liabilities
This exception in relation to derecognition of financial assets and liabilities is not applicable to the group.
Hedge accounting
The exception in relation to hedge accounting permitted under IFRS1 is not applicable to the group.
Estimates
The group's estimates at the date of transition to IFRS are consistent with estimates made for the same date under UK GAAP.
Assets classified as held for sale and discontinued operations
At the date of transition the group has no non-current assets (or disposal groups) that meet the criteria to be classified as held for
sale or operations that meet the criteria to be classified as discontinued.
A description of the main/significant differences between UK GAAP and IFRS accounting policies is set out below. The reconciliation of
the group balance sheet and equity under UK GAAP and IFRS as at 1 October 2006, 31 March 2007 and 30 September 2007 is included on pages 35
to 37. The reconciliation of the group income statement and cashflows from UK GAAP and IFRS for the six months period ended 31 March 2007
and the year ended 30 September 2007 are included on pages 38 to 41.
IFRS principal adjustments
A summary of the IFRS accounting policies is provided in note 5 of the interim financial information. The resultant adjustments by
standard are set out below:
(a) Goodwill - IFRS 3 "Business combinations"
(i) Goodwill amortisation
UK GAAP
Accounting for business combinations under UK GAAP is dealt with by FRS 6 "Acquisitions & Mergers" and FRS 7 "Fair values in
acquisition". Under FRS 10 "Goodwill and intangible assets", purchased goodwill and intangible assets were amortised to the income
statement on a systematic basis over their useful economic lives where they are regarded as having a finite useful economic life. Under UK
GAAP, there is a rebuttable presumption that the useful economic lives of purchased goodwill and intangible assets are limited to period of
20 years or less. In accordance with UK GAAP, the goodwill arising from the purchase of subsidiary undertakings was capitalised and
amortised on a straight-line basis over its expected useful life. The group's practice under UK GAAP was to amortise goodwill over a 5 year
period.
IFRS
IFRS 3 prohibits the amortisation of purchased goodwill. The standard requires goodwill to be carried at cost. Goodwill is the excess
of the cost of an acquisition over the fair value of the group's share of the net identifiable assets of the acquired subsidiary/associate
at the date of acquisition. Recognised goodwill is tested annually for impairment and is carried at cost less accumulated impairment
losses. Impairment reviews are required to be performed on an annual basis and when there are indications that the carrying value may not be
recoverable.
Impact
Under the transitional arrangements of IFRS 1, the group has taken the option of applying IFRS 3 prospectively from the transition date
to IFRS. The group has chosen this option rather than to restate previous business combinations. The impact of IFRS 3 and associated
transitional arrangements on the group are as follows;
* the accounting for all business combinations before 1 October 2006 is frozen at the transition date; and
* goodwill is no longer amortised.
In accordance with IFRS 1, regardless of whether there is any indication that goodwill may be impaired, a first-time adopter shall test
goodwill for impairment at the date of transition to IFRS.
At 1 October 2006 and 30 September 2007 impairment reviews were performed on the carrying value of goodwill under IFRS.
The impact on the 31 March 2007 income statement under IFRS is the reinstatement of goodwill previously amortised under UK GAAP of
EUR22.554 million. Accordingly, income under IFRS is increased by EUR22.554 million and as a result of the reinstatement, an additional loss
of EUR0.232 million was recorded on the disposal of a subsidiary during the period. At 31 March 2007 the net effect on the balance sheet
was a reinstatement of goodwill of EUR22.075 with a foreign exchange translation difference of EUR0.247 million debited to the translation
reserve.
The impact on the 30 September 2007 income statement under IFRS is the reinstatement of goodwill previously amortised under UK GAAP of
EUR45.251 million, and an impairment charge of EUR45.251 million. Accordingly, income under IFRS is reduced by EURnil. As an impairment
charge of EUR3.889m had been recorded under UK GAAP, the total impairment charge for the year of EUR49.14 million was reclassified to
administrative expenses - special items in accordance with the group's accounting policy.
