TIDMBOX
RNS Number : 6727O
Boxhill Technologies PLC
10 February 2016
10 February 2016
BOXHILL TECHNOLOGIES PLC
("Boxhill", the "Group" or the "Company")
Company Update, Internal Restructuring, Change of Year End,
Second Interim Results for the 12 months to 31 July 2015 &
Update on Acquisition
Boxhill Technologies Plc (AIM:BOX), the AIM quoted lottery,
software, gaming and leisure company, announces the following
update to shareholders.
Company Update, Internal Restructuring & Change of Year
End
The Company acquired Pay Corporation Limited ("PayCorp") in 2013
(see announcement of 13 September 2013) as an element of its
strategy of developing a broad range of services within the gaming
and lottery sector. As disclosed in note 4 to the annual report and
accounts for the year to 31 July 2014, the Company had become aware
of an outstanding VAT matter in PayCorp that related to invoices
and VAT returns around the time of its acquisition. The Company has
been unable to satisfactorily address these issues (which are
explained in detail later in this announcement) during the last
year, and this would have resulted in a disclaimed audit opinion
for the accounts for the year ended 31 July 2015. The Company has
therefore taken the following steps to address this matter:
-- The business of PayCorp was transferred out of PayCorp within the Group on 29 January 2016.
-- The Company's 100% shareholding of PayCorp was transferred to
a non-Group company on 29 January 2016.
-- The Company's financial year end has been extended to 31
January and the Company is in the process of producing accounts for
the 18 months to 31 January 2016 which will be subject to audit
(the "Report and Accounts") and which will incorporate these
actions (collectively, the "Restructuring").
The Company's ordinary shares of 0.1 pence each ("Ordinary
Shares) will remain suspended from trading on AIM until the Company
publishes the Report and Accounts. This is in accordance with the
AIM Rules for Companies Rule 19 which requires the annual
publishing of audited accounts. It is anticipated that the
Restructuring will enable the Company to receive an unmodified
audit opinion in the Report and Accounts.
Second Unaudited Interim Results for the 12 Months to 31 July
2015
In advance of the publication of the Report and Accounts, the
Company announces second unaudited interim results for the 12
months to 31 July 2015.
It was originally anticipated that the Company would release
audited accounts for the year to 31 July 2015 (the "2015 Accounts")
in January 2016. The Company's auditors provided an audit opinion
for the 2015 Accounts on 7 January 2016, which included a
disclaimer of opinion for the reasons set out in "Matters that
would have resulted in a Disclaimer of Audit Opinion" below.
Due to the wider issues described in the Company Update,
Internal Restructuring & Change of Year End section above, and
that the 2015 Accounts had not yet been published, the board of
directors of Boxhill have concluded that undertaking the
Restructuring is in the best interests of the Company.
As a consequence of the Company extending the year end to 31
January 2016, statutory accounts for the year ended July 2015 are
not required to be issued by the Company under UK company law and
therefore an audit report for the year ended 31 July 2015 is no
longer required.
As a result the Directors are today issuing unaudited interim
results for the 12 months to 31 July 2015. The Company's Ordinary
Shares will remain suspended from trading on AIM under the AIM
Rules for Companies, Rule 19, until the Report and Accounts are
published.
Shareholders' attention is drawn to the matters that would have
resulted in a disclaimer of opinion in the Independent Auditors
Report if the Restructuring had not been undertaken. An explanation
regarding these matters can be found below.
Financial Highlights
-- Revenue on continuing activities increased by 46% to GBP2,064,000 (2014: GBP1,410,000)
-- EBITDA of GBP655,000 (2014: EBITDA loss of GBP172,000)
-- Bank and other borrowings reduced to GBP18,000 (2014: GBP489,000)
Operational Highlights
-- Completion on 31 January 2016 of the agreement to acquire
Emex to further grow and develop the operations within the payment
processing division (see announcement of 2 December 2015)
-- Completion of the state-of-the-art Harvey Hadden Sports
Village in Billborough, Nottingham ("HHSV") reopened in September
2015, which includes the company's five-a-side business, allowing
that business to resume under the new joint venture (see the
announcement of 30 October 2015)
-- The lottery business has made good progress as it continues
to assist over 900 lotteries with their fund raising
Matters that would have resulted in a Disclaimer of Audit
Opinion
Shareholders should note below the matters highlighted by the
Company's independent auditors that would have resulted in their
disclaimer of opinion as the Restructuring had not been undertaken
before 31 July 2015 (the Company's original year end). The matters
involve a potential VAT liability of GBP1.218m within PayCorp, a
wholly-owned subsidiary of the Company, dating back to 2013, and in
turn the ability by that subsidiary or Boxhill to reclaim that
potential VAT liability from third parties from whom it is due.
Professional advice has been received by the Company to deal with
these matters.
As further background for shareholders this matter has arisen
following two VAT repayment claims made by PayCorp in the latter
part of 2013 and details were set out in the Company's annual
report and accounts for the year to 31 July 2014. An equivalent sum
was paid out by PayCorp to non-Group companies immediately
following receipt of these monies from HMRC by PayCorp. The
consolidated statement of financial position of the Group includes
this amount as both an asset and a liability. The Company however
does not currently have any visibility on the recoverability of the
full amount from the third parties. Legal advice received is that
PayCorp would seek to recover the liability from the vendor of
PayCorp (under the terms of the sale and purchase agreement entered
into with the vendor), prior directors of PayCorp, and de facto
Directors of PayCorp (who were appointed or acting as directors of
PayCorp at the time these VAT repayment claims were submitted and
processed), and against the professional advisors to PayCorp at the
time. In light of the uncertainty about the recoverability of this
asset and the magnitude of the VAT liability which may be payable
to HMRC, the auditors have disclaimed their opinion on this
matter.
