COMPANY REGISTRATION NUMBER 05066838
One Horizon Group plc
Annual report
30 June 2011
One Horizon Group plc
Annual report and accounts for the year ended 30 June 2011
| Contents | Page |
| | |
| Officers and professionaladvisers | 1 |
| | |
| Directors’ report | 2-5 |
| | |
| Independentauditor’s report | 6 |
| | |
| Consolidated statement of comprehensive income | 7 |
| | |
| Consolidated statement of financial position | 8 |
| | |
| Company statement of financial position | 9 |
| | |
| Consolidated statement of changes in equity | 10 |
| | |
| Company statement of changes in equity | 11 |
| | |
| Consolidated cash flow statement | 12 |
| | |
| Company cash flow statement | 13 |
| | |
| Notes to the financial statements | 14-37 |
One Horizon Group plc
Officers and professional advisers
| Directors | |
| | Mark White(Chief Executive Officer) |
| | Martin Ward FCA(Chief Financial Officer) |
| | Alexandra Johnson(Chief Operating Officer) |
| | Brian Collins(Chief Technology Officer) |
| | |
| Secretary | Martin Ward FCA |
| | |
| Registered number | 5066838 |
| | |
| Registered office and principal trading address | Unit 3, The Woodford Centre |
| | Lysander Way |
| | Old Sarum |
| | Salisbury |
| | Wiltshire SP4 6BU |
| | |
| Auditors | BDO LLP |
| | Arcadia House |
| | Ocean Village |
| | Southampton SO14 3TL |
| | |
| Principal bankers | HSBC Bank Plc |
| | Southern Corporate Banking Centre |
| | HSBC House |
| | Mitchell Way |
| | Southampton International Airport |
| | Southampton SO18 2XU |
| | |
| Solicitors to the group (UK) | Shoosmiths |
| | Apex Plaza |
| | Forbury Road |
| | Reading |
| | RG1 1SH |
| | |
| Attorneys to the group (US) | Farrell Fritz P.C. |
| | 1320 RXR Plaza |
| | West Tower |
| | Uniondale |
| | New York 11556-1320 |
| | |
| Registrars | Capita IRG plc |
| | Northern House |
| | Woodsome Park |
| | Fenay Bridge |
| | Huddersfield HD8 0LA |
One Horizon Group plc
DIRECTORS’ REPORT
The Directors present their report and the audited accounts of the Group and Company for the year ended 30 June 2011.
Principal activity
The principal activity of the Company is that of a holding company, and the principal activities of the Group during the year was (i) distribution of satellite communication equipment and airtime and (ii) sale of proprietorial software and associated equipment in VoIP and bandwidth optimisation markets.
Reporting currency
The Group reports its financial statements in US dollars because the majority of its sales and cost of sales are in this currency.
Results and dividends
The retained profit for the year of $5,833,000 (2010: $2,290,000) was transferred to reserves. During the year dividends, final dividend for 2010 and interim for the year under review, of $723,000 were paid (2010: $481,000). The board are not recommending a final dividend for the year ended 30 June 2011 as the company considers it prudent to retain cash for the completion of the Horizon roll out programme.
Review of the business and future developments
The Group’s results for the year ended 30 June 2011 show income increased by 6.2 % to $ 123 million (2010: $115 million) at a blended gross margin of 18.4 % (2010: 16.9%) which reflects the higher margin available from the Horizon Globex business, the gross profit earned in the year increased to $22.5 million (2010: $19.5 million). Administration expenses rose 4.7% to $16.5 million. The profit after tax is $ 5.8 million (2010: $2.3 million) and the dividends paid and recommended are as set out in the preceding note.
Key performance indicators (“KPI’s”) are as follows:
| · | Inventory turnaround average = 4.5 times per year (2010: 4.28) |
| · | Average trade receivables days = 45.2 days (2010: 42.2) |
| · | Average trade payables days = 74.2 days (2010: 50.7) |
Following the acquisition of Abbey Technology GmbH (“Abbey”) in September 2010 the Group has set up a subsidiary Horizon Globex GmbH (“Globex”) to sell the IP optimisation platform developed by Abbey. In the year under review Globex sold two Global Exchanges to (1) Singapore Telecommunications Ltd (“SingTel”) and (2) Horizon Globex India PVT Ltd, in which the Group has a 19% voting participation with the balance of shares owned by Voicecom Technologies PVT Ltd.
Overview of Horizon
Horizon is the world’s most bandwidth-efficient Voice over IP (VoIP) platform. Enabled by the company’s SmartPacket™ technology, it offers VoIP from only 2kbs compared to around 8kbps from other VoIP platforms.
Horizon enables greater bandwidth efficiency by reducing IP overhead and optimising packet flow, delivery and playback. It is also extremely efficient in the way it handles silence. Traditional VoIP calls send the same amount of data in both directions, regardless of whether someone is speaking or not. Horizon detects silence and sends “heartbeats” so it doesn’t sound like the line has been dropped. These heartbeats get sent at only 0.25kbps compared to around 8kbps on other VoIP platforms. From low-bandwidth VoIP, Horizon extends into a range of optimised data applications – email, web browsing and instant messaging – which give the user total visibility and control over how much data they consume.
The solution has been totally developed in-house and is fully compatible with digital telecommunications standards. It is capable of interconnecting any phone system over IP – on mobile, fixed and satellite networks.
The company’s SmartPacket™ technology is patent-pending and the patent is expected to come through by mid 2012.
One Horizon Group plc
DIRECTORS’ REPORT(continued)
Future growth opportunities
The Horizon solution was initially developed for the mobile satellite market, to make best use of the limited bandwidth available, minimise the amount of data consumed and ultimately save costs for the end-user.
The company then realised the potential for the solution in the broader telecommunications market, particularly within the mobile sector. With the explosive growth in smartphone sales and increased usage of mobile data services, mobile operators face the challenge of dealing with increasingly congested networks, more dropped calls and rising levels of churn. Wireless spectrum is a finite resource and it is not always possible to increase network capacity. The demand for solutions which optimise the use of IP bandwidth will inevitably grow.
The company has therefore developed a mobile application which enables highly bandwidth-efficient VoIP calls over a smartphone using an EDGE, 3G, 4G/LTE, WiFi or WiMax connection. The Horizon Call app is currently available for the iPhone and a version for Android is in development.
Unlike other mobile VoIP apps, Horizon Call is positioned a business-to-business solution for mobile operators. It is a solution that they own and deploy. They decide how to integrate it within their portfolio, how to offer it commercially and it can be customised according to their own branding. It helps them to manage rising traffic volumes while also combating the competitive threat to their voice telephony revenues from other mobile VoIP apps.
Asia represents a key opportunity for the Horizon Call app because there are significant markets with high population density, high penetration of mobile phones and high growth in the adoption of smartphones. These factors will put increased pressure on mobile operators to manage their network availability.
In this context, Horizon Globex is forming a number of joint ventures with local partners in the region to exploit this opportunity. To date, the company has formed a joint venture in India and others are currently being established.
Commercial risks
Commercial risks faced by the Group are similar to many other businesses, in terms of foreign exchange losses where the business buys and sells goods and services in a currency other than the reporting currency. The Group has limited exposure in salaries and other overheads priced in Sterling, Euro’s, Thai Baht, Singapore Dollars, Australian Dollars and to a small extent Yen. Trading expenditure and income is predominately in US dollars. Where certain product lines are priced in other currencies the price quoted is based on prevailing rates of exchange.
The Group has US Dollar bank facilities (see note 22) which are being repaid. In order to protect the Group against interest rate changes the Group has taken out hedging options on the two bank term facilities as follows:
| a) | Three quarters of the term loan secured with HSBC USA has an interest collar with the minimum rate payable of 5.7% and the maximum rate payable of 7.0%. The balance of the facilities are at floating rates. The balance outstanding at 30 June 2011 on this loan was $1.4 million (2010: $2.19 million) |
| b) | On the term loan secured with HSBC UK, an option was taken with the rate fixed at 5.5% to cover the amortising balance outstanding throughout the term. The balance outstanding at 30 June 2011 on this loan was $1.6 million (2010: $3.2 million) |
Regarding risks associated with technology changes within the industry product ranges, the Group has experienced a low level of inventory obsolescence over many years, partially due to maintaining low inventory levels and partially due to the long practical life of products within the mobile satellite services sector when compared to other communication sectors.
Directors and their interests
The Directors of the Company who held office throughout the year and at the date of this report are as follows;
| Mark White (CEO) | |
| Alexandra Johnson (COO) | |
| Martin Ward (CFO) | |
| Brian Collins (CTO) | Appointed 21 October 2010 |
One Horizon Group plc
DIRECTORS’ REPORT(continued)
Political and charitable contributions
The amount donated by the Group to charitable bodies was $10,000 (2010: $14,000). The Group made no political contributions during the year (2010: $nil).
Third party indemnity provision for directors
Qualifying third party indemnity provision for all directors was in force during the year.
Risk factors
Information on the Group’s financial risk management objectives and policies relating to market risk, credit risk and liquidity risk is provided in note 4 to the financial statements.
Creditor payment policy
It is the Group’s policy that payments to suppliers are made in accordance with all relevant terms and conditions.
