RNS Number:2670P
Appian Technology PLC
04 March 2008
Appian Technology plc / Ticker: ATT / Market: AIM / Sector: Technology
Appian Technology plc ("Appian" or "the Company")
Final Results
4 March 2008
Appian Technology plc, the AIM-traded provider of Automatic Number Plate
Recognition ('ANPR') systems and traffic management products and solutions,
announces its results for the year ended 30 September 2007.
Overview
* Progress made in a number of areas, particularly in product and market
development
* As previously announced, difficult second half due to order delays - sales
of �4.78 million (2006: �5.15 million)
* Order flow increased in first quarter of this year and healthy pipeline of
new business
* UK market continuing to develop and international market strengthening,
notably in the Middle East, Central and South America, Europe and North
Africa
* Over 30 trials conducted worldwide which should lead to new business
opportunities
* Investment and development programme during 2007 resulting in wider product
portfolio
* Post year end, contracts announced with three police forces, a UK military
base and a prestigious Middle Eastern hotel
* Cost reduction programme underway
* Placing of new shares raised �1.5 million gross in December 2007; intention
to issue convertible loan note to raise up to �1 million, interest for
�480,000 already received
* Confident of capitalising on position as a leading internationally
recognised brand in ANPR and traffic management
Chairman's Statement
I am pleased to update shareholders on the progress we made during the year
ended 30 September 2007 and to give an overview on current trading.
Since my last report, Appian Technology plc has seen some significant changes,
which I believe have strengthened its position in the market, enabling us to
maximise the potential of its proprietary ANPR related products and services.
Progress has been made in a number of areas, particularly in product and market
development, resulting in Appian now being recognised as a global brand in ANPR
and traffic management. We carried out over 30 trials worldwide, which have led
to product approval in a number of markets, tailoring of our product for
specific circumstances which we anticipate will lead to future business. We
also made progress in camera development and product rollout and we believe that
we now have the best of breed in recognition cameras, which we have commenced
selling as stand alone products.
However, whilst the underlying business was strengthened, the second half of the
last financial year was a difficult period for Appian, during which many
anticipated orders were delayed by circumstances outside of our control or our
customers. Importantly, we did not lose any business which we expected to win
and the order flow has increased in the first quarter of this year. In addition,
there was an increase in cost due to the acquisition of Genesis, which was only
sustainable at the higher levels of sales experienced in the first half. All
costs have been reviewed and, following the end of the Genesis earn-out period,
greater focus on cost management is being achieved, which will reduce our
ongoing cost base, particularly in the second half of this year.
On a more optimistic note, the Group's addressable markets are expanding. The UK
market is continuing to develop - for example we have contracts with all major
high-spending metropolitan police forces. International markets are forecast to
replicate the UK penetration levels, and ANPR spend is predicted to grow by 20%
per annum. We have secured additional market footholds notably in the Middle
East, Central and South America, Europe and North Africa, so we believe the door
has been opened and the concept is tried, tested and proven.
In the UK, we have a blue-chip customer base. During the year, the Group won
various UK police orders, in many cases displacing competing ANPR providers to
become the supplier of choice. Notable contract wins in the period included a
�270,000 order for a fixed site system from a UK metropolitan police force,
orders for our new COBRA ANPR camera range and a �350,000 order from a West
Country constabulary. We also won an order from the Civil Nuclear Constabulary,
for mobile systems worth �185,000. In the commercial sector, we are selling
static and mobile systems to individual companies and commercial systems
integrators at an increasing rate. A new parking ANPR system was installed at
the prestigious NEC site in Birmingham. Follow-on business is expected for this
type of application.
Internationally, we won orders in Latin America, the Middle East, Europe and the
USA. The Group has a 30% interest in a consortium which has a 10-year contract
to run a new congestion charging scheme in Malta. This sophisticated system
combines ANPR with a state of the art hourly billing system, allowing motorists
to view and pay charges on the Internet. The consortium intends to roll this
initiative out to further congestion charging schemes.
