Digital Barriers PLC : Half Yearly Report

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28 November 2013

Digital Barriers plc

("Digital Barriers" or the "Group")

Interim Results for the six months ended 30 September 2013

Digital Barriers (LSE AIM: DGB), the specialist provider of advanced surveillance technologies to the international homeland security and defence markets, announces unaudited results for the six months ended 30 September 2013.

Key Highlights

·      Group revenues increased 12% to £9.0m (2012: £8.1m) in the six-month period to 30 September 2013, with international product revenues increasing 36% and exports now accounting for 33% of Group revenues (2012: 27%).

·      The Group raised £18.0m (net of placing costs) through the issue of new ordinary shares on 4 November 2013 to further implement its stated strategy and address its working capital requirements.

·      The Group has seen significant interest for its RDC ground sensors during the period, including a £2.3m contract extension with a UK customer and its first major overseas sale in the form of an initial £1.0m contract with an Asia Pacific government customer.

·      The Group is also continuing to see increasing exports of its TVI video surveillance platform, with sales to 18 countries during the period, including its second major US federal agency and OEM arrangements with both SingTel and BT Redcare.

Commenting on the results, Tom Black, Executive Chairman of Digital Barriers, said:

"We are delivering increased sales momentum overseas with exactly those flagship customers we sought to secure since establishing the Group. We track this strategic sales momentum around the world and we continue to see increasing demand across each of our regions, with our world-class TVI and RDC technologies seeing especially strong interest across major government and commercial customers. This is the best indicator of the future potential of the Group. The recent share placing also demonstrated the excellent ongoing support we have from existing shareholders and attracted significant new investors into the Group. Both the traction of our disruptive technologies and the ongoing shareholder support, reaffirm my confidence in the longer-term prospects for the Group"

For further information please contact:
Digital Barriers plc	[phone]
Tom Black, Executive Chairman
Colin Evans, Managing Director
Zak Doffman, Managing Director
Investec Investment Banking	[phone]
Andrew Pinder / Dominic Emery / Patrick Robb
FTI Consulting	[phone]
Edward Bridges / Matt Dixon / Elodie Castagna

About Digital Barriers

Digital Barriers provides advanced surveillance technologies to the international homeland security and defence markets, specialising in 'edge-intelligent' solutions that are designed for remote, hostile or complex operating environments. We work with governments, multinational corporations and system integrators in the defence, law enforcement, critical infrastructure, transportation and natural resources sectors. Our surveillance technologies have been successfully proven on some of the most demanding operational and environmental deployments around the world.

Chairman's Statement

Introduction

This period has been characterised by several strategically important international contract wins where initial sales value is modest but with the potential for very significant follow-on orders with each of these organisations over the next few years. We have sold into 30 countries during the period and the 36% increase in international product revenues, which made up 33% of Group revenues in the period, was very encouraging.

During the period, we secured the sale of our TVI video technology as an enterprise solution into a second US federal agency and received an initial order for unattended ground sensors valued at £1.0m into a high-profile border protection programme in the Asia Pacific region. This is typical of what we are seeing with other sales to international governments because the initial order has been many months in gestation with our technology coming through several extensive and competitive trials to secure its position on a very significant national-level programme.

We continue to experience greater levels of seasonality than originally envisaged which is exacerbating the peaks and troughs of our sales and delivery cycles. This, combined with the need to purchase and integrate third-party equipment into large-scale solutions built around Digital Barriers' intellectual property for delivery to customers, places increased demands on our cash resources. Therefore on 4 November we raised an additional £18.0m (net of placing costs) from existing and new shareholders.

Our Services business continues to operate in the UK only. The focus of this division remains the provision of integration services for government departments, which has been a challenging sector given the current spending climate in the UK. This has inevitably led to revenues from our Services division declining in the period, although we are now seeing material interest from customers within our Services division in technology offerings such as TVI video streaming solutions.

Our very clear focus is on developing our international product revenues and, in the short to medium term, our growth will continue to be built on the significant market traction we are seeing for RDC and TVI, whilst ThruVision remains a compelling medium-term opportunity.

RDCUnattended Ground Sensors

The Group is seeing significant customer interest around the world for its fully integrated unattended ground sensor solution, and is actively engaged in discussions or trials with customers across twelve countries for major defence and border protection programmes. Highlights include:

·      In July 2013 the Board announced a contract extension valued at £2.3m with a UK-based customer for its fully integrated unattended ground sensor solution.