Going concern
The Group has, following the year end, secured additional funds totalling $5.0 million. The funds are from an outside investor for new shares ($3.0m) and a loan from the major shareholders ($2.0m) which incurs 10% interest with repayment on IPO, Company sale or anytime at the Company’s discretion. The Group has bank facilities due for renewal at the end of February 2012. The Directors are not aware of any reason why the bank facilities will not be renewed, however should the Group need to raise additional funding then the Board have identified equity investors and confirmed their interest in investing. After making suitable enquiries, the Board is satisfied that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.
Awareness of relevant audit information
At the time of this report the Directorsconfirm that:
| · | there is no relevant information of which theauditor is unaware; and |
| · | they have taken all the steps they ought to have taken to make themselves aware of any relevant audit information and to establish that theauditor is aware of that information. |
Statement of directors' responsibilities
The following statement, which should be read in conjunction with theauditor’s report regarding the respective responsibilities of Directors andauditor, is made with a view to distinguishing for shareholders those respective responsibilities in relation to the financial statements.
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and Group and of the profit or loss of the Group for that period.
In preparing those financial statements, the Directors are required to:
| 1. | select suitable accounting policies and then apply them consistently; |
| 2. | make judgements and estimates that are reasonable and prudent; |
| 3. | state that the financial statements comply with IFRSs as adopted by the European Union; |
| 4. | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. |
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
One Horizon Group plc
DIRECTORS’ REPORT(continued)
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for the maintenance and integrity of the satcomgroup.com website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Auditor
During the year Chantrey Vellacott DFK resigned as Auditors and BDO LLP were appointed in their place. A resolution that BDO LLP be reappointed will be proposed at the Annual General Meeting.
By order of the Board
Martin Ward
Company Secretary
DATE 14 February 2012
One Horizon Group plc
Independent auditor’s report to the shareholders of One Horizon Group plc
We have audited the financial statements of One Horizon Group plc for the year ended 30 June 2011, whichcomprise the consolidated statement of comprehensive income , the consolidated and company statement of financial position, the consolidated and company statement of changes in equity, the consolidated and company cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). These standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
| · | the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2011 and of the group’s profit for the year then ended; |
| · | the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; |
| · | the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and |
| · | the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. |
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
| · | adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or |
| · | the parent company financial statements are not in agreement with the accounting records and returns; or |
| · | certain disclosures of directors’ remuneration specified by law are not made; or |
| · | we have not received all the information and explanations we require for our audit. |
Mr Paul Anthony (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Southampton
United Kingdom
Date 14 February 2012
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
One Horizon Group plc
Consolidated statement of comprehensive income for the year ended 30 June 2011
| | | Notes | | 2011 | | | 2010 | |
| | | | | $’000 | | | $’000 | |
| | | | | | | |
| Revenue | | | | | | | | | | | | |
| Continuing operations | | | | | | | 122,529 | | | | 115,330 | |
| | | | | | | | | | | | | |
| Group revenue | | | | | | | 122,529 | | | | 115,330 | |
| | | | | | | | | | | | | |
| Cost of sales | | | | | | | (99,997 | ) | | | (95,844 | ) |
| | | | | | | | | | | | | |
| Gross profit | | | | | | | 22,532 | | | | 19,486 | |
| | | | | | | | | | | | | |
| Administration expenses | | | | | | | (16,484 | ) | | | (15,678 | ) |
| | | | | | | | | | | | | |
| Operating profit | | | | | | | | | | | | |
| Continuing operations | | | 5 | | | | 6,048 | | | | 3,808 | |
| | | | | | | | | | | | | |
| Group operating profit | | | | | | | 6,048 | | | | 3,808 | |
| | | | | | | | | | | | | |
| Finance income | | | 10 | | | | 3 | | | | 138 | |
| Finance costs | | | 11 | | | | (917 | ) | | | (1,304 | ) |
| | | | | | | | | | | | | |
| Profit on ordinary activities before taxation | | | | | | | 5,134 | | | | 2,642 | |
| | | | | | | | | | | | | |
| Taxation | | | 12 | | | | 699 | | | | (352 | ) |
| | | | | | | | | | | | | |
| Profit for the financial year and total comprehensive income | | | | | | | 5,833 | | | | 2,290 | |
| | | | | | | | | | | | | |
| Attributable to: | | | | | | | | | | | | |
| Equity holders of the parent company | | | | | | | 5,833 | | | | 2,290 | |
There were no recognised gains or losses other than those shown in the consolidated income statement.
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Consolidated statement of financial position as at 30 June 2011
| | | Notes | | 2011 | | | 2010 | |
| | | | | $’000 | | | $’000 | |
| | | | | | | | | |
| Non-current assets | | | | | | | | | | | | |
| Goodwill | | | 14 | | | | 16,588 | | | | 16,588 | |
| Intangible fixed assets | | | 15 | | | | 12,090 | | | | 3,081 | |
| Property, plant and equipment | | | 16 | | | | 4,610 | | | | 3,457 | |
| | | | | | | | 33,288 | | | | 23,126 | |
| Current assets | | | | | | | | | | | | |
| Inventories | | | 19 | | | | 7,010 | | | | 5,859 | |
| Trade and other receivables | | | 20 | | | | 20,926 | | | | 18,651 | |
| Bank balances and cash | | | 21 | | | | - | | | | 1,717 | |
| | | | | | | | 27,936 | | | | 26,227 | |
| Current liabilities | | | | | | | | | | | | |
| Financial liabilities | | | 22 | | | | 2,565 | | | | 2,796 | |
| Trade and other payables | | | 24 | | | | 30,434 | | | | 24,475 | |
| Current tax | | | | | | | 237 | | | | 1,144 | |
| Bank balances and cash | | | 21 | | | | 606 | | | | - | |
| Obligations under finance leases | | | 25 | | | | 98 | | | | 106 | |
| | | | | | | | 33,940 | | | | 28,521 | |
| Net current liabilities | | | | | | | (6,004 | ) | | | (2,294 | ) |
| | | | | | | | | | | | | |
| Non-current liabilities | | | | | | | | | | | | |
| Financial liabilities | | | 22 | | | | 812 | | | | 2,587 | |
| Obligations under finance leases | | | 25 | | | | 62 | | | | 26 | |
| Deferred taxation | | | 26 | | | | 445 | | | | - | |
| | | | | | | | 1,319 | | | | 2,613 | |
| Net assets | | | | | | | 25,965 | | | | 18,219 | |
| | | | | | | | | | | | | |
| Shareholders’ equity | | | | | | | | | | | | |
| Share capital | | | 27 | | | | 7,700 | | | | 6,053 | |
| Share premium account | | | | | | | 5,834 | | | | 4,845 | |
| Merger reserve | | | 28 | | | | (10,884 | ) | | | (10,884 | ) |
| Retained profits | | | 29 | | | | 23,315 | | | | 18,205 | |
| Total shareholders funds | | | | | | | 25,965 | | | | 18,219 | |
The financial statements were approved and authorised for issue by the Board of Directors on 14 February 2012.
Signed on behalf of the Board of Directors:
Martin Ward
Director
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Company statement of financial position as at 30 June 2011
| | | Notes | | | 2011 | | | | 2010 | |
| | | | | | $’000 | | | | $’000 | |
| Non-current assets | | | | | | | | | | | | |
| Investments | | | 17 | | | | 23,200 | | | | 18,157 | |
| | | | | | | | 23,200 | | | | 18,157 | |
| Current assets | | | | | | | | | | | | |
| Trade and other receivables | | | 20 | | | | 671 | | | | 867 | |
| Loans to related undertakings | | | 23 | | | | 3,566 | | | | 4,088 | |
| Current tax | | | | | | | 154 | | | | - | |
| | | | | | | | 4,391 | | | | 4,955 | |
| Current liabilities | | | | | | | | | | | | |
| Financial liabilities | | | 22 | | | | 1,849 | | | | 2,717 | |
| Loans from related undertakings | | | 23 | | | | 11,811 | | | | 6,452 | |
| Trade and other payables | | | 24 | | | | 421 | | | | 571 | |
| Current tax | | | | | | | - | | | | 49 | |
| | | | | | | | 14,081 | | | | 9,789 | |
| | | | | | | | | | | | | |
| Net current (liabilities) / assets | | | | | | | (9,690 | ) | | | (4,834 | ) |
| | | | | | | | | | | | | |
| Non-current liabilities | | | | | | | | | | | | |
| Financial liabilities | | | 22 | | | | - | | | | 1,150 | |
| | | | | | | | | | | | | |
| Net assets | | | | | | | 13,510 | | | | 12,173 | |
| | | | | | | | | | | | | |
| Shareholders’ equity | | | | | | | | | | | | |
| Share capital | | | 27 | | | | 7,700 | | | | 6,053 | |
| Share premium account | | | | | | | 5,834 | | | | 4,845 | |
| Retained profits | | | 29 | | | | (24 | ) | | | 1,275 | |
| | | | | | | | | | | | | |
| Total equity | | | | | | | 13,510 | | | | 12,173 | |
The financial statements were approved and authorised for issue by the Board of Directors on 14 February 2012.