In the USA, we signed our first original equipment manufacturer agreement
('OEM') with a leading security software solutions group, Civica Software
('Civica'), our California based distributor. As part of the agreement, Appian
receives an equity position with an option to increase this shareholding at a
defined price in the future. Civica is focused on developing and distributing
technology products for the US Government and law enforcement agencies. Under
the terms of the agreement, Civica will integrate Appian's TalonSP(TM)
recognition engine into its proprietary hardware and software system,
PlateScan(TM), to create a superior product that enables customers to identify
proactively vehicles of interest during routine patrols. The new integrated
system is already generating considerable interest, with the first sale recently
agreed.
Following an intensive investment and development programme over the last 12
months, we now have a wider product portfolio including both fixed site (Cobra,
Stinger) and mobile (Viper and MShark) applications. As reported in the interim
results, we remain focused on developing innovative, high specification ANPR
related products, which incorporate unique design features, in order to keep our
systems at the forefront of technology and accuracy. Our new COBRA camera,
which commenced production in February 2007, has been well received in the
market. STINGER, a camera combined with a processor, is designed to recognise
and process licence plates and associated imagery in extreme conditions and
transmit the data to the user via wireless communications. Our third new
camera, the VIPER, a miniature in-car ANPR camera for the mobile market, was
also launched in 2007, as was the hand held MShark, and the order book is
improving.
A number of changes have been made to our management structure. In particular,
we reorganised the sales teams, enabling them to further capitalise on
opportunities and strengthened the management team. The management of Research &
Development has also been significantly strengthened.
David Hearn has given notice of his intention to leave the Board to pursue other
opportunities. Philip Lindsell, a chartered accountant who has held a number of
senior finance roles within major UK companies, has been appointed as Interim
CFO.
Furthermore, I am pleased to announce that the Group has commenced the search
for a non-executive Chairman, and look forward to updating shareholders in the
near future.
We were also delighted to welcome Arbuthnot Securities Limited as our new
nominated adviser and stockbroker. Its highly professional team supported us
during the recent fundraising and continue to provide valuable advice.
Financials
After an encouraging first six months of continuing the increased trend in sales
growth, sales for the year ended 30 September 2007 were slightly down at �4.78
million from �5.15 million previously, as a result of the slowdown in sales in
the second half. Gross margins decreased to 39.6% (2006: 52.8%) as a result of
some "one off" costs totalling �384,000 in respect of stock write downs and the
additional costs associated with delivering the congestion charging scheme in
Malta.
The Group incurred a loss after tax of �2.97 million (2006: profit �5,000) which
is equivalent to a loss of 2p per share.
Other operating expenses increased to �4.48 million (2006: �2.65 million) due
to: a full year's costs from Genesis of �894,000; an increase of �243,000 on
research and development; an increase of �572,000 on sales and marketing; and,
an increase of �121,000 on continuing to strengthen the management and after
sales team within the delivery and maintenance departments. These cost
increases have significantly improved the Group's product lines and market
position.
In December 2007, the Group raised �1,390,000 net of expenses, through the
placing of 36,913,700 new ordinary shares at 4p per share with existing and new
institutional investors, as well as certain directors of the Group.
The Board is finalising plans regarding the issue of a convertible loan note to
raise up to �1 million, of which interest for �480,000 has already been
received, to strengthen the balance sheet and provide additional working capital
to fund the strong level of contracts won since the end of December. The cash
tightened to February 2008 as a result of forecast Quarter One sale orders being
received later than anticipated in the quarter, a delay in supplier deliveries
in January which are now ramping up faster than the Group's credit lines allow
resulting in certain key suppliers granting shortened credit facilities and
limits being imposed on the invoice discounting facility due to debtor
concentration.
Current Trading and Outlook
The delayed orders from the second half of 2007 are now materialising. After
the year end, Appian won a �540,000 contract with a major national police force
in the UK to install a new ANPR system, capable of processing in excess of 20
million vehicle licence plates per day. This contract is the first phase of a
larger two-phase contract, which is expected to be completed within 12 months.
We also won two contracts with major UK police forces in the south and north of
England worth a total of �410,000. These comprised a �260,000 order to install
our ANPR technology at a number of strategic fixed sites in the south of England
and a �150,000 order for a fixed site ANPR system for a major city police force
in the north of England. We also recently announced two further orders
totalling �350,000 to supply ANPR technology to a UK military base and a
prestigious Middle Eastern hotel.