·      In September 2013 it announced its first significant overseas sale of the same technology, with an initial contract award valued at £1.0m for the protection of a high-profile border in the Asia Pacific region.

·      The Group has also recently made its first sale of this technology into a major US defence customer, with the successful trial of the technology followed by an initial order valued at £0.1m.

·      The technology has been selected for trial by an oil and gas multinational as part of a major facility protection programme in the Middle East.

The Board believes that this international traction is indicative of the significant demand the Group can generate for this technology solution around the world.

TVI Video Surveillance Platform

The Group has continued to export its world-class TVI video surveillance platform internationally and has sold the technology into eighteen countries during the period, highlights include:

·      Following the announcement in January 2013 that the Group had won a contract with a US federal agency for the development of a high-definition version of its core TVI video streaming technology, the Group has in the period secured an enterprise-grade TVI sale into its second US federal agency, with an initial contract valued at £0.2m for TVI products, including the Group's first enterprise sale of TVI encoding software to run on iOS devices operated by frontline law enforcement agents. The opportunity for the TVI surveillance platform to be deployed across defence and law enforcement sectors is now well established, and the Group is focused on securing initial enterprise grade TVI sales that can lead to significant follow-on orders over the coming years.

·      The Group now has TVI solutions that operate on its own hardware, on iOS and Android devices, and embedded in third-party products. During the period, the Group launched a variant of TVI technology to work with IP cameras, opening up significant new markets and the high-definition version of TVI is scheduled to launch in late 2013. TVI has also been successfully tested with a potential customer organisation in the Middle East on 4G/LTE networks during the period.

·      In addition to the core TVI video streaming technology, the Group is now working to integrate key technologies from its acquired companies onto the TVI platform to significantly enhance the functionality of its products. This includes real-time video content analytics and facial recognition capabilities that the Group is adapting to operate on its own surveillance products and on smartphones.

·      The Group's OmniPerception technology, acquired in January 2013, is now being adapted to operate as an embedded technology on platforms including TVI devices, smartphones and IP cameras. The Board believes this represents a larger opportunity than marketing facial recognition technology on specialist dedicated hardware and will significantly increase the market potential for such technology.

·      Following the announcement at the beginning of the period that SingTel had selected TVI as the delivery platform for its video surveillance as a service ("VSaaS") offering, the Group is now actively working with SingTel to support their sales efforts into their enterprise customers. In August 2013, the Group announced that it would also supply BT Redcare, the UK's largest provider of CCTV surveillance infrastructure and alarm signalling, with TVI products on an OEM basis. The Group is now developing specifically adapted TVI products for this OEM reseller market; it is expected that these products will be launched early in 2014.

·      The Group is actively engaged in discussions with multiple mobile network operators around potential TVI reseller arrangements under similar annuity revenue models. The Board believes that the Group can generate significant revenues in the medium to long term by productising and selling its IP through multinational technology and telecoms organisations. As with the Group's sales into government customers, the pattern of modest initial sales with the potential for very significant follow-on revenues in later years also applies here.

·      The Group announced in October, post period end, the sale of its first video management solution into a major public transportation network in the Asia Pacific region. The contract, valued at approximately £0.75m, is expected to be fulfilled during the course of this financial year and next, and lead to follow-on orders with the same customer. The contract represents a significant early reference for the Group's newly launched video management capabilities within the transportation sector.

ThruVision Passive People Screening

The Group has made positive progress in the period with its ThruVision technology. This remains an early stage technology and the Group continues to further develop and promote it within sectors where the Board believes there is short to medium term sales potential. Highlights in the period include:

·      Successfully delivering the significant customs sale into Asia Pacific that was announced last year. This system is now fully operational and further sales are expected to the same customer.

·      The force protection sector has continued to show great interest in our ThruVision technology as part of some larger technology deployment programmes.

·      ThruVision has been trialled successfully by one of the UK's largest retail organisations to reduce shrinkage within its distribution centres, and the customer now anticipates a wider deployment.

Financials

Group

Revenue in the period was £9.0m (2012: £8.1m), generating a gross profit of £3.8m (2012: £3.7m) and margin of 42% (2012: 46%). The lower gross margin is due to both product mix as well as a low margin in the Services division, in line with expectations and is forecast to increase in the second half. The adjusted loss before tax was £(6.8)m (2012: £(5.0)m) and on an unadjusted basis was £(7.2)m (2012: £(7.1)m). The increased adjusted loss is driven by higher Corporate overheads at £(4.6)m (2012: £(3.3)m), reflecting strategic investment in sales and marketing, some additional central overheads and an increased charge for LTIPs.

