4 July 2008
TEP EXCHANGE GROUP PLC
("TEP" or "the Company")
Final Results for the year ended 31 December 2007
Chairman's statement
I am pleased to report the results for the year ended 31 December 2007. Revenue
for the year totalled �606,502 (2006 - �384,015) resulting in a profit from
operations of �64,369 compared to a loss from operations of �21,011 in 2006.
The profit before and after taxation was �37,535, compared to a loss before and
after taxation of �58,635 in 2006. The earning per share was 0.01 pence,
compared to a loss per share in 2006 of 0.03 pence.
Revenue increased significantly in 2007 compared with 2006 due to the
continuing increased activity in the traded endowment policy market and the 50
per cent. increase in transaction charges implemented during the second half of
2006. In addition, re-negotiation of the variable fee percentage which is
payable to Surrenda-link Limited for the 2007 accounting period for the
outsourcing of the operational management of the business enabled the Company
to achieve profitability in 2007 for the first time in the Company's history.
The supply of UK traded endowment policies (known as "TEPs") continues to be
strong and the volume of TEPs being offered for sale on the Company's
electronic platform has grown by 40 per cent. in the first quarter of 2008
compared to the same period in 2007.
The development of the Company's electronic platform for its current range of
products primarily into the German market, has now been completed and formally
launched in the first quarter of 2008. The launch of the platform into the
German market is expected to contribute to the Company's performance in 2008.
Your Board is not proposing a dividend for the year under review.
G Kynoch
Chairman
3 July 2008
Audited consolidated income statement for the year ended 31 December 2007
2007 2006
� �
Revenue 606,502 384,015
Other operating income - 104,152
Administrative expenses (542,133) (509,178)
Profit/(loss) from operations 64,369 (21,011)
Profit/(loss) from operations
Finance income 7,082 448
Finance costs (33,916) (38,072)
Profit/(loss) before tax 37,535 (58,635)
Tax expense - -
Profit/(loss) attributable to equity holders of the 37,535 (58,635)
parent
Earnings/(loss) per share [Note 2]
Basic and diluted earnings/(loss) per share 0.01p (0.03)p
Audited consolidated balance sheet at 31 December 2007
2007 2006
� �
Assets
Non-current assets
Property, plant and equipment - -
Total non-current assets - -
Current assets
Inventories 3,050 2,938
Trade and other receivables [Note 4] 259,444 229,999
Cash and cash equivalents 38,044 25,798
Total current assets 300,538 258,735
Total assets 300,538 258,735
Current liabilities
Bank overdraft (70) -
Bank loan (53,143) (52,585)
Other borrowings (20,000) (40,000)
Trade and other payables [Note 5] (188,662) (443,753)
Total current liabilities (261,875) (536,338)
Liabilities
Non-current liabilities
Bank loan - (57,336)
Trade payables (248,036) (213,562)
Total non-current liabilities (248,036) (270,898)
Total liabilities (509,911) (807,236)
Total net liability (209,373) (548,501)
Equity attributable to
equity holders of the parent
Share capital [Note 6] 2,262,980 2,245,434
Share premium 3,951,948 3,667,901
Retained losses (6,424,301) (6,461,836)
Total deficit (209,373) (548,501)
Audited consolidated cash flow statement for the year ended 31 December 2007
2007 2006
� �
Operating activities
Profit/(loss) before tax 37,535 (58,635)
Depreciation - 175
Finance income (7,082) (448)
Finance costs 33,916 38,072
Profit/(loss) from operations before changes in working 64,369 (20,836)
capital
Increase in inventories (112) (113)
Increase in trade and other receivables (29,445) (21,775)
(Decrease)/increase in trade and other payables (220,617) 148,593
Cash (used)/generated by operating activities (185,805) 105,869
Investing activities
Interest received 7,082 448
Financing activities
Issue of Ordinary Shares 350,913 -
Expenses relating to the issue of deferred shares (49,320) -
Repayment of borrowings (76,778) (50,704)
Interest paid (33,916) (38,072)
Net cash inflow/(outflow) from financing activities 197,981 (88,328)
Net increase in cash and cash equivalents 12,176 17,541
Cash and cash equivalents at beginning of year 25,798 8,257
Cash and cash equivalents at end of year 37,974 25,798
Cash and cash equivalents comprise:
Cash available on demand 38,044 25,798
Bank overdraft (70) -
Cash and cash equivalents at end of the year 37,974 25,798
Audited consolidated statement of changes in equity for the year ended 31
December 2007
Share Share Retained
capital premium losses Total
� � � �
At 1 January 2006 2,245,434 3,667,901 (6,403,201) (489,866)
Loss and total recognised income - - (58,635) (58,635)
and expense for the year
At 1 January 2007 2,245,434 3,667,901 (6,461,836) (548,501)
Profit and total recognised - - 37,535 37,535
income
and expense for the year
Issue of share capital 17,546 333,367 - 350,913
Expenses relating to the issue - (49,320) - (49,320)
of shares
At 31 December 2007 2,262,980 3,951,948 (6,424,301) (209,373)
Share Capital is the amount subscribed for Ordinary Shares and deferred shares
at nominal value.