With our addressable markets expanding and showing strong potential, a wider
product portfolio and more focused business, the Board is confident that Appian
can capitalise on its position as a leading internationally recognised brand in
ANPR and traffic management and deliver significantly enhanced sales. Whilst
the timing of the receipt of large orders will always be an issue for us, I
believe that 2008 will prove a pivotal year for the Group as successful trials
are converted into real contracts. I am therefore confident that the
initiatives we implemented during 2007 will have a positive impact on Appian
during 2008 and look forward to regularly updating shareholders with positive
news flow.
Pat Ryan
Executive Chairman
4 March 2008
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year Ended 30 September 2007
2007 2007 2006 restated 2006 restated
� � � �
Notes
Turnover 4,775,548 5,150,135
Cost of sales (2,883,089) (2,453,602)
Gross profit 1,892,459 2,696,533
(4,476,695) (2,648,739)
Other operating expenses
FRS 20 Share Charge (224,355) (100,967)
Depreciation (42,833) (20,537)
Amortisation of goodwill and
intangible assets (15,240) (5,574)
Operating expenses (4,759,123) (2,775,817)
Operating loss (2,866,664) (79,284)
Impairment of investments (101,425) -
Interest receivable 51,495 54,446
Interest payable (96,023) (58,351)
Loss on ordinary activities (3,012,617) (83,189)
before taxation
Taxation 2 47,371 88,654
(Loss)/profit for the financial (2,965,246) 5,465
year
Basic and diluted (loss)/profit 3 (0.02) 0.0001
per ordinary 1p share
There were no recognised gains or losses in the financial year other than those
dealt with in the profit and loss account. Accordingly, no statement of total
recognised gains and losses is prepared.
CONSOLIDATED BALANCE SHEET
As at 30 September 2007
2007 2006 restated
Notes � �
Fixed assets
Intangible assets 4 2,001,153 2,247,024
Tangible assets 167,474 60,622
Investments 101,425 -
2,270,052 2,307,646
Current assets
Stock 711,324 837,953
Debtors 5 1,727,662 2,630,486
Cash at bank and in hand 70,589 2,768,412
2,509,575 6,236,851
Creditors - Amounts falling due within one year 6 (2,743,174) (3,270,934)
Net current (liabilities)/assets (233,599) 2,965,917
Total assets less current liabilities 2,036,453 5,273,563
Creditors - Amounts falling due after more than one year (247,921) (847,816)
Net assets 1,788,532 4,425,747
Capital and reserves
Called up share capital 7 1,528,550 1,506,550
Share premium account 8 10,372,023 10,290,347
Merger reserve 8 623,432 623,432
FRS 20 share reserve 8 375,629 151,274
Profit and loss account 8 (11,111,102) (8,145,856)
Shareholders' funds 9 1,788,532 4,425,747
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 September 2007
2007 2006
Notes � �
Net cash outflow from operating activities 10 (1,658,713) (1,369,382)
Return on investments and servicing of finance 11 (44,528) (3,905)
Taxation 47,371 88,654
Capital expenditure and financed investments 12 (815,604) (152,457)
Acquisitions and disposals 13 (300) (622,215)
Cash outflow before financing (2,471,774) (2,059,305)
Financing 14 298,029 4,078,104
(Decrease)/increase in cash in the year 15 (2,173,745) 2,018,799
Notes to the Financial Statements
1 Accounting Policies
Historical Cost Convention
The financial statements are prepared on the going concern basis, under the
historical cost convention and in accordance with the Companies Act 1985 and
applicable standards.
Basis of Preparation
The financial statements have been prepared in accordance with accounting
standards generally accepted in the United Kingdom and under UK GAAP (UK statute
comprising the Companies Act, 1985).
The principal accounting policies are set out below. The policies have remained
unchanged from the previous year except that in preparing the financial
statements for the current period, the Group has adopted FRS 20 "share-based
payment". The effect of this change in policy on the prior year financial
statements is to increase the operating expenses by �100,967, thus reducing the
profit for the year. A corresponding amount has been credited to a share option
reserve in accordance with FRS 20, together with a restatement of the opening
reserves at 1 October 2005 of �50,307.