Signed on behalf of the Board of Directors:
Martin Ward
Director
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Consolidated statement of changes in equity for the year ended 30 June 2011
| | | | Share | | | | Share | | | | Merger | | | | Retained | | | | | |
| | | | capital | | | | premium | | | | reserve | | | | profits | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at 30 June 2009 | | | 6,053 | | | | 4,845 | | | | (10,884 | ) | | | 16,396 | | | | 16,410 | |
| | | | | | | | | | | | | | | | | | | | | |
| Changes in equity for 2010 | | | | | | | | | | | | | | | | | | | | |
| Profit for the year and total | | | | | | | | | | | | | | | | | | | | |
| comprehensive income | | | - | | | | - | | | | - | | | | 2,290 | | | | 2,290 | |
| | | | | | | | | | | | | | | | | | | | | |
| Contributions by and distributions to owners | | | | | | | | | | | | | | | | | | | | |
| Dividends paid | | | - | | | | - | | | | - | | | | (481 | ) | | | (481 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at 30 June 2010 | | | 6,053 | | | | 4,845 | | | | (10,884 | ) | | | 18,205 | | | | 18,219 | |
| | | | | | | | | | | | | | | | | | | | | |
| Changes in equity for 2011 | | | | | | | | | | | | | | | | | | | | |
| Profit for the year and total | | | | | | | | | | | | | | | | | | | | |
| comprehensive income | | | - | | | | - | | | | - | | | | 5,833 | | | | 5,833 | |
| | | | | | | | | | | | | | | | | | | | | |
| Contributions by and distributions to owners | | | | | | | | | | | | | | | | | | | | |
| Dividends paid | | | | | | | | | | | | | | | (723 | ) | | | (723 | ) |
| New shares issues | | | 1,647 | | | | 989 | | | | - | | | | - | | | | 2,636 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at 30 June 2011 | | | 7,700 | | | | 5,834 | | | | (10,884 | ) | | | 23,315 | | | | 25,965 | |
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Company statement of changes in equity for the year ended 30 June 2011
| | | | Share | | | | Share | | | | Retained | | | | |
| | | | capital | | | | premium | | | | profits | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $000 | | | | $’000 | |
| | | | | | | | | | | | | | | | | |
| Restatedbalance at 30 June 2009 | | | 6,053 | | | | 4,845 | | | | 2,292 | | | | 13,190 | |
| | | | | | | | | | | | | | | | | |
| Changes in equity for 2010 | | | | | | | | | | | | | | | | |
| Loss for the year and total comprehensive income | | | - | | | | - | | | | (536 | ) | | | (536 | ) |
| | | | | | | | | | | | | | | | | |
| Contributions by and distributions to owners | | | | | | | | | | | | | | | | |
| Dividends paid | | | - | | | | - | | | | (481 | ) | | | (481 | ) |
| | | | | | | | | | | | | | | | | |
| Balance at 30 June 2010 | | | 6,053 | | | | 4,845 | | | | 1,275 | | | | 12,173 | |
| | | | | | | | | | | | | | | | | |
| Changes in equity for 2011 | | | | | | | | | | | | | | | | |
| Loss for the year and total comprehensive income | | | - | | | | - | | | | (576 | ) | | | (576 | ) |
| | | | | | | | | | | | | | | | | |
| Contributions by and distributions to owners | | | | | | | | | | | | | | | | |
| Dividends paid | | | - | | | | - | | | | (723 | ) | | | (723 | ) |
| New shares issued | | | 1,647 | | | | 989 | | | | - | | | | 2,636 | |
| | | | | | | | | | | | | | | | | |
| Balance at 30 June 2011 | | | 7,700 | | | | 5,834 | | | | (24 | ) | | | 13,510 | |
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Consolidated cash flow statement for the year ended 30 June 2011
| | | Note | | 2011 | | 2010 |
| | | | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| | | | | | | | | | | | | | | | | | | |
| Net cash generatedfrom operating activities | | | 31 | | | | | | | | 7,333 | | | | | | | | 7,187 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | | | | | | | | | | | | |
| Interest received | | | | | | | - | | | | | | | | 138 | | | | | |
| Purchase of intangible fixed assets | | | | | | | (3,624 | ) | | | | | | | (556 | ) | | | | |
| Purchase of property, plant and equipment | | | | | | | (2,495 | ) | | | | | | | (1,610 | ) | | | | |
| Acquisition of subsidiary (net of cash acquired) | | | | | | | (849 | ) | | | | | | | (307 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net cash used in investing activities | | | | | | | | | | | (6,968 | ) | | | | | | | (2,335 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | | | | | | | | | | | | |
| Dividends paid | | | | | | | (723 | ) | | | | | | | (481 | ) | | | | |
| Repayment of Convertible Unsecured Loan Stock | | | | | | | - | | | | | | | | (1,223 | ) | | | | |
| (Decrease)/increase in short term borrowing | | | | | | | (105 | ) | | | | | | | (803 | ) | | | | |
| Net (decrease)/increase in long term borrowing | | | | | | | (1,775 | ) | | | | | | | (3,315 | ) | | | | |
| Capital element of finance lease rental payments | | | | | | | (85 | ) | | | | | | | (87 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net cash (used)/generatedby financing activities | | | | | | | | | | | (2,688 | ) | | | | | | | (5,909 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net (decrease)/increase in cash and cash equivalents | | | | | | | | | | | (2,323 | ) | | | | | | | (1,057 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of year | | | | | | | | | | | 1,717 | | | | | | | | 2,774 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents at end of year | | | | | | | | | | | (606 | ) | | | | | | | 1,717 | |
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Company cash flow statement for the year ended 30 June 2011
| | | 2011 | | 2010 |
| | | $’000 | | $’000 | | $’000 | | $’000 |
| Cash flows from operating activities | | | | | | | | | | | | | | | | |
| Operating profit | | | (330 | ) | | | | | | | 222 | | | | | |
| | | | | | | | | | | | | | | | | |
| Operating cash flows before movement in working capital | | | (330 | ) | | | | | | | 222 | | | | | |
| Decrease/(Increase) in receivables | | | 599 | | | | | | | | 585 | | | | | |
| Increase in payables | | | 5,434 | | | | | | | | 2,396 | | | | | |
| | | | | | | | | | | | | | | | | |
| Cash generated/(used)by operations | | | 5,703 | | | | | | | | 3,203 | | | | | |
| | | | | | | | | | | | | | | | | |
| Tax paid | | | (276 | ) | | | | | | | (7 | ) | | | | |
| Interest paid | | | (173 | ) | | | | | | | (328 | ) | | | | |
| | | | | | | | | | | | | | | | | |
| Net cash generatedby operating activities | | | | | | | 5,254 | | | | | | | | 2,868 | |
| | | | | | | | | | | | | | | | | |
| Cash flows from investing activities | | | | | | | | | | | | | | | | |
| Acquisition of investments | | | (2,288 | ) | | | | | | | (1 | ) | | | | |
| | | | | | | | | | | | | | | | | |
| Net cash used in investment activities | | | | | | | (2,288 | ) | | | | | | | (1 | ) |
| | | | | | | | | | | | | | | | | |
| Financing activities | | | | | | | | | | | | | | | | |
| Repayment of Convertible Unsecured Loan Stock | | | - | | | | | | | | (1,223 | ) | | | | |
| Increase/(decrease) in short term borrowing | | | (1,093 | ) | | | | | | | 868 | | | | | |
| Net (decrease)/Increase in long term borrowing | | | (1,150 | ) | | | | | | | (2,197 | ) | | | | |
| Dividends paid | | | (723 | ) | | | | | | | (481 | ) | | | | |
| | | | | | | | | | | | | | | | | |
| Net cash usedby financing activities | | | | | | | (2,966 | ) | | | | | | | (3,033 | ) |
| | | | | | | | | | | | | | | | | |
| Net increase/(decrease) in cash and cash equivalents | | | | | | | - | | | | | | | | (166 | ) |
| | | | | | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of year | | | | | | | - | | | | | | | | 166 | |
| | | | | | | | | | | | | | | | | |
| Cash and cash equivalents at end of year | | | | | | | - | | | | | | | | - | |
The notes on pages 14 to 37 form part of these financial statements.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 1. | Nature of business and corporate information |
One Horizon Group plc is a company incorporated in the United Kingdom. The address of the registered office is given on page 1. The nature of the group’s operations and its principal activities are set out in the Directors’ report on pages 2 to 5.
The financial statements of the Group and Company have been prepared in accordance with International Financial Reporting and Accounting Standards adopted by the European Union (“IFRS”). The financial statements have been prepared on the historical cost basis, except where IFRS requires an alternative treatment. The principal variations from historical cost relate to financial instruments (IAS 39).
The financial statements are presented in US dollars since this is the currency in which the majority of the Company’s transactions are denominated.
The preparation of financial statements in conformity with general accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the estimates are based on management’s best knowledge of the amount, even or actions, actual results ultimately may differ from those estimates.
At the date of authorisation of these financial statements, there were Standards and Interpretations that were in issue but not yet effective and have not been applied in these financial statements. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financialstatements of the Group or Company, except for additional disclosures when the relevant Standards come into effect.