(a) Goodwill - IFRS 3 "Business combinations" - continued
(ii) Fair value adjustment
Certain assets and liabilities acquired in business combinations effected prior to 30 September 2007 and subject to the measurement
rules of UK GAAP were accounted for using provisional fair values in the UK GAAP balance sheet as at 30 September 2007 which is used as a
base for deriving the IFRS balance sheet for the same date. Since the period for finalising such fair values crossed the 30 September 2007
date, the Group has deemed it appropriate to reflect the finalisation of these fair values (which would have been reflected in the UK GAAP
financial statements for the year ended 30 September 2008) in the IFRS balance sheet at 30 September 2007. This results in an adjustment to
increase goodwill by EUR3.431 million together an increase in provisions of EUR3.431 million.
(b) Deferred tax and current tax - IAS 12 - "Income taxes"
UK GAAP
FRS 19 requires deferred tax to be accounted for on the basis of timing differences. Timing differences are differences between an
entity's taxable profits and its results as stated in the financial statements due to the inclusion of gains and losses in tax assessments
in periods different from those in which they are recognised in financial statements.
IFRS
IAS 12 requires that deferred tax be accounted for on the basis of taxable or deductible temporary differences. Temporary differences
are differences between the carrying value of an asset or liability in the consolidated balance sheet and the tax base of the asset or
liability. Under IAS 12, deferred tax is recognised directly to equity if the tax relates to items that are credited or charged directly to
equity.
Impact
The transition to IFRS does not give rise to any restatement of tax balance as at 1 October 2006 and 31 March 2007. At 30 September
2007 a deferred taxation liability of EUR1.143 million was recognised in respect of the intangible assets acquired as part of the Travelex
acquisition in April 2007. A corresponding entry was made to goodwill.
(c) IAS 39 "Financial instruments: Recognition and Measurement"
UK GAAP
Under UK GAAP, only accrued interest under interest rate swaps was recognised on the balance sheet.
IFRS
Under IAS 39, the fair value of interest rate swaps is recognised on the balance sheet. The group's interest rate swaps have been
designated as cash flow hedges, and the movement in fair value of the effective portion of the swaps from one period to another is taken to
the hedging reserve and will cumulatively net out to zero when the swaps term out.
Impact
The impact on the balance sheet at the transition date of 1 October 2006 was the recognition of a financial asset of EUR493,000 and a
corresponding adjustment to the hedging reserve. The financial asset recognised as at 31 March 2007 was EUR402,000 and EUR304,000 as at 30
September 2007. The corresponding entries were to the hedging reserve.
(d) Currency translation reserve
Currency translation differences on foreign currency net investments have been written off under UK GAAP to revenue reserves.
Under IAS 21, translation differences are recorded in a separate currency translation reserve. On disposal of a foreign operation, the
cumulative translation differences relating to that operation are transferred to the income statement as part of the profit and loss on
disposal.
The Group has availed of the IFRS 1 exemption allowing it to deem all cumulative translation differences that have arisen up to
transition date to be equal to zero. These translation differences will therefore remain written off against revenue reserves and will no
longer be separately disclosed in the notes to the accounts.
