TIDMXPH
RNS Number : 3416Q
X-Phonics plc
08 April 2009
X-PHONICS PLC ("X-Phonics" or the "Company")
Preliminary results for the period ended 30 September 2008
CHAIRMAN'S STATEMENT
I present the financial statements for the year to 30th September 2008.
It has been a difficult year for the music industry and particularly for smaller
businesses such as ours that do not have established artists generating revenues
with which to support the development of newer artists. The market has further
deteriorated in the early part of 2009. The larger records labels, through which
we had expected to jointly develop our artists, have taken on very few new
projects and in fact have rationalised their own existing artist roster. Retail
distribution in the high street is almost non-existent with the closure of many
outlets, for example Zavvi and Woolworths with those remaining only interested
in selling established artist product.
Financial Commentary
Sales of GBP84,567 were primarily achieved from our smaller and earlier stage
artists. The Attic Lights, for whom we received an advance in May 2007 from
Universal Island, released their first album, "Friday Night Lights" in November
2008. Whilst critically acclaimed it did not generate sufficient sales to
increase our share of the sales beyond the initial advance. It is our
expectation that a second album will be commissioned although in the current
economic climate many larger record labels are taking the opportunity of
renegotiating the terms of such projects. A lack of available cash has made it
difficult to progress the smaller projects although modest progress has been
made in some areas. Maeve O'Boyle has recorded her first album which is expected
to be released through Linn Records in July 2009 and Keith Jack's album released
in November continues to sell, although at a modest level.
Overheads have been reduced substantially to offset, as far as is possible, the
lack of sales. The directors have not drawn salaries since March 2008 and do not
intend to do so under current circumstances. Other costs are being managed at a
significantly lower level than in previous periods. Neil Reed, one of the
original founders resigned in December 2008.
The directors have made a number of attempts to raise additional funds during
the last year none of which have been successful given the turmoil in the
financial markets. This, linked to the likely low level of future revenues means
that the company's future cash flow is uncertain.
Given the company's current situation and its reliance upon the music industry
the directors believe that it is in the best interest of shareholders to limit
any additional exposure in that sector other than to what is necessary to
maintain the collection of cash from existing projects, wherever possible.
In parallel, the directors believe that it is sensible to seek alternative
opportunities that could make use of the company's infrastructure and listing on
AIM in market sectors where there is scale, growth and a revenue model that is
better suited to a public market.
I hope to be able to report progress upon this in due course.
Robin Davies
Chairman
8 April 2009
X-PHONICS PLC
Consolidated Group Income Statement
For the year ended 30th September 2008
+------------------------------------------------------+------------+-----------+
| | | Restated* |
+------------------------------------------------------+------------+-----------+
| | 30 Sep 08 | 30 Sep 07 |
+------------------------------------------------------+------------+-----------+
| | GBP | GBP |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Revenue | 84,567 | 339,074 |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Cost of sales | (149,716) | (404,993) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Gross loss | (65,149) | (65,919) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Administrative expenses | | |
+------------------------------------------------------+------------+-----------+
| Exceptional | (327,639) | - |
+------------------------------------------------------+------------+-----------+
| Normal | (411,606) | (406,327) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Operating loss | (804,394) | (472,246) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Finance income | 653 | 6,826 |
+------------------------------------------------------+------------+-----------+
| Finance costs | (882) | (1,713) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Loss before taxation | (804,623) | (467,133) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Income tax expense | - | 1,257 |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Loss for the financial year | (804,623) | (465,876) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Attributable to equity holders of the company | (804,623) | (465,876) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Earnings per share for loss attributable to the equity holders of the company |
| (pence) |
+-------------------------------------------------------------------------------+
| | | |
+------------------------------------------------------+------------+-----------+
| Basic | (1.22) | (0.70) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Diluted | (1.22) | (0.70) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
All of the activities of the group are classed as continuing.
The group has no recognised gains or losses other than the results for the
period as set out above.