The Group has, following the year end, secured additional funds totalling $5.0 million. The funds are from an outside investor for new shares ($3.0m) and a loan from the major shareholders ($2.0m) which incurs 10% interest with repayment on IPO, Company sale or anytime at the Company’s discretion. The Group has bank facilities due for renewal at the end of February 2012. The Directors are not aware of any reason why the bank facilities will not be renewed, however should the Group need to raise additional funding then the Board have identified equity investors and confirmed their interest in investing in the Group , After making suitable enquiries, the Board is satisfied that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.
| 3. | Summary of significant accounting policies |
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (“its subsidiaries”) made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of a subsidiary.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make additional investment to cover the losses.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All inter-company transactions and balances between group enterprises are eliminated on consolidation.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 3. | Summary of significant accounting policies (continued) |
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the acquisition date, of assets given, liabilities incurred or assumed, and equity instruments issued by the group, plus any costs directly attributable to the acquisition. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognised at their fair value at the acquisition date, except for non-current assets that are held for resale, which are recognised and measured at fair value less costs to sell.
Goodwill
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of cost over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised of a subsidiary, associate or jointly controlled entity at the date of acquisition. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense. Goodwill is recognised as an asset and is tested for impairment annually, or on such occasions that events or changes in circumstances indicate that its value might be impaired.
On disposal of a subsidiary, the attributable amount of unamortised goodwill, which has not been subject to impairment, is included in the determination of the profit or loss on disposal.
Positive goodwill arising on acquisitions before the date of the transition to International Financial Reporting Standards has been retained at the previous UK GAAP amount subject to being tested for impairment at that date. Negative goodwill arising on acquisitions before the date of the transition has been credited to retained earnings at the date of transition. Where negative goodwill arises on acquisitions after the date of the transition, it is immediately credited in full to the consolidated statement of comprehensive income on the acquisition date.
Revenue recognition
Revenue is recognised:
| · | on hardware and prepaid airtime sales when invoiced and shipped, |
| · | on postpaid airtime when supplied, |
| · | on software when supplied. |
Revenue is stated net of discounts, VAT and other sales related taxes.
Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.
Assets leased to customers
Assets sold to customers under finance leases are capitalised as equipment and depreciated over the term of the lease to the customer. Assets leased to customers on operating leases are capitalised as equipment and depreciated over their useful life.
Borrowing costs
All borrowing costs are recognised in the income statement in the period to which they are incurred.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 3. | Summary of significant accounting policies (continued) |
Taxation
The tax charge represents the sum of current and deferred tax.
Current tax payable is based on taxable profits for the year. Taxable profits differ from net profits as reported in the income statement because it excludes items that are taxable or deductible in other years and items that are not taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheets date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates enacted or substantially enacted, and that are expected to apply in the period when the liability or the asset is realised.
Currencies
Transactions in currencies other than US Dollars are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. The principal exchange rate ruling at 30 June 2011 was £1 = US$1.61 . Profits and losses arising on exchange are included in the net profit or loss for the period.
Impairment
At each balance sheet date, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Goodwill arising on acquisition is allocated to cash-generating units. The recoverable amount of the cash-generating unit to which goodwill has been allocated is tested for impairment annually, or on such other occasions that events or changes in circumstances indicate that its value might be impaired
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit). A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses relating to goodwill are not reversed.
Share based payments - employee services
The fair value of employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable and the number of shares that the employee will ultimately receive. This estimate is revised at each balance sheet date and the difference is charged or credited to the income statement. Proceeds received on exercise of options, net of any directly attributable transaction costs, are credited to equity.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 3. | Summary of significant accounting policies (continued) |
Externally acquired intangible assets
Externally acquired intangible fixed assets are initiallyrecognisedat cost and subsequently amortised on a straight-linebasis over their usefuleconomiclives.
Intangible assets are recognised onbusinesscombinations it they are separable from the acquired entity or giveriseto other contractual/legal rights. The amounts ascribedtosuchintangiblesare arrived at byusingappropriate valuation techniques (see section related to criticalestimatesandjudgementsbelow).
In-process research and development programmes acquired in such combinations are recognised as an asset even ifsubsequent expenditureis written off becausethecriteria specified in the policy for development costs below arenot met.
The significantintangibles recognisedby theGroup, theiruseful economic lives and themethods usedtodetermine thecostofintangibles acquired in a business combination are as follows:
| Intangible assets | Useful economic life | Valuation method |
| Contractual relationships | Term of contract | Estimated discounted |
| | (up to 5 years) | Cash flow |
| | | |
| Software | Indeterminate | Relief from Royalty method |
| | | incorporating a discounted |
| | | cash flow |
The software isincludedwithin the billing system intangible asset, and as such is tested for impairment annually, or on such occasionsthatevents or changes in circumstances indicate thatitsvalue might beimpaired.
Internally generated intangible assets (development costs)
Expenditure oninternallydeveloped productsiscapitalised if it can be demonstrated that:
• it is technically feasible todevelopthe product for it to be sold;
• adequate resources are available to complete thedevelopment;
• thereisanintentionto complete and sell the product;
• theGroupis abletosell theproduct;
• sale oftheproduct will generate future economicbenefits;and
• expenditure on the project can be measured reliably.
Capitalised developmentcosts are in relation tothe Group'sbilling system, whichisconsidered to have anindeterminateeconomic life.The billing system is tested forimpairmentannually, or on such occasionsthatevents or changes in circumstances indicatethatits value might beimpaired.
Developmentexpenditurenotsatisfying the above criteria and expenditure on the research phaseof internalprojects are recognisedinthe consolidated statement of comprehensiveincomeasincurred.
Segmental reporting
The Directors regard the Group's primary segments of business to be Satcom Global FZE and Horizon Software. The business has no geographical aspect which requires analysis as secondary segments. Costs are allocated to the appropriate segment as they arise with central overheads apportioned on a reasonable basis.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 3. | Summary of significant accounting policies (continued) |
Property, plant and equipment
Property, plant and equipmentis stated at cost less accumulated depreciation. Depreciation is charged so as to write the cost less residual value over estimated useful lives, using the straight-line method commencing in the month following the purchase, on the following basis:
| Leasehold property improvements | - | Term of lease |
| Equipment | - | Between 3 and 5 years |
| Motor vehicles | - | 5 years |
The useful lives and residual values of assets are reviewed annually.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the lease.
The gain or loss arising on the disposal of an asset including disposal costs is recognised in the income statement.
Inventories
Inventories are stated at the lower of cost, using the average cost method, and net realisable value. Net realisable value represents the estimated revenue less all estimated costs of completion and necessary selling costs.
Financial instruments
Financial assets and financial liabilities are recognised when the Group or Company has become a party to the contractual provisions of the instrument.
The Group faces certain risks, not all of which are within its control. The main risk factors are outlined as follows:
| a) | Suppliers – The Group purchases its airtime from a few main satellite operators, the majority being from Inmarsat, Iridium and Thuraya and is reliant on the operators maintaining their capacity to enable customers to use their equipment. The satellite operators have contingency plans to protect their business and the directors consider the risk is not significant. |
| b) | Foreign currency – The Group reports its results in US Dollars because the majority of the trading income and expenditure is in that currency. The Group has limited exposure to sterling/US dollar exchange rate due to the fact that UK head office and certain interest costs are payable in sterling. |
Trade receivables
Trade receivables are stated at their nominal value less allowances for irrecoverability.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term deposits and liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest rate method.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that creates a residual interest in the assets of the group. Financial Liabilities are measured at amortised cost.
Trade payables are stated at cost.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 3. | Summary of significant accounting policies (continued) |
Provisions are recognised when the Group has a present obligation as a result of a past event from which it is likely that an outflow of economic benefits will occur which can be reasonably quantified.
Equity instruments
Equity instruments are recorded at the proceeds received, net of direct issue costs.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of intangibles
(a)The Group is required to test, where indicators of impairment exist, whether intangible assets have suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary.
(b) The Group’s core business is subject to rapid technological change. The accounts are prepared and policies relating to goodwill and other intangibles are applied in accordance with judgements formed in the light of current technological and market knowledge. It is possible that technological change could alter these judgements at any time.
Summarised below are details of the new standards, significant amendment to standards and interpretations which have been issued by the IASB and IFRIC but not adopted by the Group during the period as application is not mandatory in the current financial year:
| Standard/ | | |
| Interpretation | Title | Effective date |
| | | |
| - IFRS 7 (amendments): | Financial instruments disclosures | 1 July 2011 |
| - IFRS 7 (amendments): | Offsetting Financial Assets and | |
| | Financial Liabilities | 1 January 2013 |
| - IFRS 9: | Financial instruments | 1 January 2015 |
| - IFRS 10: | Consolidated financial statements | 1 January 2013 |
| - IFRS 11: | Joint arrangements | 1 January 2013 |
| - IFRS 12: | Disclosure of interests in other entities | 1 January 2013 |
| - IFRS 13: | Fair value measurement | 1 January 2013 |
| - IAS 1 (amendments): | Presentation of Financial Statements | 1 July 2012 |
| - IAS 12 (revised): | Income taxes | 1 January 2012 |
| - IAS 19 (amendments): | Employee benefits | 1 January 2013 |
| - IAS 32 (amendments): | Offsetting Financial Assets and | |
| | Financial Liabilities | 1 January 2014 |
None of the new standards, interpretations and amendments, which are effective for periods beginning after 1 July 2010 and which have not been adopted early, are expected to have a material effect on the Group's future financial statements.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 4 | Financial risk management |
Financial risk factors
The Group’s business activities are set out in the Business Review on pages 2 to 3. These activities expose the Group to a number of financial risks. The following describes the Group’s objectives, policies and processes for managing these risks and the methods used to measure them.
| (a) | Capital risk management |
The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an efficient capital structure to manage the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, return capital to shareholders and issue new shares or buy back existing shares. The Group has bank facilities as set out in note 22. There were no changes in the Group’s approach to capital management during the year.
