Released: 31/01/2008
RNS Number:9334M
Spiritel PLC
Part 2 : For preceding part double-click [nRNSe9334M]
Deferred tax is not provided on the initial recognition of goodwill, or on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and joint ventures
is not provided if reversal of these temporary differences can be controlled by
the Group and it is probable that reversal will not occur in the foreseeable
future.
Cash
Cash, for the purposes of the consolidated cash flow statement, comprises cash
in hand and deposits repayable on demand, less overdrafts payable on demand.
Foreign currency
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date. Any exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in the income statement in the period in which
they arise.
Contributions to pension schemes
The Company contributes to the personal pension schemes of certain Directors and
employees. The pension costs are charged against operating profit in the
relevant accounting period.
Financial instruments
Financial assets are recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial liabilities are obligations
to pay cash or other financial assets and are recognised when the Group becomes
a party to the contractual provisions of the instrument. Financial liabilities
categorised as at fair value through profit or loss are recorded initially at
fair value and all transaction costs are recognised immediately in the income
statement. All other financial liabilities are recorded initially at fair value,
net of direct issue costs.
Financial liabilities categorised as at fair value through profit or loss are
re-measured at each reporting date at fair value, with changes in fair value
being recognised in the income statement. All other financial liabilities are
recorded at amortised cost using the effective interest method, with
interest-related charges recognised as an expense in finance cost in the income
statement. Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are charged to the income statement on an
accruals basis using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled in the period
in which they arise.
Financial liabilities are categorised as at fair value through profit or loss
where they are classified as held-for-trading or designated as at fair value
through profit or loss on initial recognition. Financial liabilities are
designated as at fair value through profit or loss where they are measured and
their performance evaluated on a fair value basis in accordance with the Group's
documented risk management strategy.
Classification as equity or financial liability
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into.
A financial liability exists where there is a contractual obligation to deliver
cash or another financial asset to another entity, or to exchange financial
assets or financial liabilities under potentially unfavourable conditions. In
addition, contracts which result in the entity delivering a variable number of
its own equity instruments are financial liabilities. Shares containing such
obligations are classified as financial liabilities.
Finance costs and gains or losses relating to financial liabilities are included
in the income statement. The carrying amount of the liability is increased by
the finance cost and reduced by payments made in respect of that liability.
Finance costs are calculated so as to produce a constant rate of charge on the
outstanding liability.
An equity instrument is any contract that evidences a residual interest in the
assets of the group/company after deducting all of its liabilities. Dividends
and distributions relating to equity instruments are debited directly to
reserves.
Compound instruments
Compound instruments comprise both a liability and an equity component. The
elements of a compound instrument are classified in accordance with their
contractual provisions. At the date of issue, the liability component is
recorded at fair value, which is estimated using the prevailing market interest
rate for a similar debt instrument without the equity feature. Thereafter, the
liability component is accounted for as a financial liability in accordance with
the accounting policy set out above.
The residual is the equity component, which is accounted for as an equity
instrument.
Equity
Equity comprises the following:
- Share capital represents the nominal value of equity shares.
- Share premium represents the excess over nominal value of the fair value
of consideration received for equity shares, net of expenses of the share
issue.
- Other reserves represent equity-settled share-based employee
remuneration until such share options are exercised and the equity component
of compound financial instruments.
- Reverse acquisition reserve represents the amount recognised in respect
of the reverse acquisition accounting treatment of the acquisition of
Spiritel plc by Spiritel Technologies Limited (formerly Expo Communications
Limited) in 2005.
- Profit and loss account represents retained losses.
Government grants
Government grants in respect of capital expenditure are netted against the cost
of the asset.
Share-based payments
Equity settled share-based payment
The Group issues equity settled share-based payments to certain Directors and
employees. All share-based payment arrangements granted after 5 March 2004 that
had not vested prior to 1 May 2006 are recognised in the financial statements.
Where employees are rewarded using share-based payments, the fair values of
employees' services are determined indirectly by reference to the fair value of
the instrument granted to the employee. This fair value is appraised at the
grant date and excludes the impact of non-market vesting conditions. All equity
settled share-based payments are ultimately recognised as an expense in the
profit and loss account with a corresponding credit to other reserves.
If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Estimates are revised subsequently if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options that have vested are not exercised.
Upon exercise of share options, the proceeds received net of attributable
transaction costs are credited to share capital, and where appropriate share
premium.
4. Loss per share
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number for shares in issue
during the period. The share options are not dilutive and therefore a diluted
earnings per share calculation has not been presented.
The losses and weighted average number of shares used in the calculation are set
out below:
Weighted Per share
Loss average number amount
£'000 of shares Pence
Continuing and total operations
6 months to 31 October 2007
Loss after tax (2,339)
--------
Loss attributable to ordinary shareholders (2,339)
--------
Weighted average number of shares 316,232,646
Loss per share (pence) (0.74)
6 months to 31 October 2006
Loss after tax (1,147)
--------
Loss attributable to ordinary shareholders (1,013)
--------
Weighted average number of shares 176,477,807
Loss per share (pence) (0.57)
Year ended 30 April 2007
Loss after tax (3,058)
--------
Loss attributable to ordinary shareholders (2,924)
--------
Weighted average number of shares 217,231,927
Loss per share (pence) (1.35)
5. Business combination
On 22 October 2007, Spiritel Plc acquired 100% of the issued share capital of
Tdotcom Limited, a company based in the UK. The total cost includes the
components stated below. The purchase price was settled in cash.