Revenue

Product revenue in the period increased 12% to £7.3m (2012 pro forma1: £6.5m), driven by TVI and RDC, which in combination grew 255% to £3.9m (2012: £1.1m). Services revenue in the period contracted 30% to £1.7m (2012: £2.4m), reflecting a tightening in UK government spending and longer sales lead times.

Export product revenue accounted for 33% of Group revenue (2012: 27%), the majority of which was to Asia Pacific and North America.

1Assuming all prior period acquisitions occurred on 1 April 2012 and excluding all current year acquisitions.

Cash

The Group ended the period with a £1.1m cash balance (31 March 2013: £5.5m). Net cash outflow from operating activities was £(3.9)m including a £2.1m working capital inflow less £(6.0)m of other operating flows, primarily cash loss before tax. The other £(0.5)m of outflows is mostly capital expenditure and payments of deferred consideration.

The working capital inflow is driven by a £6.0m decrease in trade and other receivables, reflecting an unwind of the significant £13.2m 31 March 2013 balance caused by high March 2013 monthly revenues. Trade and other payables decreased £(1.9)m, also impacted by the high March 2013 revenues, whilst inventory increased by £(2.0)m.

Outlook

With our technology solutions seeing strong international sales momentum, the outlook for the future prospects of the Group is increasingly compelling as it continues to deliver very strong overseas sales growth and moves towards break-even.

The Board remains comfortable with its expectations for this financial year.

Independent review report to Digital Barriers plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 September 2013 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows, and related notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standards 34, "Interim Financial Reporting," as adopted by the European Union and the AIM Rules issued by the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standards 34, "Interim Financial Reporting," as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 September 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP

London

27 November 2013

DIGITAL BARRIERS PLC

Consolidated income statement

for the six months ended 30 September 2013

		6 months ended		6 months ended	Year ended
		30 September 2013		30 September 2012	31 March 2013
		Unaudited		Unaudited	Audited
	Note	£'000		£'000	£'000
Revenue	2	9,009		8,078	23,272
Cost of sales		(5,223)		(4,353)	(13,322)
Gross profit		3,786		3,725	9,950
Administration costs		(11,490)		(10,299)	(20,823)
Other income		489		647	1,484
Other costs		-		(1,087)	(1,336)
Operating loss

The results for the period and the prior period are derived from continuing activities

DIGITAL BARRIERS PLC

Consolidated statement of comprehensive income

for the six months ended 30 September 2013

		6 months ended		6 months ended	Year ended
		30 September 2013		30 September 2012	31 March 2013
		Unaudited		Unaudited	Audited
	Note	£'000		£'000	£'000
Loss for the period / year		(6,900)		(6,644)	(9,916)
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Exchange differences on retranslation of foreign operations		(27)		13	25
Net other comprehensive income to be reclassified to profit or loss in subsequent periods		(27)		13	25
Total comprehensive loss attributable to owners of the parent		(6,927)		(6,631)	(9,891)

DIGITAL BARRIERS PLC

Consolidated balance sheet

at 30 September 2013

			30 September 2013		30 September 2012	31 March 2013
			Unaudited		Unaudited	Audited
	Note		£'000		£'000	£'000
Assets
Non current assets
Property, plant and equipment			1,245		1,197	1,370
Goodwill			24,647		21,880	24,647
Other intangible assets			4,931		5,986	5,828
			30,823		29,063	31,845
Current assets
Inventories			3,743		2,896	1,779
Trade and other receivables			7,261		5,523	13,239
Current tax recoverable			1,102		761	972
Cash and cash equivalents			1,145		7,258	5,544
			13,251		16,438	21,534
Total assets			44,074		45,501	53,379
Equity and liabilities
Attributable to owners of the parent
Equity share capital	6		510		438	510
Share premium			57,989		48,012	57,989
Capital redemption reserve			4,735		4,735	4,735
Merger reserve			454		454	454
Translation reserve			(248)		(233)	(221)
Other reserves			(307)		(307)	(307)
Retained earnings			(23,904)		(14,177)	(17,267)
Total equity			39,229		38,922	45,893
Non current liabilities
Deferred tax liabilities			305		184	363
Financial liabilities			207		1,031	202
			512		1,215	565
Current liabilities
Trade and other payables			4,115		4,170	6,038
Financial liabilities			218		1,194	883
			4,333		5,364	6,921
Total liabilities			4,845		6,579	7,486
Total equity and liabilities			44,074		45,501	53,379