The Group has limited exposure to price risk relating to the price of airtime and hardware, as price changes from suppliers would be passed onto customers under the contractual agreements.
As the Group has limited interest rate risk as it has fixed rates on its principal debt contracts. The impact is on income and operating cash flow and arises from changes in market interest rates. Cash resources are held in current, floating rate accounts.
| (ii) | Foreign currency risk |
The vast majority of the group’s trading activities are denominated in USD, the reporting currency. The group has salary and operating costs in local currency in the countries where we have a presence. These risks are not considered significant.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables and other current assets. The majority of the Group’s cash and cash equivalents are held across three UK financial institutions.
The concentration of credit risk from trade receivables and other current assets varies throughout the year depending on the timing of transactions.
A high proportion of trading partners by value are large corporate entities, or governmental bodies with good credit ratings thereby minimising the risk of non-payment. Other exposures of the Group are spread over a number of customers and counterparties with little concentration on any one entity. There are no other identified concentration risks.
Exposures to credit risk is analysed below:
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| Trade receivables | | | 15,206 | | | | 13,339 | |
| Other receivables | | | 1,616 | | | | 1,384 | |
| | | | | | | | | |
| | | | 16,822 | | | | 14,723 | |
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 4 | Financial risk management (continued) |
The maximum exposure to credit risk for trade receivables and other current assets is represented by their carrying amount.
No significant collateral is held is respect of the above exposures however no significant amounts are past due or impaired and the credit quality of the exposures is considered to be good
The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business and to invest cash assets safely and profitably. The Board reviews available cash to ensure there are sufficient resources for working capital requirements.
At 30 June 2011 and 30 June 2010 all amounts shown in the consolidated balance sheet under current assets and current liabilities mature for payment within one year.
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| Profit from operations has been arrived at after charging: | | | | | | | | |
| | | | | | | | |
| Auditor’s remuneration payable to the Company’s auditor for the audit of parent Company’s annual accounts | | | 60 | | | | 50 | |
| Auditor’s remuneration - audit of subsidiaries pursuant to legislation | | | 60 | | | | 77 | |
| Fees payable to the Company’s auditor and its associates for other services | | | - | | | | 10 | |
| | | | | | | | | |
| Amortisation | | | 132 | | | | 306 | |
| Depreciation of property, plant, and equipment | | | | | | | | |
| - owned assets | | | 1,428 | | | | 787 | |
| - leased assets | | | 27 | | | | 75 | |
| Staff costs | | | 8,353 | | | | 8,919 | |
| Directors’ remuneration | | | 1,028 | | | | 492 | |
| Property lease rentals | | | 801 | | | | 659 | |
| Equipment lease rentals | | | 22 | | | | 25 | |
| (Gain)/loss on foreign currency translation | | | (169 | ) | | | (4 | ) |
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these accounts. The retained (loss) for the year of the Company was ($576,000) (2010: ($536,000))
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| | At 30 June 2011 the Group is organised into two main business segments: Satcom Global and Horizon Globex. |
The segment analysis for the year ended 30 June 2011 is as follows:
| | | | | | | | | | | | Intra group | | | | | |
| | | | Satcom | | | | Horizon | | | | adjustments | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| Revenue from services | | | 118,908 | | | | 3,621 | | | | | | | | 122,529 | |
| | | | | | | | | | | | | | | | | |
| Trading profit/(loss) | | | 1,976 | | | | 2,361 | | | | - | | | | 4,337 | |
| Negative goodwill | | | - | | | | - | | | | 1,711 | | | | 1,711 | |
| Group operating profit | | | 1,976 | | | | 2,361 | | | | 1,711 | | | | 6,108 | |
| Finance income | | | 3 | | | | - | | | | - | | | | 3 | |
| Finance costs | | | (917 | ) | | | - | | | | - | | | | (917 | ) |
| Profit before tax | | | 1,062 | | | | 2,361 | | | | 1,711 | | | | 5,194 | |
| | | | | | | | | | | | | | | | | |
| Total assets | | | 31,024 | | | | 8,368 | | | | 21,832 | | | | 61,224 | |
| Total liabilities | | | (31,902 | ) | | | (2,912 | ) | | | (445 | ) | | | (35,259 | ) |
| Net assets | | | (878 | ) | | | 5,456 | | | | 21,387 | | | | 25,965 | |
| | | | | | | | | | | | | | | | | |
| Capital expenditure | | | 2,608 | | | | 3,625 | | | | - | | | | 6,233 | |
| Depreciation | | | 1,448 | | | | 7 | | | | 132 | | | | 1,587 | |
The segment analysis for the year ended 30 June 2010 is as follows:
| | | | | | | | | | | | Intra group | | | | | |
| | | | Satcom | | | | Horizon | | | | adjustments | | | | Group | |
| | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| Revenue from services | | | 115,330 | | | | - | | | | - | | | | 115,330 | |
| | | | | | | | | | | | | | | | | |
| Group operating profit | | | 3,808 | | | | - | | | | - | | | | 3,808 | |
| Finance income | | | 138 | | | | - | | | | - | | | | 138 | |
| Finance costs | | | (1,304 | ) | | | | | | | - | | | | (1,304 | ) |
| Profit/(loss) before tax | | | 2,642 | | | | - | | | | - | | | | 2,642 | |
| | | | | | | | | | | | | | | | | |
| Total assets | | | 32,765 | | | | - | | | | 16,588 | | | | 49,353 | |
| Total liabilities | | | (31,134 | ) | | | - | | | | - | | | | (31,134 | ) |
| Net assets | | | 1,631 | | | | - | | | | 16,588 | | | | 18,219 | |
| | | | | | | | | | | | | | | | | |
| Capital expenditure | | | 2,166 | | | | - | | | | - | | | | 2166 | |
| Depreciation | | | 862 | | | | - | | | | - | | | | 862 | |
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
The cost of employing all staff and Directors was:
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Wages and salaries | | | 7,800 | | | | 8,261 | |
| Social security costs | | | 553 | | | | 658 | |
| | | | | | | | | |
| | | | 8,353 | | | | 8,919 | |
| | | | | | | | | |
| | | | No. | | | | No. | |
| | | | | | | | | |
| The average number of employees during the period was: | | | | | | | | |
| Distribution | | | 18 | | | | 26 | |
| Administration | | | 120 | | | | 110 | |
| Management | | | 21 | | | | 19 | |
| | | | | | | | | |
| | | | 159 | | | | 155 | |
All Group employees are paid through trading subsidiaries of the Group.
The Directors have identified 7 (2010: 6) key management personnel whose compensation was as follows:
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Short-term employment benefits | | | 1,780 | | | | 1,379 | |
Share options
There were 1,000,000 share options granted by the Company during the year to employees of the Group. Details of the movements during the year are as follows:
| | | | June | | | | Issued/ | | | | June | | | | Exercisable at | | | | Exercise | | | | | |
| | | | 2010 | | | | (Lapsed) | | | | 2011 | | | | 30/06/11 | | | | price | | | | Exercise dates | |
| EMI approved (UK) | | | 28,440 | | | | (5,830 | ) | | | 22,610 | | | | 22,610 | | | | 9.6 p | | | | Apr 2008 – 2015 | |
| Unapproved (Overseas) | | | 11,660 | | | | (5,830 | ) | | | 5,830 | | | | 5,830 | | | | 9.6 p | | | | Apr 2008 – 2015 | |
| EMI approved (UK) | | | 4,380 | | | | - | | | | 4,380 | | | | 4,380 | | | | 34.0 p | | | | Oct 2008 – 2015 | |
| Unapproved (Overseas) | | | 98,904 | | | | - | | | | 98,904 | | | | 98,904 | | | | 34.0 p | | | | Oct 2008 – 2015 | |
| EMI approved (UK) | | | 12,400 | | | | - | | | | 12,400 | | | | 12,400 | | | | 36.5 p | | | | Dec 2009 – 2016 | |
| Unapproved (Overseas) | | | 101,601 | | | | - | | | | 101,601 | | | | 101,601 | | | | 36.5 p | | | | Dec 2009 – 2016 | |
| Unapproved (Overseas) | | | 250,000 | | | | (250,000 | ) | | | - | | | | - | | | | 10.0 p | | | | Nov 2011 – 2018 | |
| Unapproved (Overseas) | | | - | | | | 1,000,000 | | | | 1,000,000 | | | | - | | | | 10.0 p | | | | Dec 2013 - 2020 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 507,385 | | | | 738,340 | | | | 1,245,725 | | | | 245,725 | | | | | | | | | |
The unapproved options vest after three years of service and can be excercised within 10 years of grant. The other options have similar vesting conditions.