As detailed in note 4 to the second unaudited interim accounts
for the 12 months to 31 July 2015, the Company has sought legal
counsel's opinion on this matter which has concluded that the net
liability of PayCorp to HMRC is likely to be restricted to a
potential VAT penalty which is expected to be more than covered by
assets available to the Group. However at this stage it is not
possible to quantify any potential VAT penalty since HMRC have not
at this stage submitted a claim, and in light of this uncertainty
the auditors have disclaimed their audit opinion. The Company has
therefore concluded that the Restructuring offers the best option
to address this matter.
In last year's accounts the auditors treated this issue as an
emphasis of matter. In their opinion, however, the auditors have
opined that a disclaimer of opinion would have been included in any
audit report issued to the public in respect of accounts prepared
to 31 July 2015 given the lack of appropriate audit evidence
available to the auditors, this comprising sufficient independent
experts' reports being available to quantify the likely VAT
penalties that PayCorp could be liable for. Following the transfer
of PayCorp to a non-Group company as part of the Restructuring,
these issues of uncertainty will not be included in the in the
audited consolidated annual accounts for the period to 31 January
2016.
A copy of the second interim unaudited accounts for the 12
months to 31 July 2015 can be found below.
Update on Acquisition
Further to the announcement of 2 December 2015, the Company is
pleased to confirm that it has completed on 31 January 2016 the
acquisition of Emex (UK) Group Limited, and the associated company,
FreePayMaster Limited (collectively, "Emex"). Emex has developed
software for peer to peer payments, money transfer and trade
services, crowd funding and accounts for individuals and
businesses, and is already a significant supplier to the Company
and will now form the cornerstone of the Payments Division. The
transaction is expected to make a significant positive contribution
in the current financial year based on servicing Payment Division's
current contracted business. Longer term, the efficiencies from
vertical integration and cross-selling will provide further
opportunities for growth.
While Emex has been actively building its business in these
areas for the last three years, it has begun to grow rapidly since
commencing business with the Group in June 2015. Current monthly
sales for Emex have grown to GBP25,000 per month, of which
approximately 90% are made to the Group, and as a result, the Group
expects to see significant improvements to the profit margin of the
Payment Division by bringing Emex within the Group. For the year to
30 September 2014, EmexConsult Limited (the main operating entity
of the Emex acquisition and the only constituent to have yet
produced annual accounts) made a loss of GBP13,435 for that
year.
February 10, 2016 08:00 ET (13:00 GMT)
The remuneration of the Directors, who are the key management
personnel of the Group, is as referred to above, and on page 8
within the Directors Report and in Note 9.
Issue of Equity
As referred to in Note 26, share options were granted in 2010 to
Directors and key management, all of which were outstanding at the
year end. The following options were held by the Directors and key
management at the year end:
Options No. Option details
Lord E T Razzall 3,300,000 See A below
J M Botros 4,800,000 See B below
A - 1,100,000 at 0.75p, 1,100,000 at 1p and 1,100,000 at
1.25p
B - 1,600,000 at 0.75p, 1,600,000 at 1p and 1,600,000 at
1.25p
All of the options are exercisable by 2 June 2017.
28. Operating lease commitments
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
2015 2014
GBP'000 GBP'000
Land and buildings:
Within one year 5 -
In the second to fifth
years inclusive - 16
After five years - -
Operating lease payments represent rentals payable by the Group
for office premises. Leases are negotiated over the term considered
most relevant to the individual subsidiary and rentals are fixed
where possible for that term.
29. Controlling Party
No single individual has sole control of the company.
30. Events after the balance sheet date
On 2 December 2015 the Company announced that it had agreed
heads of terms to acquire Emex (UK) Group Limited, and the
associated company, FreePayMaster Limited (collectively, "Emex").
These acquisitions were completed on 31 January 2016. Emex has
developed software for peer to peer payments, money transfer and
trade services, crowd funding and accounts for individuals and
businesses, and is already a significant supplier to the Company's
Payments Division.
On 29 January 2016 the business of PayCorp was transferred out
of PayCorp to within the Group, also on this date, a corporate
restructuring exercise took place and the Company's 100%
shareholding of PayCorp was transferred to a non-Group company.
The Company's year end has been extended from 31 July 2015 to 31
January 2016, therefore audited accounts for the eighteen month
period ended 31 January 2016 will be prepared.
31. Going Concern
The Group made an after taxation profit for the 12 months to 31
July 2015 of GBP503,000 (2014: loss for the year of GBP683,000) and
an EBITDA profit of GBP655,000 (2014: loss of GBP172,000).
The management have controlled costs and continued with the
expansion of the business based on past acquisitions to produce a
profitable Group of companies in the year ended 31 July 2015. The
Group is forecasting further turnover growth and improved
profitability in the forthcoming year.
Given the trading results for 2015 and expected continuing and
improving profitability for 2016, together with the additional
capital available from the supporting shareholders, the Directors
consider that the Group continues to be a going concern and they
forecast that that there is sufficient funding in place to enable
the continuance of the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UROURNAAUAAR
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February 10, 2016 08:00 ET (13:00 GMT)
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