DIGITAL BARRIERS PLC

Consolidated statement of changes in equity

for the 6 months ended 30 September 2013

	Share capital	Share premium account	Capital redemption reserve	Merger reserve	Translation reserve	Other reserves	Profit and loss reserve	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2012	437	48,012	4,735	348	(246)	(307)	(7,687)	45,292
Total comprehensive income / (loss)	-	-	-	-	13	-	(6,644)	(6,631)
Share-based payment credit	-	-	-	-	-	-	154	154
Issue of shares regarding the acquisition of Keeneo	1	-	-	106	-	-	-	107
At 30 September 2012	438	48,012	4,735	454	(233)	(307)	(14,177)	38,922
Total comprehensive income / (loss)	-	-	-	-	12	-	(3,272)	(3,260)
Share-based payment credit	-	-	-	-	-	-	182	182
Share issue cost	-	(351)	-	-	-	-	-	(351)
Share placement	72	10,328	-	-	-	-	-	10,400
At 31 March 2013	510	57,989	4,735	454	(221)	(307)	(17,267)	45,893
Total comprehensive loss for the period	-	-	-	-	(27)	-	(6,900)	(6,927)
Share-based payment credit	-	-	-	-	-	-	263	263
At 30 September 2013	510	57,989	4,735	454	(248)	(307)	(23,904)	39,229

DIGITAL BARRIERS PLC

Consolidated statement of cash flows

for the 6 months ended 30 September 2013

		6 months ended	6 months ended	Year ended
		30 September 2013	30 September 2012	31 March 2013
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Operating activities
Loss before tax		(7,234)	(7,061)	(10,756)
Non-cash adjustment to reconcile loss before tax to net cash flows
	Depreciation of property, plant and equipment	394	318	771
	Amortisation of intangible assets	929	1,168	2,102
	Impairment of intangible assets	-	1,087	1,336
	Share-based payment transaction expense	263	154	336
	Release of deferred consideration	(260)	(647)	(678)
	Reassessment of deferred consideration	(229)	-	(805)
	Disposal of fixed assets	(2)	-	226
	Finance income	(1)	(15)	(69)
	Finance costs	20	62	100
Working capital adjustments:
	Decrease / (increase) in trade and other receivables	5,966	1,260	(6,096)
	(Increase) / decrease in inventories	(1,964)	(959)	351
	Decrease in trade and other payables	(1,937)	(2,637)	(1,163)
Cash utilised in operations		(4,055)	(7,270)	(14,345)
Tax received		146	81	275
Net cash flow from operating activities		(3,909)	(7,189)	(14,070)
Investing activities
Sale of property, plant & equipment		2	-	-
Purchase of property, plant & equipment		(269)	(616)	(1,453)
Expenditure on intangible assets		(32)	(33)	(97)
Acquisition of subsidiaries		-	(144)	(3,349)
Payment of deferred consideration		(188)	(60)	(822)
Acquisition of cash and cash equivalents of subsidiaries		-	-	(41)
Interest received		1	15	69
Net cash flow from investing activities		(486)	(838)	(5,693)
Financing activities
Proceeds from issue of shares		-	-	10,400
Share issue costs		-	-	(351)
Interest paid		(3)	-	-
Net cash flow from financing activities		(3)	-	10,049
Net decrease in cash and cash equivalents		(4,398)	(8,027)	(9,714)
Cash and cash equivalents at beginning of period / year		5,544	15,289	15,289
Effect of foreign exchange rate changes on cash and cash equivalents		(1)	(4)	(31)
Cash and cash equivalents at end of period / year		1,145	7,258	5,544

DIGITAL BARRIERS PLC

Notes to the financial statements

for the 6 months ended 30 September 2013

1. Accounting policies

Basis of preparation

The consolidated interim financial statements include those of Digital Barriers plc and all of its subsidiary undertakings (together "the Group") drawn up at 30 September 2013, and have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" ("IAS 34") as adopted for use in the European Union ("EU"). The consolidated interim financial statements have been prepared using accounting policies and methods of computation consistent with those applied in the financial statements for the period ended 31 March 2013. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within its current level of cash reserves of £1.1m, as at 30 September 2013, and the equity fund raise of £18.0m, net of expenses, received on 4 November 2013. The Directors have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future, and for this reason they have adopted the going concern basis in these consolidated interim financial statements.