No options were granted to executive Directors and employees during the year ended 30 June 2010. The weighted average fair value of options granted to employees during the year ended 30 June 2011 was determined using the Black-Scholes-Merton valuation model at 1.26p per option. The significant inputs into the model were exercise price shown above, volatility of 40%, dividend yield of 1%, expected option life of 3 years and annual risk free interest rate of 4.6%. Future volatility has been estimated based on comparable information rather than historical data.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 9. | Directors’ remuneration |
Remuneration paid to Directors during the year was as follows:
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Salary and benefits | | | 976 | | | | 475 | |
| Pension contributions | | | 52 | | | | 17 | |
| | | | | | | | | |
| | | | 1,028 | | | | 492 | |
| | | | | | | | | |
| Remuneration paid to the highest paid Director was as follows: | | | | | | | | |
| | | | | | | | | |
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Emoluments | | | 485 | | | | 242 | |
| Pension contributions | | | - | | | | 8 | |
| | | | | | | | | |
| | | | 485 | | | | 250 | |
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Interest on bank deposits | | | 3 | | | | 3 | |
| Interest on loan note released | | | - | | | | 135 | |
| | | | | | | | | |
| | | | 3 | | | | 138 | |
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Interest and similar charges on bank loans and overdrafts | | | 866 | | | | 772 | |
| Interest on directors’ and shareholders’ loans | | | 27 | | | | 28 | |
| Interest on convertible loan stock | | | - | | | | 39 | |
| Amortisation of issue costs on long term borrowings | | | - | | | | 430 | |
| Interest on obligations under finance leases | | | 24 | | | | 35 | |
| | | | | | | | | |
| | | | 917 | | | | 1,304 | |
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
Analysis of charge in period
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Current tax | | | | | | | | |
| UK taxation: | | | | | | | | |
| United Kingdom corporation tax in respect of the period | | | - | | | | - | |
| | | | | | | | | |
| Foreign tax: | | | | | | | | |
| Current tax on income for the year | | | 535 | | | | 352 | |
| Over provision previous years | | | (735 | ) | | | - | |
| Deferred Tax (see note 26) | | | (499 | ) | | | - | |
| | | | | | | | | |
| Total tax | | | (699 | ) | | | 352 | |
Factors affecting tax charge for period
The differences between the total tax shown above and the amount calculated by applying the standard rate of United Kingdom corporation tax to the profit before tax is as follows:
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Profit from continuing operations before tax | | | 5,134 | | | | 2,642 | |
| | | | | | | | | |
| Tax on profit from continuing operations at the average standard | | | | | | | | |
| United Kingdom corporation tax rate of 27.5% (2010: 28%) | | | 1,412 | | | | 739 | |
| | | | | | | | | |
| Effects of: | | | | | | | | |
| Expenses not deductible for tax purposes | | | 279 | | | | 1 | |
| Non taxable income | | | (470 | ) | | | - | |
| Temporary differences arising on fixed assets | | | (40 | ) | | | (43 | ) |
| Movement on unrecognised losses | | | 518 | | | | - | |
| Lower taxes on overseas earnings | | | (1,164 | ) | | | (345 | ) |
| Prior year adjustment | | | (735 | ) | | | - | |
| Movement on deferred tax rate | | | (499 | ) | | | - | |
| | | | | | | | | |
| Total tax charge for period | | | (699 | ) | | | 352 | |
Deferred taxation
An amount of $499,000 has been released to income statement in respect of the acquisition of Abbey Technology GmbH.
There is an unprovided deferred tax asset in relation to losses carried forward of $2,921,000 at the balance sheet date.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| | | | 2011 | | | | 2010 | |
| | | | $’000 | | | | $’000 | |
| | | | | | | | | |
| Amounts paid in the year: | | | | | | | | |
| | | | | | | | | |
| Final dividend of 0.60 cents (2010: 0.50 cents) per share | | | 457 | | | | 301 | |
| | | | | | | | | |
| Interim dividend of 0.35 cents (2010: 0.30 cents) per share | | | 266 | | | | 180 | |
| | | | | | | | | |
| | | | 723 | | | | 481 | |
The Board is not proposing a final dividend at the Annual General Meeting as set out in the Directors’ Report.
| Group | | | | |
| | | |
| Carrying amount | | | $’000 | |
| | | |
| At 1 July 2009 | | | 18,739 | |
| Additions | | | (2,151 | ) |
| | | | | |
| At 30 June 2010 | | | 16,588 | |
| Additions/Reductions | | | | |
| | | | - | |
| | | | | |
| At 30 June 2011 | | | 16,588 | |
Goodwill and recoverable amounts have been calculated in respect of the one cash generating operating unit operated by the Group.
| | | | $’000 | |
| | | | Goodwill | |
| | | | | |
| SatCom Global | | | 16,588 | |
The unit’s recoverable amount have been determined on the value in use basis. This were calculated as the net present value of projected cash flows derived from budgets approved by management for the three years ending 30 June 2014 and extended by a further two years to 30 June 2016 by assuming trading in those two years would be similar to the budget for the year ending 30 June 2014 with a compound growth rate of 5% applied.
The key assumptions used for the budgets for the three years to 30 June 2014 were:-
Growth – growth assumptions were related to forecasts on the take up of new technology being offered by the Group together with the reasonably expected growth associated with existing large contracts.
Margin – based on existing margins achieved and those inherent in the future performance of existing contracts.
Acquisitions – no acquisitions have been assumed.
Discount rates – rates of 12% have been used. The Board considers that this rate reflects the current market assessment of the time value of money and risk specific to the income generating units.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
The Board currently considers that the recoverable amounts are greater than the carrying value of goodwill for any reasonably likely variance in the key assumptions.
| 15. | Intangible fixed assets |
Group
2011
| | | | Contractual | | | | Billing | | | |
| | | | Relationship | | | | system | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $’000 | |
| Cost | | | | | | | | | | | | |
| At 1 July 2010 | | | - | | | | 3,916 | | | | 3,916 | |
| Additions | | | - | | | | 3,625 | | | | 3,897 | |
| Acquired in subsidiary | | | 885 | | | | 4,631 | | | | 5,244 | |
| | | | | | | | | | | | | |
| At 30 June 2011 | | | 885 | | | | 12,172 | | | | 13,057 | |
| | | | | | | | | | | | | |
| Amortisation: | | | | | | | | | | | | |
| At 1 July 2010 | | | - | | | | 835 | | | | 835 | |
| Charge for the year | | | 132 | | | | - | | | | 132 | |
| | | | | | | | | | | | | |
| At 30 June 2011 | | | 132 | | | | 835 | | | | 967 | |
| | | | | | | | | | | | | |
| Net book value: | | | | | | | | | | | | |
| At 30 June 2011 | | | 753 | | | | 11,337 | | | | 12,090 | |
Group
2010
| | | | Billing | |
| | | | system | |
| | | | $’000 | |
| Cost | | | | |
| At 1 July 2009 | | | 3,360 | |
| Additions | | | 556 | |
| | | | | |
| At 30 June 2010 | | | 3,916 | |
| | | | | |
| Amortisation: | | | | |
| At 1 July 2009 | | | 529 | |
| Charge for the year | | | 306 | |
| | | | | |
| At 30 June 2010 | | | 835 | |
| | | | | |
| Net book value: | | | | |
| At 30 June 2010 | | | 3,081 | |
The Group billing system includes licences and other ancillary costs. The system enables call data records from a large number of sources to be collated and billed to customers. Following the acquisition of Abbey the billing system is now an integral part of the Horizon Software product. As such the Board considers that this intellectual property now has an indeterminate life and accordingly is not amortised but is instead subject to annual impairment review.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 16. | Property improvements and equipment |
Group
2011
| | | | Leasehold | | | | | | | |
| | | | property | | | | Motor | | | | | |
| | | | improvements | | | | vehicles | | | | Equipment | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| Cost | | | | | | | | | | | | | | | | |
| At 1 July 2010 | | | 311 | | | | 20 | | | | 7,530 | | | | 7,861 | |
| Additions | | | 265 | | | | - | | | | 2,343 | | | | 2,608 | |
| | | | | | | | | | | | | | | | | |
| At 30 June 2011 | | | 576 | | | | 20 | | | | 9,873 | | | | 10,469 | |
| | | | | | | | | | | | | | | | | |
| Depreciation: | | | | | | | | | | | | | | | | |
| At 1 July 2010 | | | 159 | | | | 8 | | | | 4,237 | | | | 4,404 | |
| Charge for the year | | | 25 | | | | 4 | | | | 1,426 | | | | 1,455 | |
| | | | | | | | | | | | | | | | | |
| At 30 June 2011 | | | 184 | | | | 12 | | | | 5,663 | | | | 5,859 | |
| | | | | | | | | | | | | | | | | |
| Net book value: | | | | | | | | | | | | | | | | |
| At 30 June 2011 | | | 392 | | | | 8 | | | | 4,210 | | | | 4,610 | |
Group
2010
| | | | Leasehold | | | | | | | |
| | | | property | | | | Motor | | | | | |
| | | | improvements | | | | vehicles | | | | Equipment | | | | Total | |
| | | | $’000 | | | | $’000 | | | | $’000 | | | | $’000 | |
| Cost | | | | | | | | | | | | | | | | |
| At 1 July 2009 | | | 269 | | | | 20 | | | | 5,962 | | | | 6,251 | |
| Additions | | | 42 | | | | - | | | | 1,568 | | | | 1,610 | |
| | | | | | | | | | | | | | | | | |
| At 30 June 2010 | | | 311 | | | | 20 | | | | 7,530 | | | | 7,861 | |
| | | | | | | | | | | | | | | | | |
| Depreciation: | | | | | | | | | | | | | | | | |
| At 1 July 2009 | | | 89 | | | | 4 | | | | 3,449 | | | | 3,542 | |
| Charge for the year | | | 70 | | | | 4 | | | | 788 | | | | 862 | |
| | | | | | | | | | | | | | | | | |
| At 30 June 2010 | | | 159 | | | | 8 | | | | 4,237 | | | | 4,404 | |
| | | | | | | | | | | | | | | | | |
| Net book value: | | | | | | | | | | | | | | | | |
| At 30 June 2010 | | | 152 | | | | 12 | | | | 3,293 | | | | 3,457 | |
The carrying amount of the Group’s equipment includes an amount of $414,000 (2010: $398,000) in respect of assets held under finance leases.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
Company
| | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| Cost | | | | | | | | |
| At 1 July 2010 | | | 18,157 | | | | 18,156 | |
| Additions | | | 5,043 | | | | 1 | |
| | | | | | | | | |
| At 30 June 2011 | | | 23,200 | | | | 18,157 | |
The principal subsidiary undertakings of the Company are shown below. They have share capitals comprising ordinary shares or common stock, apart from Shared Data Networks, LLC where the equity is classified as Membership Interest, and all are consolidated into the Group accounts.