As an AIM Listed Company, the Group must adopt IFRS for accounting periods
commencing on or after 1 January 2007. The Group is considering the impact of
IFRS in the meantime and reporting where appropriate.
FRS 20 ''Share-based payment''
The Group issues share options to its employees under two schemes: the 2000
Executive Share Option Scheme ("SOS") and under an Enterprise Management
Incentives Plan ("EMI"). The Group also issues warrants to its directors. In
accordance with FRS 20, the charges for these share options and warrants are
measured at fair value at date of grant, using the Monte Carlo pricing model for
the warrants and the SOS plan and the binomial pricing model for the EMI plan.
The fair value is then expensed on a straight line basis over the vesting
period, based on the Group's estimate of the number of shares that will
eventually vest, updated at each Balance Sheet date for options that have lapsed
or been exercised. All options and warrants are equity-settled.
Going Concern
The financial statements have been prepared on the going concern basis which
assumes that the parent company and its subsidiaries will continue in
operational existence for the foreseeable future.
In December 2007 the company raised �1,390,000 net of expenses, through the
placing of 36,913,700 ordinary shares of �0.01 each for a cash price of �0.04
each to institutional and other investors. The proceeds which were received by
12 December 2007 will be used for working capital.
The directors have prepared projections to March 2009 reflecting current market
conditions and execution of a planned reduction in the cost base. These
projections are based on assumptions about sales growth and new business which
by their nature are subject to uncertainty as to the precice timing of the
expected improvement. The directors consider that, given the cash received in
the form of equity and the bank facilities available, the financial projections
are achievable.
The auditors have included an emphasis of matter statement with regard to going
concern in their unqualified auditor's report. See note 16 for further details.
2 Taxation
2007 2006
� �
(a) Analysis of Credit in Period:
Taxation credit 47,371 88,654
The tax credit arises on research and development.
(b) Factors Affecting Tax Credit for Period
2007 2006 restated
� �
Loss on ordinary activities before tax (3,012,617) (83,189)
Loss on ordinary activities multiplied by standard rate of corporation tax in the (903,785) (24,957)
UK of 30% (2006: 30%)
Expenses not deductible for tax purposes 17,643 67,065
Depreciation for period in excess of capital allowances 12,795 (3,101)
Utilisation of group tax losses (254,378) (39,995)
Tax losses carried forward 1,127,725 988
Corporation tax credit for prior year 2,809 -
Research and development tax credit for the prior year 44,562 88,654
Total current taxation (a) 47,371 88,654
The Group has carried forward tax losses of �5,600,000 (2006: �3,600,000). The
Group has not recognised any deferred tax asset in respect of these losses or
accelerated capital allowances due to there being insufficient certainty
regarding their recovery.
3 (Loss)/Profit Per Ordinary 1p Share
2007 2006 restated
(Loss)/profit after taxation - � (2,965,246) 5,465
Weighted average number of ordinary shares in issue during the 147,188,146 105,978,955
year
(Loss)/profit per ordinary 1p share - � (0.02) 0.0001
(Loss)/profit per share has been calculated on the "net basis".
Diluted earnings per share takes account solely of the potential future exercise
of share options and warrants granted and is based on a weighted number of
shares in issue of 148,098,146 (2006: 109,906,422). Diluted earnings per share
has the same value as earnings per share when rounded to three decimal places.
Due to the Group's loss for the year the diluted loss per share is the same as
the basic loss per share. The loss per share is wholly attributable to
continuing operations.
4 Intangible Assets Research
Goodwill and Software Total
development
� � � �
Cost
At 30 September 2006 2,060,201 192,397 19,642 2,272,240
Additions 300 463,069 - 463,369
Adjustment to deferred consideration (694,000) - - (694,000)
At 30 September 2007 1,366,501 655,466 19,642 2,041,609
Amortisation
At 30 September 2006 - 5,574 19,642 25,216
Charge for the year - 15,240 - 15,240
At 30 September 2007 - 20,814 19,642 40,456
Net Book Value
At 30 September 2006 2,060,201 186,823 - 2,247,024
At 30 September 2007 1,366,501 634,652 - 2,001,153
The adjustment to deferred consideration of �694,000 relates to the purchase of Genesis UK Limited in 2006.
