Embargoed for release at 7.00am on
30 April 2007
TEP EXCHANGE GROUP PLC
("TEP" or "the Company")
Audited Preliminary Results for the year ended 31 December 2006
Chairman's statement
I am pleased to report the results for the year ended 31 December 2006.
Turnover for the year totalled �384,015 (2005 - �404,118) resulting in an
operating loss of �21,011 compared to an operating loss of �69,032 in 2005. The
loss on ordinary activities before and after taxation was �58,635, compared to
a loss before and after taxation of �96,077 in 2005. The loss per share was
0.03 pence, compared to a loss per share last year of 0.04 pence.
Turnover increased significantly in the second half of the year, compared to
the first half due to a continuation of the increased activity in the traded
endowment policy market as well as the 50 per cent increase in transaction
charges which the Company implemented in the middle of the year.
In the first quarter of 2007, turnover as recorded in the internal management
accounts of the Company matched the turnover achieved in the entire first half
of 2006. In addition to this, your Directors have negotiated a reduction in the
variable fee percentage which is payable to Surrenda-link Limited for the
outsourcing of the operational management of the business. This will result in
a thirty five per cent. saving in 2007 on the variable fee percentage which is
payable to Surrenda-link Limited compared to last year. As a result of the
increase in turnover and the reduction in cost the Company is well placed to
achieve further improvements in trading performance.
In March 2007, the Company raised �350,913 before expenses, by means of a share
issue. The net proceeds of the share issue will be used to reduce debt and to
fund the extension and development of the Company's electronic trading platform
for its current range of products into the German and subsequently other
European markets.
Your Board is not proposing a dividend for the year under review.
G Kynoch
Chairman
30 April 2007
Audited consolidated profit and loss account
for the year ended 31 December 2006
Note 2006 2005
� �
Turnover 384,015 404,118
Cost of sales (56,250) (120,834)
Gross profit 327,765 283,284
Administrative expenses (452,928) (525,363)
Other operating income 104,152 173,047
Operating loss (21,011) (69,032)
Interest receivable 448 1,352
Interest payable (38,072) (28,397)
Loss on ordinary activities before (58,635) (96,077)
taxation
Tax on loss on ordinary activities - -
Loss on ordinary activities after (58,635) (96,077)
taxation
Loss per share
Basic and diluted loss per share 3 (0.03)p (0.04)p
Audited consolidated balance sheet
at 31 December 2006
Note 2006 2006 2005 2005
� � � �
Fixed assets
Tangible assets - 175
Current assets
Stock 2,938 2,825
Debtors 5 229,999 208,224
Cash at bank and in 25,798 13,446
hand
258,735 224,495
Creditors: amounts 6 (536,338) (680,991)
falling due within one
year
Net current liabilities (277,603) (456,496)
Total assets less (277,603) (456,321)
current liabilities
Creditors: amounts 7 (270,898) (33,545)
falling due after more
than one year
Net liabilities (548,501) (489,866)
Capital and reserves
Called up share capital 2,245,434 2,245,434
Share premium account 3,667,901 3,667,901
Profit and loss account (6,461,836) (6,403,201)
Shareholders' funds 8 (548,501) (489,866)
Audited consolidated cash flow statement
for the year ended 31 December 2006
Note 2006 2006 2005 2005
� � � �
Net cash inflow/(outflow) 9 105,869 (278,364)
from operating activities
Returns on investments and
servicing of finance
Interest received 448 1,352
Interest paid (38,072) (28,397)
Net cash outflow from (37,624) (27,045)
returns on investment and
servicing of finance
Financing
New bank loan - 190,000
Bank loan repaid (50,704) (29,375)
Issue of ordinary share - 329,787
capital
Net cash (outflow)/inflow (50,704) 490,412
from financing
Movement in net debt 10 17,541 185,003
Notes to the Audited Preliminary Results
for the year ended 31 December 2006
1 Accounting policies
The financial statements have been prepared under the historical cost
convention and are in accordance with applicable United Kingdom accounting
standards. The following principal accounting policies have been applied
consistently in dealing with items that are considered material to the Group's
financial statements.