| Subsidiaries | | Proportion | | | Country of incorporation |
| | | held | | | and operation |
| | | | | |
| (C) SatCom Distribution Limited | | | 100 | % | | UK |
| (F) SatCom Distribution Inc. | | | 100 | % | | USA |
| (A) O'Gara Satellite Systems Inc * | | | 100 | % | | USA |
| (C) SatCom Distribution (Asia) Limited * | | | 100 | % | | Hong Kong |
| (G) Horizon Mobile Communications Co. Limited * | | | 100 | % | | Thailand |
| (C) SatCom Global Pte Ltd formerly*(Horizon Mobile Communications Pte Ltd) | | | 100 | % | | Singapore |
| (C) Horizon Mobile Communications (HK) Co. Limited * | | | 100 | % | | BVI |
| (C)Horizon Mobile Communications (Australia) Pty Limited* | | | 100 | % | | Australia |
| (B) SatCom Global FZE | | | 100 | % | | UAE |
| (C) SatCom Global Inc* (Formerly World Communications Center Inc) | | | 100 | % | | USA |
| (D) Shared Data Networks, LLC* | | | 100 | % | | USA |
| (E) Abbey Technology GmbH | | | 100 | % | | Switzerland |
| (E) Horizon Globex GmbH | | | 100 | % | | Switzerland |
| | | | | | | |
| Registered branch | | | | | | |
| Horizon Mobile Communications (HK) Co. Limited * | | | 100 | % | | Japan |
* Held by a subsidiary undertaking
Nature of business
A –Airtime distribution and ancillary services.
B – Wholesale airtime, Equipment & VSAT distribution to third parties and group
C – Sales Company
D – VSAT distribution to third party and group
E – Software and equipment
F – Non trading company
G – Administration company
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
On 18 September 2010 the Group acquired 100% of the voting equity instruments of Abbey Technology GmbH (“Abbey”). Abbey is a software development company based in Switzerland.
The primary reasons for this acquisition were that Abbey had been contracted to develop bandwidth optimised software “Horizon” for the Mobile Satellite Services sector by the Group and, having worked in close collaboration with Abbey, the parties could see significant other markets to utilise this new technology in, particularly GSM and VSAT. Having worked prior to the acquisition jointly with Abbey to develop Horizon, the Directors believe that the Group would be in a better position to roll-out the product and service proposition by bringing the Group and Abbey together. This enabled the expanded Group to own the IP relating to Horizon, and to retain the full benefit of the margins and to strengthen the management team by the addition of Brian Collins to the Board.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
| | | Book
value | | | Adjustments | | | Fair
value | |
| | | $’000 | | | $’000 | | | $’000 | |
| Software | | | 272 | | | | 4,359 | | | | 4,631 | |
| Customer list | | | | | | | 885 | | | | 885 | |
| Directors loan receivable | | | 804 | | | | | | | | 804 | |
| Receivables | | | 123 | | | | | | | | 123 | |
| Cash | | | 154 | | | | | | | | 154 | |
| Payables | | | (303 | ) | | | | | | | (303 | ) |
| Deferred tax liability | | | | | | | (944 | ) | | | (944 | ) |
| | | | 1,050 | | | | 4,300 | | | | 5,350 | |
The assets acquired were subject to an independent valuation.
On acquisition Abbey held trade receivables with a book and fair value of $123k. The group considers it likely that they will all ultimately be received.
The directors loan was received immediately post the acquisition.
Fair value of consideration paid
| | | $’000 |
| Cash | | | 1,003 | |
| 16,473,000 $0.10 Ordinary shares issued at a value of $0.16 | | | 2,636 | |
| Total consideration | | | 3,639 | |
| | | | | |
| Negative goodwill | | | (1,711 | ) |
Negative goodwill has been written off to administration expenses in the statement of comprehensive income in full at the date of acquisition.
Acquisition costs of $1,285k arose as a result of the transaction. These have been recognised as part of administrative expenses in the statement of comprehensive income.
Since the acquisition date, Abbey has contributed $656k to group revenues and $440k to group profit. If the acquisition had occurred on 1 July 2010, group revenue and profit would not have been significantly different.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| Group | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| | | | | | | | | |
| Finished goods | | | 7,010 | | | | 5,859 | |
The amount of inventories recognised as an expense during the year amounted to $31,331,000 (2010: $25,131,000)
| 20. | Trade and other receivables |
| | | Group | | Company |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | |
| Trade receivables | | | 15,206 | | | | 13,339 | | | | - | | | | - | |
| Other taxes and social security | | | - | | | | 120 | | | | - | | | | - | |
| Other receivables | | | 1,616 | | | | 1,264 | | | | 667 | | | | 864 | |
| Prepayments and accrued income | | | 4,104 | | | | 3,928 | | | | 4 | | | | 3 | |
| | | | | | | | | | | | | | | | | |
| | | | 20,926 | | | | 18,651 | | | | 671 | | | | 867 | |
The amounts presented in the financial statements are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The group has a bad debt provision of $225,000 (2010 $107,000)
The ageing profile of trade receivables is as follows
| | | Group |
| | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| | | | | |
| Current | | | 12,947 | | | | 11,710 | |
| Overdue | | | | | | | | |
| Less than 90 days | | | 1,142 | | | | 487 | |
| 91 to 120 days | | | 330 | | | | 201 | |
| Over 120 days | | | 787 | | | | 941 | |
| | | | 15,206 | | | | 13,339 | |
Credit risk
The Group and Company have no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 21. | Bank balances and cash |
Bank balances and cash comprise cash held by the Group and Company and short-term bank deposits with an original maturity of three months or less. The carrying value of these assets approximates their fair value.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
| | | Group | | Company |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | |
| Within one year | | | | | | | | |
| Bank overdrafts and loans | | | 2,340 | | | | 2,600 | | | | 1,624 | | | | 2,521 | |
| Directors’ loan accounts | | | 225 | | | | 196 | | | | 225 | | | | 196 | |
| | | | | | | | | | | | | | | | | |
| | | | 2,565 | | | | 2,796 | | | | 1,849 | | | | 2,717 | |
| Over one year | | | | | | | | | | | | | | | | |
| Bank overdrafts and loans | | | 812 | | | | 2,587 | | | | - | | | | 1,150 | |
| | | | | | | | | | | | | | | | | |
| | | | 812 | | | | 2,587 | | | | - | | | | 1,150 | |
| | | | | | | | | | | | | | | | | |
| Total | | | 3,377 | | | | 5,383 | | | | 1,849 | | | | 3,867 | |
The principal features of the financial liabilities are as follows:
Directors’ loan accounts
Details of Directors’ loan accounts are set out in note 32. The loans are repayable on demand and accrue interest at 4% per annum.
Bank overdrafts and loans
The Group has banking facilities with HSBC Bank Plc, which are supported by guarantees from main trading subsidiaries of the Group together with a debenture over the cash and assets of the Company. There is a net UK facility of US$2.0 million in the Company, which is set-off against cash balances in the UK within the Group. The interest chargeable is on the net balance at the rate of 1.75% over the HSBC Bank base rate. In addition, there is a US$4.8million 3 year term loan which was advanced in June 2009.
SatCom Distribution, Inc. has two facilities totalling US$3.25 million with HSBC Bank USA which are secured on cash balances and receivables held by US subsidiaries of SatCom Distribution, Inc. The first facility is a 5 year term revolving loan of US$3.0 million, repayments on which commenced in June 2009.