RECONCILIATION OF CONSOLIDATED BALANCE SHEET BETWEEN UK GAAP AND IFRS
As at 30 September 2007
UK GAAP EUR'000 IFRS IAS IAS IFRS EUR'000
3BusinessCombination 39FinancialInstrumen 12DeferredTaxationEU
sEUR'000 tsEUR'000 R*000
Non-current assets
Property, plant and equipment 53,314 - - - 53,314
Intangible assets 112,560 3,431 - 1,143 117,134
Total non-current assets 165,874 3,431 - 1,143 170,448
Current assets
Inventories 652 - - - 652
Trade and other receivables 7,822 - - - 7,822
Derivative financial - - 304 - 304
instrument
Cash and cash equivalents 12,440 - - - 12,440
Total current assets 20,914 - 304 - 21,218
Total assets 186,788 3,431 304 1,143 191,666
Current liabilities
Interest-bearing loans and (7,722) - - - (7,722)
borrowings
Trade and other payables (30,156) - - - (30,156)
Income tax liabilities (353) - - - (353)
Total current liabilities (38,231) - - - (38,231)
Non-current liabilities
Deferred tax liability - - - (1,143) (1,143)
Interest-bearing loans and (109,768) - - - (109,768)
borrowings
Provisions (3,063) (3,431) - - (6,494)
Total non-current liabilities (112,831) (3,431) - (1,143) (117,405)
Total liabilities (151,062) (3,431) - (1,143) (155,636)
Net assets 35,726 - 304 - 36,030
Equity
Called up share capital 8,296 - - - 8,296
Share premium account 132,617 - - - 132,617
Other reserve 522 - - - 522
Hedging reserve - - 304 - 304
Translation reserve (526) - - - (526)
Retained earnings (105,338) - - - (105,338)
Equity attributable to equity 35,571 - 304 - 35,875
holders of the parent
Minority interests 155 - - - 155
Total equity 35,726 - 304 - 36,030
RECONCILIATION OF CONSOLIDATED BALANCE SHEET BETWEEN UK GAAP AND IFRS
As at 31 March 2007
UK GAAP EUR'000 IFRS IAS IFRS EUR'000
3BusinessCombination 39FinancialInstrumen
sEUR'000 tsEUR'000
Non-current assets
Property, plant and equipment 41,360 - - 41,360
Intangible assets 125,618 22,075 - 147,693
Total non-current assets 166,978 22,075 - 189,053
Current assets
Inventories 443 - - 443
Trade and other receivables 8,916 - - 8,916
Derivative financial - - 402 402
instrument
Cash and cash equivalents 11,898 - - 11,898
Total current assets 21,257 - 402 21,659
Total assets 188,235 22,075 402 210,712
Current liabilities
Interest-bearing loans and (11,548) - - (11,548)
borrowings
Trade and other payables (32,980) - - (32,980)
Total current liabilities (44,528) - - (44,528)
Non-current liabilities
Interest-bearing loans and (86,073) - - (86,073)
borrowings
Total non-current liabilities (86,073) - - (86,073)
Total liabilities (130,601) - - (130,601)
Net assets 57,634 22,075 402 80,111
Equity
Called up share capital 8,260 - - 8,260
Share premium account 132,481 - - 132,481
Other reserve 522 - - 522
Hedging reserve - - 402 402
Translation reserve (15) (247) - (262)
Retained earnings (83,769) 22,322 - (61,447)
Equity attributable to equity 57,479 22,075 402 79,956
holders of the parent
Minority interests 155 - - 155
Total equity 57,634 22,075 402 80,111
RECONCILIATION OF CONSOLIDATED BALANCE SHEET BETWEEN UK GAAP AND IFRS
As at 1 October 2006
UK GAAP EUR'000 IAS IFRS EUR'000
39FinancialInstrument
sEUR'000
Non-current assets
Property, plant and equipment 44,807 - 44,807
Intangible assets 149,136 - 149,136
Total non-current assets 193,943 - 193,943
Current assets
Inventories 2,172 - 2,172
Trade and other receivables 13,237 - 13,237
Derivative financial - 493 493
instrument
Cash and cash equivalents 11,875 - 11,875
Total current assets 27,284 493 27,777
Total assets 221,227 493 221,720
Current liabilities
Interest-bearing loans and (10,929) - (10,929)
borrowings
Trade and other payables (38,353) - (38,353)
Income tax liabilities (4) - (4)
Total current liabilities (49,286) - (49,286)
Non-current liabilities
Interest-bearing loans and (93,026) - (93,026)
borrowings
Trade and other payables (270) - (270)
Total non-current liabilities (93,296) - (93,296)
Total liabilities (142,582) - (142,582)
Net assets 78,645 493 79,138
Equity
Called up share capital 7,786 - 7,786
Share premium account 130,468 - 130,468
Other reserve 522 - 522
Hedging reserve - 493 493
Retained earnings (60,286) - (60,286)
Equity attributable to equity 78,490 493 78,983
holders of the parent
Minority interests 155 - 155
Total equity 78,645 493 79,138