Under the terms of the acquisition no further consideration is now due as certain targets were not achieved.
Accordingly the creditor has been written back and the related goodwill reduced by the same amount
5 Debtors
2007 2006
� �
Trade debtors 828,468 2,148,671
Called up share capital not paid (note 7) 37,500 37,500
Prepayments and accrued income 826,771 413,642
Other debtors 34,923 30,673
1,727,662 2,630,486
6 Creditors - Amounts falling due within one year 2007 2006
� �
Bank overdraft 555,068 1,067,230
Trade creditors 1,053,409 1,224,015
Social security and other taxes 207,235 278,431
Other creditors 9,275 9,928
Deferred consideration 38,192 38,192
Accruals and deferred income 732,163 630,102
Convertible unsecured loan notes 87,457 -
2,743,174 3,270,934
The issued convertible unsecured loan notes attract interest at seven per cent per annum and are convertible into
ordinary shares at an exercise price of seven pence.
To date the loan note holders have not opted to convert but have agreed for them to be repaid over a 12 month period.
7 Called Up Share Capital 2007 2007 2006 2006
Number � Number �
Authorised:
Ordinary shares of �0.01 each 250,000,000 2,500,000 250,000,000 2,500,000
Redeemable preference shares of
�1 each 50,000 50,000 50,000 50,000
250,050,000 2,550,000 250,050,000 2,550,000
Called Up Share Capital
Ordinary shares of �0.01 each 147,854,995 1,478,550 145,654,995 1,456,550
Redeemable preference shares of
�1 each 50,000 50,000 50,000 50,000
147,904,995 1,528,550 145,704,995 1,506,550
Called Up and Fully Paid:
Ordinary shares of �0.01 each 147,854,995 1,478,550 145,654,995 1,456,550
Redeemable preference shares of
�1 each 12,500 12,500 12,500 12,500
147,867,495 1,491,050 145,667,495 1,469,050
Preference Share Capital
The redeemable preference shares rank pari passu for participation in the
profits and assets of the Company and entitle the holders to receive notice of
and to attend and vote at any general meeting of the Company.
The Company may at any time give not less than 24 hours previous notice in
writing to the holders of the redeemable preference shares of its intention to
redeem all or any part of these shares which have been issued and are fully paid
up on in so far as they are paid up.
The redeemable preference shares can only be redeemed out of distributable
profits or from the proceeds of a fresh issue of shares made for the purposes of
the redemption.
Appian Technology plc issued 50,000 redeemable preference shares in July 2000 on
incorporation of the Company.
Ordinary Share Capital
During January 2007, 2,000,000 warrants were exercised at a price of �0.05 per
ordinary share, with the Group receiving a total consideration of �100,000.
During June 2007, a further 200,000 warrants were exercised at a price of �0.05
per ordinary share, with the Group receiving a total consideration of �10,000.
8 Reserves
Share FRS 20 Merger Profit and Share FRS 20 Merger Profit and
premium Reserve Reserve loss account premium Reserve Reserve loss
account account account
2007 2007 2007 2007 2006 2006 2006 2006
restated restated
� � � � � � � �
Group
Balance at
beginning
of year 10,290,347 151,274 623,432 (8,145,856) 6,949,675 50,307 - (8,151,321)
Retained
profit/
(loss)
for the
year - - - (2,965,246) - - - 5,465
Arising
from
issues of
shares in
the year 81,676 - - - 4,098,183 - 623,432 -
FRS Share
Charge - 224,355 - - - 100,967 - -
Expenses
of equity
share - - - - (757,511) - - -
issues
Balance at 10,372,023 375,629 623,432 (11,111,102) 10,290,347 151,274 623,432 (8,145,856)
end of
year
The merger reserve arose on the acquisition of Genesis (UK) Limited. The merger reserve resulted from issue of
7,556,757 shares in the consideration of the purchase of Genesis and the premium that arose on those shares. These
shares were issued at �0.0925.