The second facility is an overdraft of US$ 0.25 million which had been drawn down at the year end. The interest chargeable on the drawn balance is 2.5% over US Dollar L.I.B.O.R.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 22. | Financial liabilities (continued) |
Maturity profile
| | | Group | | | Company | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | | | | | |
| Within one year | | | 2,565 | | | | 2,796 | | | | 1,849 | | | | 2,717 | |
| Between one and two years | | | 812 | | | | 2,587 | | | | - | | | | 1,150 | |
| Between two and five years | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| | | | 3,377 | | | | 5,383 | | | | 1,849 | | | | 3,867 | |
The fair value of the Group’s and Company’s overdrafts, bank loans and deferred consideration have been reviewed with the Group’s advisers and their fair values are not considered to be materially different from their book values.
| 23. | Loans to / from related undertakings |
Company
| | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| | | | | | | |
| Loans to subsidiaries | | | 3,566 | | | | 4,088 | |
| | | | | | | | | |
| | | | 3,566 | | | | 4,088 | |
| | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| | | | | | | |
| Loans from subsidiaries | | | 11,811 | | | | 6,452 | |
| | | | | | | | | |
| | | | 11,811 | | | | 6,452 | |
The Directors consider that the fair values of the loans outstanding are not materially different from their book values. The loans are unsecured and repayable on demand. Interest is charged at commercial rates on long term elements of the loans.
| 24. | Trade and other payables |
| | | Group | | | Company | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | | | | | |
| Trade payables | | | 23,898 | | | | 15,575 | | | | - | | | | 45 | |
| Other taxation and social security | | | 56 | | | | 192 | | | | 26 | | | | 15 | |
| Other payables | | | 2,423 | | | | 2,383 | | | | 192 | | | | 321 | |
| Accruals and deferred income | | | 4,057 | | | | 6,325 | | | | 203 | | | | 190 | |
| | | | | | | | | | | | | | | | | |
| | | | 30,434 | | | | 24,475 | | | | 421 | | | | 571 | |
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 25. | Obligations under finance leases |
| Group | | 2011 | | | 2010 | |
| Amounts payable under finance leases | | $’000 | | | $’000 | |
| | | | | | | |
| Within one year | | | 98 | | | | 125 | |
| In the second to fifth years inclusive | | | 97 | | | | 47 | |
| | | | | | | | | |
| | | | 195 | | | | 172 | |
| | | | | | | | | |
| Less: future finance charges | | | (35 | ) | | | (40 | ) |
| | | | | | | | | |
| Value of minimum lease payments | | | 160 | | | | 132 | |
| | | | | | | | | |
| Amount due for settlement within 12 months | | | 98 | | | | 106 | |
| | | | | | | | | |
| Amounts over one year | | | 62 | | | | 26 | |
The average lease term is 3 years. For the year ended 30 June 2011 the average effective borrowing rate was 12.5% (2010: 12.5%). All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
There is no material difference between the total value of the future finance lease payments at the balance sheet dates and their present value.
Obligations under finance leases are secured over the asset acquired.
| | | Group | |
| | | $’000 | |
| | | | |
| Balance at 1 July 2010 | | | - | |
| | | | | |
| Arising on valuation of assets acquired | | | 944 | |
| Released to income statement | | | (499 | ) |
| | | | | |
| Balance at 30 June 2011 | | | 445 | |
The deferred tax liability arises on the acquisition of Abbey Technology GmbH. On transfer of the Intellectual Property to Horizon Globex GmbH the deferred tax liability is reduced to $445,000 giving rise to a release of $499,000.
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| | | 2011 | | | 2011 | | | 2010 | | | 2010 | |
| | | $’000 | | | No of shares | | | $’000 | | | No of shares | |
| | | | | | ‘000 | | | | | | ‘000 | |
| Authorised: | | | | | | | | | | | | | | | | |
| Ordinary shares of $0.10 each | | | 50,000 | | | | 500,000 | | | | 50,000 | | | | 500,000 | |
| Deferred shares of £1 each | | | 90 | | | | 50 | | | | 90 | | | | 50 | |
| | | | | | | | | | | | | | | | | |
| | | | 50,090 | | | | 500,050 | | | | 50,090 | | | | 500,050 | |
| | | 2011 | | | 2011 | | | 2010 | | | 2010 | |
| | | $’000 | | | No of shares | | | $’000 | | | No of shares | |
| | | | | | ‘000 | | | | | | ‘000 | |
| Called up, allotted and fully paid: | | | | | | | | | | | | | | | | |
| Ordinary shares of $0.10 each | | | 7,610 | | | | 76,101 | | | | 5,963 | | | | 59,629 | |
| Deferred shares of £1 each | | | 90 | | | | 50 | | | | 90 | | | | 50 | |
| | | | | | | | | | | | | | | | | |
| | | | 7,700 | | | | 76,151 | | | | 6,053 | | | | 59,679 | |
Deferred shares of £1 each carry no voting or dividend rights and are redeemable at par.
A total of 16,473,000 ordinary shares at $0.10 each were issued at $0.16 during the year in consideration for the issued share capital of Abbey Technology GmbH, less the associated issue costs of $12,000 .
The acquisition by the Company of the SatCom Distribution Limited group in May 2004 was accounted for as a merger. Accordingly a debit merger reserve has been recognised in the consolidated balance sheet representing the difference between the consideration paid to acquire the group and its net assets at the date of the transaction.
| | | Group | | | Company | |
| | | $’000 | | | $’000 | |
| | | | | | | |
| Balance at 1 July 2009 | | | 16,396 | | | | 2,292 | |
| | | | | | | | | |
| Dividends paid | | | (481 | ) | | | (481 | ) |
| Net profit for the year | | | 2,290 | | | | (536 | ) |
| | | | | | | | | |
| Balance at 1 July 2010 | | | 18,205 | | | | 1,275 | |
| | | | | | | | | |
| Dividends paid | | | (723 | ) | | | (723 | ) |
| Net profit (loss) for the year | | | 5,833 | | | | (576 | ) |
| | | | | | | | | |
| Balance at 30 June 2011 | | | 23,315 | | | | (24 | ) |
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 30. | Operating lease commitments |
At the balance sheet date, the group and company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Group
| | | Land and | | | | | | Land and | | | | |
| | | buildings | | | Other | | | buildings | | | Other | |
| | | 2011 | | | 2011 | | | 2010 | | | 2010 | |
| Total rentals payable on leases expiring: | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | | | | | |
| Within one year | | | 662 | | | | 17 | | | | 736 | | | | 21 | |
| Within two to five years | | | 493 | | | | 6 | | | | 1,036 | | | | 21 | |
| After five years | | | 40 | | | | - | | | | 80 | | | | - | |
| | | | | | | | | | | | | | | | | |
| | | | 1,195 | | | | 23 | | | | 1,852 | | | | 42 | |
| 31. | Reconciliation of operating activities to operating cash flows |
| | | 2011 | | | 2010 | |
| | | $’000 | | | $’000 | |
| | | | | | | |
| Operating profit | | | 6,048 | | | | 3,808 | |
| Amortisation | | | 132 | | | | 306 | |
| Depreciation | | | 1,455 | | | | 862 | |
| Net goodwill on acquisition | | | (1,711 | ) | | | - | |
| | | | | | | | | |
| Operating cash flows before movement in working capital | | | 5,924 | | | | 4,976 | |
| | | | | | | | | |
| (Increase)/decrease in inventories | | | (1,152 | ) | | | 21 | |
| (Increase)/decrease in receivables | | | (1,348 | ) | | | 656 | |
| Increase/(decrease) in payables | | | 5,530 | | | | 3,058 | |
| | | | | | | | | |
| Cash generated by operations | | | 8,954 | | | | 8,711 | |
| | | | | | | | | |
| Interest paid | | | (914 | ) | | | (874 | ) |
| Income taxes paid | | | (707 | ) | | | (650 | ) |
| | | | | | | | | |
| Net cash generated (used) by operating activities | | | 7,333 | | | | 7,187 | |
One Horizon Group plc
Notes to the financial statements
For the year ended 30 June 2011
| 32. | Related party transactions |
Transactions between group companies are eliminated on consolidation and are not disclosed in this note.
Transactions between the parent company and its subsidiaries totalled $182,000 (2010: $556,000) representing management fees raised.
Amounts due to Directors during the year were as follows:
| | | | | | Loans | | | Interest | | | | |
| | | Opening | | | introduced/ | | | paid at | | | Closing | |
| | | balance | | | (repaid) | | | 4% | | | balance | |
| Name | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | | | | | |
| Mark White | | | 27 | | | | (27 | ) | | | - | | | | - | |
| Sandy Johnson | | | 142 | | | | 28 | | | | 10 | | | | 180 | |
| Martin Ward | | | 27 | | | | (1 | ) | | | - | | | | 26 | |
| Brian Collins | | | - | | | | 19 | | | | - | | | | 19 | |
| | | | | | | | | | | | | | | | | |
| | | | 196 | | | | 19 | | | | 10 | | | | 225 | |
The movement on the shareholder loan included in other payables is:
| | | | | | Loans | | | Interest | | | | |
| | | Opening | | | introduced/ | | | paid at | | | Closing | |
| | | balance | | | (repaid) | | | 4% | | | balance | |
| Name | | $’000 | | | $’000 | | | $’000 | | | $’000 | |
| | | | | | | | | | | | | | | | | |
| Adam Thompson | | | 401 | | | | (163 | ) | | | 12 | | | | 250 | |
SatCom Distribution Limited incurred consultancy costs in the period in the amount of €409,000 (2010: €389,000) from Satellite Communications Consultancy BVBA. Satellite Communications Consultancy BVBA is a company incorporated in Belgium and is controlled by a director Mark White.