The annual consolidated financial statements of the Group are prepared on the basis of International Financial Reporting Standards ("IFRS"). The consolidated interim financial statements are presented on a condensed basis as permitted by IAS 34 and therefore do not include all the disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the most recent Annual Report and Accounts which were approved by the Board of Directors on 28 May 2013 and have been filed with Companies House. The condensed interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and are unaudited for all periods presented. The financial information for the 12 month period ended 31 March 2013 is extracted from the financial statements for that period. The auditors' report on those financial statements was unqualified and did not contain an emphasis of matter reference and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

The following new and revised international financial reporting standards are effective for this interim period:

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1.Effective for annual periods beginning on or after 1 July 2012. IAS 1 changes the grouping of items presented in OCI. Items that could be reclassified to profit and loss at a future point in time are presented separately from items that will never be reclassified. This amendment will affect presentation in these financial statements.

IFRS 13 Fair Value Measurement.Effective for annual periods beginning on or after 1 January 2013. IFRS 13 provides guidance on how to measure fair value, but does not change when fair value is required or permitted under IFRS. The standard is not expected to significantly affect the Group's results or financial position.

2. Segmental information

The Group is organised into the Services and Products divisions for internal management, reporting and decision-making, based on the nature of the products and services of the Group's businesses. These are the reportable operating segments in accordance with IFRS 8 "Operating Segments". As the Group continues to develop and change, the Directors closely monitor these reporting operating segments to ensure they remain relevant to the management of the Group.

	6 months ended 30 September 2013				6 months ended 30 September 2012
	Services	Products	Total		Services	Products	Total
	Unaudited	Unaudited	Unaudited		Unaudited	Unaudited	Unaudited
	£'000	£'000	£'000		£'000	£'000	£'000
Total segment revenue	1,672	7,414	9,086		2,395	5,926	8,321
Inter-segment revenue	-	(77)	(77)		-	(243)	(243)
Revenue	1,672	7,337	9,009		2,395	5,683	8,078
Segment operating (loss) / profit	(290)	(1,904)	(2,194)		150	(1,808)	(1,658)
Corporate overheads			(4,626)				(3,324)
Net adjusted loss items (see note 3)			(395)				(2,032)
Operating loss			(7,215)				(7,014)
Finance income			1				15
Finance costs			(20)				(62)
Loss before tax			(7,234)				(7,061)
Income tax			334				417
Loss for the period			(6,900)				(6,644)

	Year ended 31 March 2013
	Services	Products	Total
	Audited	Audited	Audited
	£'000	£'000	£'000
Total segment revenue	6,289	17,324	23,613
Inter-segment revenue	-	(341)	(341)
Revenue	6,289	16,983	23,272
Segment operating profit / (loss)	735	(1,455)	(720)
Corporate overheads			(6,886)
Net adjusted loss items (see note 3)			(3,119)
Operating loss			(10,725)
Finance income			69
Finance costs			(100)
Loss before tax			(10,756)
Income tax			840
Loss for the year			(9,916)

3. Adjusted loss before tax

An adjusted loss before tax measure has been presented as the Directors believe that this is a more relevant measure of the Group's underlying performance. Adjusted loss is not defined under IFRS and has been shown as the Directors consider this to be helpful for a better understanding of the performance of the Group's underlying business. It may not be comparable with similarly titled measurements reported by other companies and is not intended to be a substitute for, or superior to, IFRS measures of profit. The net adjustments to loss before tax are summarised below:

	6 months ended	6 months ended	Year ended
	30 September 2013	30 September 2012	31 March 2013
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Amortisation of intangibles initially recognised on acquisition	867	1,123	2,029
Acquisition costs	-	35	369
Adjustments to deferred consideration (i)	(472)	(585)	(1,384)
Impairment of intangible assets	-	1,087	1,336
Reorganisation costs	-	372	769
Total adjustments	395	2,032	3,119

(i)          The final financial target was not met in relation to the Zimiti acquisition, resulting in the release of £260,000 of deferred consideration. The potential deferred consideration in respect of the Visimetrics acquisition has been reassessed with reference to performance to date and future expectations resulting in a reduction to the short term deferred consideration of £229,000. The longer term fair value of deferred consideration of £207,000 is unchanged. These amounts were offset by the unwind of the discount on deferred consideration of £17,000.

4. Loss per share

The basic loss per share is calculated on the loss after tax and the weighted average number of shares in issue during the period.