In preparing these financial statements the Company and the Group has adopted
for the first time FRS 20 'Share Based Payments'. However, as the Company's
share options were granted prior to 7 November 2002, the Company has elected
not to apply the requirements of this standard to these share based payment
arrangements.
Going concern
During the year ended 31 December 2006 the Group incurred a loss of �58,635
(2005 - �96,077) and at 31 December 2006 had net liabilities of �548,501 (2005
- �489,866).
The Group relies on support from one of its major shareholders, Surrenda-link
Limited, in order to meet its obligations as they fall due. It is also financed
through a bank loan together with a bank overdraft facility of �10,000. In
addition, the directors have restructured the trading operation and in
particular with Surrenda-link Limited, who charge for their services on a
commission basis. As a result of this and improved performance since the year
end, the directors anticipate improved trading results for the forthcoming year
and have projected cash flow information which show creditors with the
exception of Surrenda-link Limited can be repaid out of cash flow.
The Directors have received written confirmation from Surrenda-link Limited
that the repayment of existing outstanding charges will be deferred for not
less than one year from the date of the approval of these financial statements
until such time as the Company has sufficient liquid resources after repaying
all other creditors to repay them. At 31 December 2006, of the total balance
owing to Surrenda-link Limited, �213,562 is included within creditors falling
due after more than one year.
The Directors have also received assurances from Surrenda-link Limited that it
will advance to the Company on a quarterly basis, the lesser of the sum of �
20,000 and the specific corporate costs incurred by the Company, as defined in
the Outsourcing Agreement signed in December 2004. The Company will utilise the
quarterly advance from Surrenda-link Limited to discharge the specific
corporate costs. The Company has undertaken to use its reasonable endeavours to
minimise specific corporate costs. This funding is repayable out of the
Company's share of the income generated from the electronic platform.
Since the year end, the Company has raised approximately �270,000, after
professional fees, from the share issue in March 2007. �200,000 of the proceeds
from this has been used to reduce the amounts payable to Surrenda-link Limited
with the remainder being used to help launch the Company's German TEP platform.
On the basis of the above, and all other available information, the Directors
consider that the Group will become profitable and continue to operate within
the facilities currently agreed and those likely to be agreed in the future
with Surrenda-link Limited and its bankers and therefore that it is appropriate
to prepare the financial statements on the going concern basis.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
TEP Exchange Group PLC and all of its subsidiary undertakings made up to 31
December 2006. Uniform accounting policies are adopted by all companies in the
Group. The acquisition method of accounting is used to consolidate the results
of subsidiary undertakings in the Group financial statements.
Turnover
Turnover represents fees and commission (exclusive of value added tax) from the
purchase of with profit endowment policies by market makers registered on the
electronic trading platform. Fee and commission income is recognised when the
Group's contractual obligations are substantially complete.
Other operating income
Rent receivable is credited to the profit and loss account on a straight-line
basis over the term of the rental agreement.
Research and development costs
All research and development costs are charged to the profit and loss account
in the year in which the expenditure is incurred.
Depreciation
Depreciation is provided to write off the cost, less estimated residual values,
of all fixed assets over their expected useful lives. It is calculated at the
following rates:
Fixtures, fittings and equipment - 4 years
Computer equipment - 3 years
Investments
Investments held as fixed assets are stated at cost less provision for
impairment in value.
Stocks
Stocks of endowment policies are valued at the lower of cost and net realisable
value. Cost is based on the cost of purchase. Net realisable value is based on
surrender value less additional costs to completion and disposal.
Operating leases
Annual rentals are charged to the profit and loss account on a straight-line
basis over the term of the lease.
Financial instruments
Financial instruments are recognised initially and subsequently at cost. The
Group does not use derivative financial instruments for trading purposes or to
manage risk.
Taxation
The charge for taxation is based on the profit for the year and takes into
account taxation deferred. Current tax is measured at amounts expected to be
paid using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax balances are recognised in respect of all timing differences that
have originated but not reversed by the balance sheet date except that the
recognition of deferred tax assets is limited to the extent that the company
anticipates making sufficient taxable profits in the future to absorb the
reversal of the underlying timing differences. Deferred tax balances are not
discounted.