* Restated for International Financial Reporting Standards
X-PHONICS PLC
Group Balance Sheet
30th September 2008
+------------------------------------------------------+-------------+-------------+
| | | Restated* |
+------------------------------------------------------+-------------+-------------+
| | 30 Sep 08 | 30 Sep 07 |
+------------------------------------------------------+-------------+-------------+
| | GBP | GBP |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| ASSETS | | |
+------------------------------------------------------+-------------+-------------+
| Non-current assets | | |
+------------------------------------------------------+-------------+-------------+
| Goodwill | - | 327,639 |
+------------------------------------------------------+-------------+-------------+
| Property, plant and equipment | 36,782 | 65,440 |
+------------------------------------------------------+-------------+-------------+
| | 36,782 | 393,079 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| Current assets | | |
+------------------------------------------------------+-------------+-------------+
| Trade and other receivables | 84,259 | 139,911 |
+------------------------------------------------------+-------------+-------------+
| Cash and cash equivalents | 6,359 | 136,719 |
+------------------------------------------------------+-------------+-------------+
| | 90,618 | 276,630 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| Total assets | 127,400 | 669,709 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| LIABILITIES | | |
+------------------------------------------------------+-------------+-------------+
| Current liabilities | | |
+------------------------------------------------------+-------------+-------------+
| Trade and other payables | 383,118 | 114,036 |
+------------------------------------------------------+-------------+-------------+
| Non-current liabilities | | |
+------------------------------------------------------+-------------+-------------+
| Borrowings | - | 6,768 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| Total liabilities | 383,118 | 120,804 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| EQUITY | | |
+------------------------------------------------------+-------------+-------------+
| Capital and reserves attributable to equity holders of the company |
+----------------------------------------------------------------------------------+
| Share capital | 2,803,119 | 2,803,119 |
+------------------------------------------------------+-------------+-------------+
| Share premium account | 743,474 | 743,474 |
+------------------------------------------------------+-------------+-------------+
| Merger reserve | (738,578) | (738,578) |
+------------------------------------------------------+-------------+-------------+
| Accumulated losses | (3,063,733) | (2,259,110) |
+------------------------------------------------------+-------------+-------------+
| Total equity | (255,718) | 548,905 |
+------------------------------------------------------+-------------+-------------+
| | | |
+------------------------------------------------------+-------------+-------------+
| Total equity and liabilities | 127,400 | 669,709 |
+------------------------------------------------------+-------------+-------------+
*Restated for International Financial Reporting Standards
These financial statements were approved by the directors on 7 April 2009.
X-PHONICS PLC
Consolidated Group Cash Flow Statement
For the year ended 30th September 2008
+------------------------------------------------------+------------+-----------+
| | | Restated* |
+------------------------------------------------------+------------+-----------+
| | 30 Sep 08 | 30 Sep 07 |
+------------------------------------------------------+------------+-----------+
| | GBP | GBP |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Net cash used in operating activities | (124,690) | (621,187) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Net cash from investing activities | | |
+------------------------------------------------------+------------+-----------+
| Purchases of property, plant and equipment | (1,217) | (27,607) |
+------------------------------------------------------+------------+-----------+
| Interest received | 653 | 6,826 |
+------------------------------------------------------+------------+-----------+
| Interest paid | (882) | (1,713) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Net cash used in investing activities | (1,446) | (22,494) |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Net cash from financing activities | | |
+------------------------------------------------------+------------+-----------+
| Proceeds from issuance of ordinary shares | - | 23,996 |
+------------------------------------------------------+------------+-----------+
| Borrowings drawn/(eliminated) | (4,224) | 3,932 |
+------------------------------------------------------+------------+-----------+
| Net cash (used)/generated from financing activities | (4,224) | 27,928 |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Net (decrease)/increase in cash, cash equivalents | (130,360) | (615,753) |
| and overdrafts | | |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Cash, cash equivalents and overdrafts at beginning | 136,719 | 752,472 |
| of year | | |
+------------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------------+------------+-----------+
| Cash, cash equivalents and overdrafts at end of year | 6,359 | 136,719 |
+------------------------------------------------------+------------+-----------+
*Restated for International Financial Reporting Standards
1. Accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost convention
and in accordance with International Financial Reporting Standards ("IFRSs") as
adopted by the European Union and as applied in accordance with the provisions
of Companies Act 1985.
The first time adoption of International Financial Reporting Standards in
preparing group financial statements for the year ended 30th September 2008 has
had no material effect upon the results and financial position of the group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the company and all group undertakings. X-Phonics plc was incorporated on 17 May
2005 and on 1 July 2005 the company acquired the entire share capital of
X-Phonics Music Limited by way of a share for share exchange. As the
shareholders were the same before and after this transaction, the share for
share exchange qualifies as a common control transaction and falls outside the
scope of IFRS 3, Business Combinations. No goodwill has been recorded and the
difference between the parent company's cost of investment and X-Phonics Music
Limited's share capital and share premium is presented as a merger reserve
within equity on consolidation. Comparative amounts are restated as if the
combination had taken place at the beginning of the earliest comparative period
presented.
Revenue
Revenue compromises amounts recognised by the group in respect of goods and
services supplied, exclusive of VAT and trade discounts.
Advances to artistes
Advances to artistes and expenses incurred supporting new acts are assessed and
the value of the un-recouped portion to be included in debtors is determined by
the prospects of future recoupement, based on past sales performance, current
popularity and projected sales.