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT BETWEEN UK GAAP AND IFRS
For the six months ended 31 March 2007
UK GAAP EUR'000 IFRS IFRS EUR'000
3BusinessCombination
sEUR'000
Revenue 63,007 - 63,007
Cost of sales (45,556) - (45,556)
Gross profit 17,451 - 17,451
Administrative expenses - (13,691) - (13,691)
excluding amortisation of
intangible assets and special
items
Administrative expenses - (2,183) (232) (2,415)
special items
Administrative expenses - (22,554) 22,554 -
amortisation of intangible
assets
Administrative expenses (38,428) 22,322 (16,106)
Operating (loss)/profit (20,977) 22,322 1,345
Financial expenses (3,598) - (3,598)
(Loss) before taxation (24,575) 22,322 (2,253)
Income tax credit - - -
(Loss) for the period all (24,575) 22,322 (2,253)
attributable to equity holders
of the parent
Basic and diluted loss per (2c)
share (cent per share)
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT BETWEEN UK GAAP AND IFRS
For the year ended 30 September 2007
UK GAAP EUR'000 IFRS IFRS EUR'000
3BusinessCombination
sEUR'000
Revenue 130,970 - 130,970
Cost of sales (84,158) - (84,158)
Gross profit 46,812 - 46,812
Administrative expenses - (33,177) - (33,177)
excluding intangible
amortisation and special items
Administrative expenses - (2,067) (49,140) (51,207)
special items
Administrative expenses - (50,106) 49,140 (966)
amortisation of intangible
assets
Administrative expenses (85,350) - (85,350)
Operating (loss) (38,538) - (38,538)
Financial income 396 - 396
Financial expenses (8,964) - (8,964)
(Loss) before taxation (47,106) - (47,106)
Income tax expenses (358) - (358)
(Loss) for the period all (47,464) - (47,464)
attributable to equity holders
of the parent
Basic and diluted loss per (43c)
share (cent per share)
RECONCILIATION OF CONSOLIDATED CASH FLOW STATEMENT BETWEEN UK GAAP AND IFRS
For the six month period ended 31 March 2007
UK GAAP EUR'000 Effect of IFRS EUR'000
transitionEUR'000
Net cash flow from operating 7,480 - 7,480
activities
Net cash flow used in (3,580) - (3,580)
investing activities
Net cash flow used in (3,837) - (3,837)
financing activities
Net increase in cash, cash 63 - 63
equivalents and bank overdraft
IAS 7 "Cash Flow Statements" requires the presentation of cash flows to be classified under three headings (operating, investing and
financing activities) as opposed to the five heading which were required under UK GAAP. Therefore, a reclassification of certain items has
occurred.
(a) Taxation is now classified under operating activities, instead of being separately disclosed on the face of the cash flow.
(b) Interest received has been reclassified to operating activities and interest paid has been reclassified to operating activities
from returns and servicing of finance, as this classification no longer exist.
(c) Additions of property, plant and equipment have been reclassified to investing activities from capital expenditure and financial
investment, as this classification no longer exist.
RECONCILIATION OF CONSOLIDATED CASH FLOW STATEMENT BETWEEN UK GAAP AND IFRS
For the year ended 30 September 2007
UK GAAP EUR'000 Effect of IFRS EUR'000
transitionEUR'000
Net cash flow from operating 8,861 - 8,861
activities
Net cash flow used in (12,260) - (12,260)
investing activities
Net cash flow from financing 4,299 - 4,299
activities
Net increase in cash, cash 900 - 900
equivalents and bank overdraft
IAS 7 "Cash Flow Statements" requires the presentation of cash flows to be classified under three headings (operating, investing and
financing activities) as opposed to the five heading which were required under UK GAAP. Therefore, a reclassification of certain items has
occurred.
(a) Taxation is now classified under operating activities, instead of being separately disclosed on the face of the cash flow.
(b) Interest received has been reclassified to operating activities and interest paid has been reclassified to operating activities
from returns and servicing of finance, as this classification no longer exist.
(c) Additions of property, plant and equipment have been reclassified to investing activities from capital expenditure and financial
investment, as this classification no longer exist.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GIGDLDUBGGIC
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