£'000
Purchase price 80
Contingent consideration under earn out agreement payable in cash 120
Due diligence fees 10
Other professional fees 21
-------
231
-------
Up to a further £150,000 of consideration may become payable in the event that
the acquired business achieves certain earn-out sales targets during the
eighteen months following the date of acquisition. In the opinion of the
directors the likely amount payable is £120,000.
The allocation of the purchase price to the assets and liabilities of Tdotcom
Limited was only provisionally completed at 31 October 2007. The amounts
provisionally recognised for each class of the acquiree's assets and liabilities
recognised at the acquisition date are as follows:
Carrying Provisional
amount under Adjustments fair value
IFRS
£'000 £'000 £'000
Other intangible assets 650 - 650
Trade and other receivables 159 - 159
Current tax asset 29 - 29
Cash and cash equivalents 3 - 3
---------------------------------------
Total assets 841 - 841
Trade payables (167) - (167)
Deferred income (169) (71) (240)
Other taxes (132) - (132)
Other payables (97) - (97)
---------------------------------------
Total liabilities (565) (71) (636)
---------------------------------------
Net assets 276 (71) 205
----------------------------
Goodwill 26
-----------
Fair value of purchase consideration 231
-----------
A provisional fair value adjustment has been made to align the company's revenue
recognition policy on contracted maintenance income with that of the Group.
6. Explanation of transition to IFRS
As stated in the note 2, these are the Group's first condensed consolidated
interim financial statements, for part of the period covered by the first IFRS
annual consolidated financial statements, prepared in accordance with IFRS.
Business combinations prior to 1 May 2006, the Group's date of transition to
IFRS, have not been restated to comply with IFRS3 Business Combinations.
Goodwill arising from these business combinations of £33,000 has not been
restated and no other adjustments are required to the balance sheet as at 1 May
2006.
An explanation of how the transition from UK GAAP to IFRS has affected the
Group's financial position, financial performance and cash flows is set out
below.
Reconciliation of equity at 31 October 2006
UK GAAP (a) (b) (c) IFRS
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 715 - - - 715
Goodwill 2,490 (1,799) - - 691
Other intangible assets - 1,799 - (8) 1,791
------------------------------------------------
3,205 - - (8) 3,197
------------------------------------------------
Current assets
Trade and other receivables 1,059 - - - 1,059
Cash and cash equivalents 252 - - - 252
------------------------------------------------
1,311 - - - 1,311
------------------------------------------------
------------------------------------------------
Total assets 4,516 - - (8) 4,508
------------------------------------------------
LIABILITIES
Current liabilities
Trade and other payables (1,777) - - - (1,777)
Short term borrowings (2,243) - - - (2,243)
Current tax payable (48) - - - (48)
------------------------------------------------
(4,068) - - - (4,068)
------------------------------------------------
Non-current liabilities
Long-term borrowings (4,695) - - - (4,695)
Deferred tax liabilities (18) - - - (18)
------------------------------------------------
(4,713) - - - (4,713)
------------------------------------------------
------------------------------------------------
Total liabilities (8,781) - - - (8,781)
------------------------------------------------
------------------------------------------------
Net liabilities (4,265) - - (8) (4,273)
------------------------------------------------
EQUITY
Capital and reserves
Share capital 2,195 - - - 2,195
Additional paid in capital 3,630 - - - 3,630
Reverse acquisition reserve (5,763) - - - (5,763)
Other reserves 54 - - - 54
Profit and loss account (4,381) - - (8) (4,389)
------------------------------------------------
Total equity (4,265) - - (8) (4,273)
------------------------------------------------
Reconciliation of equity at 30 April 2007
UK GAAP (a) (b) (c) IFRS
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 408 - - - 408
Goodwill 4,859 (4,247) 177 - 789
Other intangible assets - 4,247 - (246) 4,001
------------------------------------------------
5,267 - 177 (246) 5,198
------------------------------------------------
Current assets
Inventories 392 - - - 392
Trade and other receivables 3,007 - - - 3,007
Cash and cash equivalents 322 - - - 322
------------------------------------------------
3,721 - - - 3,721
------------------------------------------------
------------------------------------------------
Total assets 8,988 - 177 (246) 8,919
------------------------------------------------
LIABILITIES
Current liabilities
Trade and other payables (3,991) - - - (3,991)
Short term borrowings (4,037) - - - (4,037)
Current tax payable (236) - - - (236)
------------------------------------------------
(8,264) - - - (8,264)
------------------------------------------------
Non-current liabilities
Long-term borrowings (4,812) - - - (4,812)
Deferred tax liabilities (17) - - - (17)
------------------------------------------------
Total non-current liabilities (4,829) - - - (4,829)
------------------------------------------------
------------------------------------------------
Total liabilities (13,093) - - - (13,093)
------------------------------------------------
------------------------------------------------