2 Publication of non-statutory accounts
These preliminary results for the year ended 31 December 2006 are prepared on
the basis of the accounting policies set out in the financial statements for
the year ended 31 December 2006.
The financial information set out in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 31 December
2005 and 2006, but is derived from those accounts. Statutory accounts for the
year end 31 December 2005 have been delivered to the Registrar of Companies and
those for the year ended 31 December 2006 will be delivered following the
Company's Annual General Meeting. The Auditors have reported on those accounts;
their reports were unqualified and did not contain statements under the
Companies Act 1985, sections 237(2) or (3).
3 Loss per share
The calculation of the basic loss per share is based on the loss after tax of �
58,635 (2005 - �96,077) and on 224,543,426 (2005 - 211,678,109) ordinary
shares, being the weighted average number of ordinary shares in issue. The
options in issue at the 31 December 2005 and 31 December 2006 are antidilutive
and have therefore been excluded from the calculation of diluted earnings per
share. However, such options may be dilutive in future periods.
4 Dividends
The Directors are not proposing the payment of a dividend in respect of the
year ended 31 December 2006.
5 Debtors
2006 2005
� �
Trade debtors 41,630 21,732
Other debtors 146,599 109,931
Prepayments 41,770 76,561
229,999 208,224
6 Creditors: amounts falling due within one year
2006 2005
� �
Bank overdraft - 5,189
Bank loan 52,585 129,080
Other loans 40,000 40,000
Trade creditors 286,854 307,779
Creditors for taxation and social security 10,815 19,187
Other creditors 5,250 8,155
Accruals and deferred income 140,834 171,601
536,338 680,991
Of the Company's bank term loan of �109,921, �52,585 is repayable during 2007,
and �57,336 over a further year to December 2008. The company also has a bank
overdraft facility of �10,000.
7 Creditors: amounts falling due after more than one year
2006 2005
� �
Bank loan 57,336 31,545
Trade creditors 213,562 -
Other creditors - 2,000
270,898 33,545
8 Reconciliation of movements in shareholders' funds
2006 2005
� �
Loss for the year (58,635) (96,077)
New share capital subscribed and issued - 329,781
(58,635) 233,704
Opening shareholders' funds (489,866) (723,570)
Closing shareholders' funds (548,501) (489,866)
9 Reconciliation of operating loss to net cash
inflow/(outflow) from operating activities
2006 2005
� �
Operating loss (21,011) (69,029)
Depreciation 175 10,860
Increase in stock (113) (117)
Increase in debtors (21,775) (79,574)
Increase/(decrease) in creditors 148,593 (140,504)
Net cash inflow/(outflow) from operating 105,869 (278,364)
activities
10 Analysis of net debt
At 31 Cash Flow Non-cash At 31
December movement December
2005 � 2006
�
� �
Cash in hand and at bank 13,446 12,352 - 25,798
Overdrafts (5,189) 5,189 - -
Cash equivalents 8,257 17,541 - 25,798
Debt due within one year (129,080) 76,495 - (52,585)
Bank loan (40,000) - (40,000)
Other loans (31,545) (25,791) (57,336)
Debt due after one year
Bank loan
Net debt (192,368) 68,245 - (124,123)
11 Post balance sheet events
On 14 March 2007, the Company issued a total of 175,456,573 new ordinary shares
at 0.2p per share. Following allotment of the new ordinary shares, the Company
has a total of 399,999,999 ordinary shares of 0.01p each in issue.
12 A copy of the Annual Report and Accounts will be sent to all shareholders
shortly and will be available from the Company's registered office, 12
Grosvenor Court, Foregate Street, Chester, Cheshire CH1 1HG.
Further Enquiries:
TEP Exchange Group PLC
George Kynoch, Non-Executive Chairman Tel: 07860 743425
Paul Sands, Director Tel: 01244 615 628
John East & Partners Limited
John East/Simon Clements Tel: 020 7628 2200
END
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