The basic adjusted loss per share is calculated on the adjusted loss after tax and the weighted average number of shares in issue during the period.

Diluted earnings per share measures are calculated using the same number of shares as the basic loss per share measures, as the inclusion of potential Ordinary Shares arising from share options and Incentive Shares in issue would be anti-dilutive.

The following reflects the loss and share data used in the basic and diluted loss per share calculations:

	6 months ended	6 months ended	Year ended
	30 September 2013	30 September 2012	31 March 2013
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Loss after tax	(6,900)	(6,644)	(9,916)
Amortisation of acquired intangible assets, net of tax	815	1,044	1,658
IPO, placing and deal costs	-	35	369
Adjustments to deferred consideration	(472)	(585)	(1,384)
Impairment of intangibles, net of tax	-	936	1,015
Reorganisation costs	-	372	769
Adjusted loss after tax	(6,557)	(4,842)	(7,489)
Weighted average number of shares	50,963,166	43,776,498	45,530,712
Basic and diluted loss per share	(13.54p)	(15.18p)	(21.78p)
Basic and diluted adjusted loss per share	(12.87p)	(11.06p)	(16.45p)

5. Business combinations

Business combinations during the 6 months ended 30 September 2013

There have been no acquisitions by the Group in the 6 months ended 30 September 2013.

Business combinations during the 12 months ended 31 March 2013

On 23 April 2012, the Group acquired the complete product set and intellectual property, along with certain customer contracts, of Enterprise Technologies (UK) Limited ("E-Tech"). The initial cash consideration paid on completion was £149,000. In addition, deferred consideration of £200,000 has been paid.

On 4 January 2013, the Group acquired 100% of the voting equity interests in Visimetrics (UK) Limited ("Visi") including its subsidiary OmniPerception Limited. The initial cash consideration paid on completion was £3,200,000. No deferred consideration has been paid.

Movements on deferred consideration

Since 31 March 2012 the following movements in the amounts recognised for deferred consideration have taken place:

	Zimiti	Keeneo	Stryker	LMW	E-Tech	Visi	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2012	1,606	107	729	90	-	-	2,532
On acquisition	-	-	-	-	227	-	227
Unwind of discount	42	-	16	-	4	-	62
Paid (i)	-	(107)	-	(60)	-	-	(167)
Released	(617)	-	-	(30)	-	-	(647)
At 30 September 2012	1,031	-	745	-	231	-	2,007
On acquisition	-	-	-	-	-	421	421
Unwind of discount	27	-	5	-	-	5	37
Paid	-	-	(750)	-	(12)	-	(762)
Released	-	-	-	-	(31)	-	(31)
Reassessed	(805)	-	-	-	-	-	(805)
At 31 March 2013	253	-	-	-	188	426	867
Unwind of discount	7	-	-	-	-	10	17
Paid	-	-	-	-	(188)	-	(188)
Released	(260)	-	-	-	-	-	(260)
Reassessed	-	-	-	-	-	(229)	(229)
At 30 September 2013	-	-	-	-	-	207	207

(i)          Final Keeneo payment settled via the issue of Ordinary Shares.

As at 30 September 2013, the maximum deferred consideration payable in the future is £4.7m (31 March 2013: £8.6m), up to £3.5m (31 March 2013: £5.4m) of which may be satisfied through the issue of new Ordinary Shares, and the remainder satisfied in cash. The deferred consideration at 30 September 2013 is payable over the period to 31 December 2014 subject to revenue and profit targets. Up to £2.35m of the deferred consideration is based on revenue and profit targets for the year ended 31 December 2013 and a further £2.35m on the year ended 31 December 2014.

Deferred consideration is carried at fair value applying a Level 3 fair value hierarchy technique based on the probability weighted average of expected cash flows. All other financial instruments are carried at amortised cost and the directors consider that their carrying value is not significantly different to their fair value.

6. Issued share capital

On 5 September 2013, 25,171 Ordinary Shares were issued to satisfy obligations under the long term incentive plan.

As at 30 September 2013, there were 50,984,761 Ordinary Shares in issue (30 September 2012: 43,787,176, 31 March 2013: 50,959,590).

7. Post Balance Sheet Event

On 4 November 2013, the Group raised £18.0m cash, net of £0.7m placing costs, by way of a share placing of 13,357,143 new Ordinary Shares at 140 pence per share. Following the placing, there were 64,341,904 Ordinary Shares in issue.

This information is provided by RNS

The company news service from the London Stock Exchange

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