Net liabilities (4,105) - 177 (246) (4,174)
------------------------------------------------
EQUITY
Capital and reserves
Share capital 3,162 - - - 3,162
Additional paid in capital 4,550 - - - 4,550
Reverse acquisition reserve (5,763) - - - (5,763)
Other reserves 97 - - - 97
Profit and loss account (6,151) - 177 (246) (6,220)
------------------------------------------------
Total equity (4,105) - 177 (246) (4,174)
------------------------------------------------
Reconciliation of loss for the 6 months ended 31 October 2006
UK GAAP (a) (b) (c) IFRS
£'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 6,837 - - - 6,837
Cost of sales (6,173) - - - (6,173)
------------------------------------------------
Gross profit 664 - - - 664
------------------------------------------------
Administrative expenses (1,695) - - (8) (1,703)
------------------------------------------------
Operating loss (1,031) - - (8) (1,039)
Share of operating loss of joint
venture (18) - - - (18)
------------------------------------------------
( 1,049) - - (8) (1,057)
Finance costs (90) - - - (90)
------------------------------------------------
Loss before taxation (1,139) - - (8) (1,147)
Income tax expense - - - - -
------------------------------------------------
Loss for the financial period (1,139) - - (8) (1,147)
------------------------------------------------
Reconciliation of loss for the year ended 30 April 2007
UK GAAP (a) (b) (c) IFRS
£'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 13,649 - - - 13,649
Cost of sales (11,613) - - - (11,613)
------------------------------------------------
Gross profit 2,036 - - - 2,036
Administrative expenses (4,432) - 177 (246) (4,501)
------------------------------------------------
Operating (loss)/profit (2,396) - 177 (246) (2,465)
Share of operating loss of joint
venture (25) - - - (25)
------------------------------------------------
(2,421) - 177 (246) (2,490)
Finance costs (589) - - - (589)
------------------------------------------------
Loss before taxation (3,010) - 177 (246) (3,079)
Income tax expense 21 - - - 21
------------------------------------------------
Loss for the financial period (2,989) - 177 (246) (3,058)
------------------------------------------------
Notes to the reconciliations
(a) The Group acquired CallPlan Limited (renamed Spiritel CallPlan
Limited) on 11 September 2006. Application of IFRS 3 to this business
combination resulted in the identification of a number of intangible assets
other than goodwill, including customer relationships and a marketing contract.
Under IFRS these have been recognised separately in the balance sheet at their
fair value at the date of combination. Under UK GAAP these intangible assets
were included within goodwill. The result of this adjustment is to decrease
goodwill and increase intangible assets by £506,000 at the date of combination.
The Group acquired Networks Direct (UK) Limited (renamed Spiritel Networks
Limited) on 13 October 2006. Application of IFRS 3 to this business combination
resulted in the identification of a number of intangible assets other than
goodwill, including customer relationships. Under IFRS these have been
recognised separately in the balance sheet at their fair value at the date of
combination. Under UK GAAP these intangible assets were included within
goodwill. The result of this adjustment is to decrease goodwill and increase
intangible assets by £1,293,000 at the date of combination.
The Group acquired Ashland Group Limited (renamed Spiritel IP Communications
Limited) on 2 March 2007. Application of IFRS 3 to this business combination
resulted in the identification of a number of intangible assets other than
goodwill, including customer lists. Under IFRS these have been recognised
separately in the balance sheet at their fair value at the date of combination.
Under UK GAAP these intangible assets were included within goodwill. The result
of this adjustment is to decrease goodwill and increase intangible assets by
£2,448,000 at the date of combination.
At 31 October 2006 and 30 April 2007 the value of intangible assets was
increased by £1,799,000 and £4,247,000 respectively.
The Group acquired tdotcom Limited (renamed Spiritel IP Communications (London)
Limited) on 22 October 2007. Application of IFRS 3 to this business combination
resulted in the identification of a number of intangible assets other than
goodwill, including customer lists. Under IFRS these have been recognised
separately in the balance sheet at their fair value at the date of combination.
(b) Goodwill recognised by the Group on the acquisitions of CallPlan
Limited, Networks Direct (UK) Limited and Ashland Group Limited under UK GAAP
was amortised over a period of 10 years. Under IFRS goodwill is not amortised
but is tested annually for impairment. The goodwill amortisation charge of
£177,000 recognised in accordance with UK GAAP during the year ended 30 April
2007 has been written back.
(c) In accordance with IFRS 3 as described above, intangible assets, other
than goodwill, identified on these business combinations, are amortised in
accordance with the accounting policy explained in note 3. The result of these
adjustments is to increase the amortisation charge in the income statement for
the six months ended 31 October 2006 by £8,000 and by £246,000 for the year
ended 30 April 2007 and decrease the carrying value of those intangible assets
by the same amounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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