Share premium represents the excess of the amount subscribed for share capital
over the nominal value of these shares net of share issue expenses.
Retained losses represent cumulative losses of the Group attributable to equity
holders. There were no changes in equity in the prior year other than the
profit/(loss) for the period.
Notes to the Audited Preliminary Results for the year ended 31 December 2007
1 Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards, International Accounting Standards and
Interpretations (collectively IFRS) issued by the International Accounting
Standards Board (IASB) as adopted by European Union ("adopted IFRSs"), and are
in accordance with IFRS as issued by the IASB.
This is the first time the Group has prepared financial information in
accordance with IFRS, having previously prepared its financial statements in
accordance with UK GAAP. Details of the effects of the transition are given
below.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2007 and 2006, but is
derived from those accounts. Statutory accounts for 2006 have been delivered to
the Registrar of Companies and those for 2007 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). The auditors' report on the
accounts for 31 December 2007 referred to a matter concerning a contingent
liability to which the auditors' drew attention by way of emphasis without
qualifying their report. The details concerning this matter are given in note
7.
Transition to IFRS
The Group's transition date to IFRS is 1 January 2006. The rules for first-time
adoption of IFRS are set out in IFRS 1 'First time adoption of International
Financial Reporting Standards'. In preparing the IFRS financial information,
these transition rules have been applied to the amounts reported previously
under generally accepted accounting principles in the United Kingdom ('UK
GAAP'). The date to which the last UK GAAP financial statements were produced
was 31 December 2006. IFRS 1 generally requires full retrospective application
of the Standards and Interpretations in force at the first reporting date.
However, IFRS 1 allows certain exemptions in the application of particular
Standards to prior periods in order to assist companies with the transition
process. In preparing these financial statements, neither the Group nor the
Company has taken advantage of the exemptions offered by IFRS 1.
The adoption of IFRS has not had a material impact on the results or net assets
for the comparative periods and accordingly these have not been restated.
Going concern
During the year ended 31 December 2007 the Group achieved a profit of �37,535
(2006 - loss of �58,635) and at 31 December 2007 had net liabilities of �
209,373 (2006 - �548,501).
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, repayable over 44 months, 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 now charge for
their services on a variable cost 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 can be repaid out of cash flow.
The directors have recently agreed with Surrenda-link Limited that the
repayment of non-current outstanding charges in the amounts of �308,036 will be
repaid over 31 months at a rate of �10,000 per month commencing in July 2008.
Should the Company's appeal against the VAT assessments raised by HM Revenue &
Customs (see note 7) be unsuccessful, Surrenda-link Limited will defer payment
of the �308,036 (or such lesser sum as is outstanding at the time of the
company's unsuccessful appeal against the VAT assessments) until such time as
the company has repaid all amounts due to HM Revenue & Customs. It is assumed
that unsuccessful in its appeals, the Company will be able to pay amounts owing
to HM Revenue and Customs over a period of not less than 18 months.
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 with Surrenda-link Limited and its bankers and
therefore that it is appropriate to prepare the financial statements on the
going concern basis.
2 Earnings/(loss) per share
The calculation of the basic earnings/(loss) per share is based upon:
2007 2006
Basic earnings/(loss) per share (pence) 0.01p (0.03)p
Profit/(loss) attributable to equity holders �37,535 �(58,635)
Number Number
Weighted average number of shares 364,908,684 224,543,426
The options, warrants and deferred shares in issue at the 31 December 2005 and
31 December 2006, which are disclosed in note 6, are antidilutive and have
therefore been excluded from the calculation of diluted earnings per share.
However, such options may be dilutive in future periods.
3 Dividends
The Directors are not proposing the payment of a dividend in respect of the
year ended 31 December 2007.