9 Reconciliation of Movements in Shareholders' Funds 2007 2006 restated
� �
Shareholders' funds/(deficit) at beginning of year 4,425,747 (494,864)
(Loss)/profit for the financial year (2,965,246) 5,465
Share capital issued 22,000 850,075
Net share premium from issued shares 81,676 3,964,104
FRS 20 share charge 224,355 100,967
Shareholders' funds at end of year 1,788,532 4,425,747
10 Reconciliation of Operating Loss to Net Cash Outflow From Operating
Activities 2007 2006 restated
� �
Operating loss (2,866,664) (79,284)
Depreciation 42,833 20,537
Amortisation of intangible assets 15,240 5,574
FRS 20 share charge 224,355 100,967
Decrease/(Increase) in debtors 902,824 (1,116,952)
Decrease/(Increase) in stocks 126,629 (59,793)
Decrease in creditors (103,930) (240,431)
Net cash outflow from operating activities (1,658,713) (1,369,382)
11 Returns on Investment and Servicing of Finance
2007 2006
� �
Interest received 51,495 54,446
Interest paid (63,396) (55,533)
Finance lease interest paid (32,627) (2,818)
Net cash outflow from returns on investment and servicing of (44,528) (3,905)
finance
12 Capital Expenditure and Financial Investment
2007 2006
� �
Payments to acquire investments (202,850) -
Receipts from disposal of tangible fixed assets - 417
Payments to acquire tangible fixed assets (149,685) (22,036)
Payments to acquire intangible fixed assets (463,069) (130,838)
Cash outflow from capital expenditure and financial investments (815,604) (152,457)
13 Acquisitions and Disposals
2007 2006
� �
Purchase of subsidiary (300) (755,905)
Bank balances acquired on purchase of subsidiary - 161,856
Bank overdrafts acquired on purchase of subsidiary - (28,166)
Net cash outflow from acquisitions and disposals (300) (622,215)
14 Financing
2007 2006
� �
Proceeds from share issue 103,676 4,872,690
Share issue costs - (757,511)
Finance lease receipts 242,360 -
Capital element of finance lease repayments (48,007) (37,075)
Net cash inflow from financing 298,029 4,078,104
15 Reconciliation of Net Cashflow to Movement in Net (Debt)/Funds
2007 2006
� �
(Decrease)/increase in cash in the year (2,173,745) 2,018,799
Inception of finance leases (242,360) (8,893)
Repayments of finance leases 48,007 37,075
Movement in net (debt)/funds in year (2,368,098) 2,046,981
Net funds/(debt) at beginning of year 1,659,880 (387,101)
Net (debt)/funds at end of year (708,218) 1,659,880
16 Publication of non statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The consolidated balance sheet at 30 September 2007 and the consolidated profit
and loss account, consolidated cash flow statement, and associated notes for the
year then ended have been extracted from the Group's 2007 statutory financial
statements upon which the auditors opinion is unqualified and does not include
any statement under Section 237 of the Companies Act 1985.
The auditors have included an emphasis of matter statement with regard to going
concern in their unqualified auditor's report. They have considered the adequacy
of the disclosure made in the Directors' Report and accounting policies
concerning the group's ability to continue as a going concern. The group
suffered losses of �3m during the year ended 30 September 2007 and, at that
date, the group's current liabilities exceeded its current assets by �234,000.
However ,the directors believe that the forecasts they have prepared for the
period ending 31 March 2009, which indicate an improvement in trading and return
to profitability (together with available funding), enable them to form an
opinion that the group can continue as a going concern for the foreseeable
future. As explained in the accounting policies, there is material uncertainty
over the timing of forecast sales growth which may cast doubt over the group's
ability to continue as a going concern. The financial statements do not include
the adjustments that would result if the group was unable to continue as a going
concern. Their audit opinion is not qualified in respect of this matter.
Those financial statements have not yet been delivered to the registrar of
companies.
FOR ENQUIRIES
Pat Ryan Appian Technology plc Tel: 01628 554750
Hugo de Salis St Brides Media and Finance Limited Tel: 020 7242 4477
This information is provided by RNS
The company news service from the London Stock Exchange
END
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