Music publishing and record royalties and record producer services
Music publishing and record royalties are accounted for on a notified earnings
basis, with any advances, if any, carried forward until the end of the relevant
contract period. Royalties received for record producer services are accounted
for on a cash basis. Royalties payable are expensed on an accruals basis except
that music publishing advances are carried forward and recognised as an asset,
where such advances relate to proven artistes or songwriters and where it is
estimated that sufficient future royalties will be recouped against those
advances.
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
at the date of acquisition. Goodwill is allocated on acquisition to
cash-generating units that are anticipated to benefit from the combination.
Goodwill is not amortised but is reviewed annually for impairment. Impairment is
determined by assessing the recoverable amount of a cash-generating unit to
which the goodwill relates. This estimate of recoverable amount is performed at
each balance sheet date. The estimate of recoverable amount requires significant
judgement, and is based on a number of factors such as the near-term business
outlook for the cash-generating unit, including both its operating profit and
operating cash flow performance. Where the recoverable amount of the
cash-generating unit is less than the carrying amount, an impairment loss is
recognised.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any provision for impairment in value.
Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
+------------------------+----+-------------------------------------------------+
| Leasehold Property | - | over the period of the lease |
+------------------------+----+-------------------------------------------------+
| Fixtures & Fittings | - | 20% straight line |
+------------------------+----+-------------------------------------------------+
| Motor Vehicles | - | 25% straight line |
+------------------------+----+-------------------------------------------------+
| Equipment | - | 20% straight line |
+------------------------+----+-------------------------------------------------+
Leasing and Hire purchase agreements
Assets obtained under hire purchase contracts and finance leases are capitalised
as tangible non-current assets. Assets acquired by finance lease are depreciated
over the shorter of the lease term and their useful lives. Assets acquired by
hire purchase are depreciated over their useful lives. Finance leases are those
where substantially all of the benefits and risks of ownership are assumed by
the company. Obligations under such agreements are included in liabilities net
of the finance charge allocated to future periods. The finance element of the
rental payment is charged to the income statement so as to produce a constant
periodic rate of charge on the net obligation outstanding in each period. Assets
held under hire purchase agreements are capitalised and disclosed under tangible
non-current assets at their fair value. The capital element of the future
payments is treated as a liability and the interest is charged to the income
statement on a straight line basis.
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight line basis over the period of the lease.
Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. In addition, tax losses available to be carried forward as well as other
income tax credits to the group are assessed for recognition as deferred tax
assets. However, deferred tax is not provided on the initial recognition of
goodwill, nor 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 liabilities are always provided for in full. Deferred tax assets
are recognised only to the extent that the directors consider that it is
probable that the underlying deductible temporary differences will be able to be
offset against future taxable income. Deferred tax is measured on an
undiscounted basis at the tax rates that are expected to apply in the periods in
which timing differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at the rate
ruling on the date of the transaction. Exchange gains and losses are recognised
in the income statement.
Financial instruments
Financial instruments are classified and accounted for, according to the
substance of the contractual arrangement, as either financial assets, financial
liabilities or equity instruments. An equity instrument is any contract that
evidences a residual interest in the assets of the company after deducting all
of its liabilities.
Investments
All investments are initially recorded at cost, being the fair value of the
consideration given and including acquisition costs associated with the
investment.
Trade and other debtors
Trade receivables and other debtors are recognised and carried forward at
invoice amounts less provisions for any doubtful debts. Bad debts are written
off when identified.
Cash and cash equivalents
Cash and cash equivalents are included in the balance sheet at cost. Cash and
cash equivalents comprise cash at bank and in hand and short term deposits with
an original maturity of three months or less.
2. Going Concern
The company has generated modest revenues and has funded operations primarily
from the proceeds of public and private placements of its shares. It does not
presently have sufficient funds to meet all of its forecast obligations for the
next 12 months and is negotiating with a selection of investors for further
funding. Based on discussions already held, the directors of the company have
reasonable expectation that the company will receive adequate funding, based on
a possible restructuring of the business model along with indications provided
by future investors regarding future financing. Accordingly the directors of the
company have prepared these accounts on a going concern basis. However, whether
or not the investors will actually provide such funding represents a material
uncertainty which casts significant doubt on the company's ability to continue
as a going concern and it may be unable to realise its assets and discharge its
liabilities in the normal course of business. The financial statements do not
include any adjustments that would result if the going concern basis were not
appropriate.
3. Publication of non-statutory accounts
The financial information set out in this preliminary statement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The accounts for the year ended 30 September 2008 will be posted to shareholders
shortly and laid before the Annual general Meeting to be held at the Company's
registered office: Grand Prix House, 126-129 Power Road, London W4 5PY on 5th
May 2009 at 10.30a.m.
Copies will also be available via the website (www.x-phonics.com) in accordance
with AIM Rule 26.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GCGDSBDGGGCI
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