4 Trade and other receivables
2007 2006
� �
Trade receivables 168,499 41,630
Other receivables 69,812 146,599
Prepayments and accrued income 21,133 41,770
259,444 229,999
5 Trade and other payables: amounts falling due within one year
2007 2006
� �
Trade payables 51,891 286,854
Other payables 4,000 5,250
Creditors for taxation and social security - 10,815
Accrued liabilities and deferred income 132,771 140,834
188,662 443,753
6 Share capital
2007 2006 2007 2006
Number Number � �
Authorised
Ordinary Shares of 1,000,000,000 400,000,000 100,000 4,000,000
0.01p (2007 - 1p) each
Deferred shares of 400,000,000 - 3,960,000 -
0.99p each
4,060,000 4,000,000
Allotted, called up and
fully paid
Ordinary Shares 0.01p 399,999,999 224,543,426 40,000 2,245,434
(2007 - 1p) each
Deferred shares of 224,543,426 - 2,222,980 -
0.99p each
2,262,980 2,245,434
Ordinary Shares Deferred shares
Number � Number �
Share capital at 1 224,543,426 2,245,434 - -
January 2007
Share restructuring - (2,222,980) 224,543,426 2,222,980
New share capital issued 175,456,573 17,546 - -
Share capital at 399,999,999 40,000 224,543,426 2,222,980
31 December 2007
Details of the two equity settled share option schemes are shown below:
Exercise period
Number of Exercise From To
shares under price
option
Enterprise Management
Incentive Scheme 1,027,879 3p 16.02.2004 16.02.2011
600,000 8p 06.09.2004 06.09.2011
582,818 10p 16.02.2004 16.02.2011
1,500,000 12p 06.09.2004 06.09.2011
3,710,697
Unapproved Share Option 200,000 8p 24.08.2004 24.08.2011
Plan
3,910,697
There were no changes to the number of options in issue in either the current
or prior period.
On 14 March 2007, each of the 224,543,426 issued Ordinary Shares of 1p each in
the Company was subdivided into one Ordinary Share of 0.01p each and one
deferred share of 0.99p each credited as fully paid.
On 15 March 2007, the Company issued 175,456,573 Ordinary Shares of 0.01p each
at a premium of 0.19p per share.
The main rights and restrictions attaching to the deferred shares are as
follows:
* no entitlement to receive dividends or other distributions;
* no entitlement to receive notice of or attend of vote at any general meeting
of the Company; and
* on a return of capital on a winding in the holders of deferred shares shall
only be entitled to receive the amount paid up on such shares after the holders
of the Ordinary Shares have received the sum of �1,000,000 for each Ordinary
Share held by them and shall have no other right to participate in the assets
of the Company.
There were no changes to the number of options in issue in either the current
or prior period.
On 14 March 2007, the Company issued warrants to subscribe for up to 35,000,000
Ordinary Shares in cash at 0.2p per share. Each warrant confers on the
warrantholder the right to subscribe in cash for Ordinary Shares to be issued
to the warrant holder or such person as the warrantholder may direct. The
warrants are not intended to be listed or dealt on any recognised investment
exchange. Ordinary Shares issued on exercise of warrants will qualify for all
dividends and distribution declared, made or paid after their date of issue.
The warrants may only be exercised upon certain performance being met criteria
in each of any two consecutive financial years over the five years commencing 1
January 2007 and ending 31 December 2011. No cash was received for the warrants
and that no charge to the income statement arises under IFRS 2.
The warrants may be exercised in whole or in part or in parts. The exercise
price of the warrants must be paid at the time the rights are exercised.
Any rights not exercised prior to 30 June 2012 will lapse on that date.
7 Contingent liabilities
The Company is appealing against assessments issued by HM Revenue & Customs in
respect of VAT under declared from 2003 to 2007. It is anticipated that the
case will be concluded by the end of 2008. In the opinion of the directors, the
VAT returns submitted were correct and their appeal against the assessments
will be successful. However, if the appeal by the Company is not successful,
the Company would be liable to pay undeclared VAT, interest and penalties which
the directors estimate to be a maximum amount of �400,000. No provisions for
these amounts have been made in these financial statements although the cost of
defending the appeal has been provided for.
8. Copies of the final results for the year ended 31 December 2007 will be sent
to shareholders today and will be available from the Company's office at 12
Grosvenor Court, Foregate Street, Chester CH1 1HG and are available for
download from the Company's website www.tepexchange.com
Further enquiries:
TEP Exchange Group plc
David Roxburgh 00 353 1 668 7782
John East & Partners Limited
John East/Simon Clements 020 7628 2200
END
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