ADVFN PLC — Earnings Release 2013

Oct 23, 2013

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RNS Number : 1455R

ADVFN PLC

23 October 2013

ADVFN PLC

Audited Results for the Year Ended 30 June 2013

ADVFN, Europe's leading stocks and shares website, announces its audited results for the year ended 30 June 2013

·               EBITDA* profit for continuing operations of £108,000 (2012: loss of £362,000)

·               Loss for the period of £539,000 (2012: loss of £1,676,000)

·               ADVFN's registered user base continues to grow and is now over 2,800,000 (2012: 2,600,000)

For further information, please contact:

Clem Chambers,

ADVFN PLC CEO

0207 0700 909

Salmaan Khawaja

Grant Thornton UK LLP (Nominated Adviser)

0207 383 5100

*EBITDA is calculated as the operating result for the year before depreciation and amortisation charges.

CHIEF EXECUTIVE'S STATEMENT

This financial year has been a significant success with the company turning in an EBITDA profit of £108,000 against an EBITDA loss of £362,000 in 2012.

The operating loss was improved by £568,000 from a loss of £1,439,000 in 2012 to £871,000 this year.

This has reflected in little change in our cash, which rose to £1,461,000 at the year end from £1,440,000 with sales broadly in line with last year at £8,077,000 down from £8,485,000 adjusted for discontinued businesses.

The global backdrop to our efforts has not been favourable but we have been able to adjust well because the international spread of our business gives us a robust platform even in these economically fragile times.

For example our US business has made up for weakness in other territories. The US economy is on the mend while our countries such as Brazil which have been historically strong are now suffering their own retrenchment.

Over the last year we have continued to shift our focus into international markets building out using our US model as a template.

We are making particular progress in Mexico, Japan and the Philippines. Meanwhile our US business continues to deliver and show much promise.

Historically ADVFN's business has developed in bursts that end in plateaus. Over the last ten years or so this cycle has repeated every few years while the business has grown at a tremendous rate. The last couple of years have been such a plateau but we think we have a good chance to enter the next growth phase. To accelerate this we have set out to acquire established websites with investor communities, the first being Finance Manila. These new communities will then become the platforms on which to build larger sites, reproducing the template of our success in the US.

It would be nice to have equity markets back in fashion but we are confident that we can grow in markets even if they remain at historically low levels of investor activity.

While on the surface there is not much to report, the significant changes in our financial performance attests to major adaptations to a changing marketplace.

Our cost base is lighter and has shifted to focus more on new markets. Our initial forays into mobile, Events, newsletters and e-books have met with initial success and we have moved to begin actively acquiring new investor communities.

As such we feel 2013-2014 should be another solid year and a step towards our long term goal of building a much larger business.

Financial overview

These accounts have been prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union.

This year's results show a significant improvement with EBITDA showing a £108,000 profit and improvement of £470,000 from last year's loss.

The result after tax, which includes £1,310,000 of non-cash items, was a loss of £539,000, an improvement of £1,137,000 against a loss in 2012 of £1,676,000.

During the year we have taken a robust position on costs which has given us the liquidity to continue to invest in R&D, international markets and acquisition.

Strategy

Strategies are by definition "long term". Since day one back in 1999, we have seen ADVFN as an international offering and this continues to be our driving vision.

We are, as I write, according to Amazon's Alexa, ranked 510th largest website in the UK, 741 in the US, 828 in Brazil, 970 in Canada, 563 in Norway and so on. I would encourage shareholders to use Alexa to compare us to other well-known and valuable properties to gauge how well we are doing. We think you will be impressed with the company we keep.

A global audience gives us a robustness that means when conditions are weak in one country; another in a rally will compensate for it. This has helped insulate us from some very harsh economic times.

We have done well in the US and we hope to use this experience as a template to drive new territories and are using this experience to acquire and embed websites like Finance Manila into ADVFN.

Communities are the heart of the internet and we see an opportunity to embrace share trading communities around the world through acquisition and joint venture. With our premium content and advertising skills, over a period of time we can boost the monetisation of these assets.

Communities can be resistant to change so to protect the value of the community this process takes time, however, we have succeeded with Investors Hub in making this transformation.

If we can reproduce our success with Investors Hub in the US in other territories, which must be stressed was not overnight, then we will have a clear path to grow our business to the next level of scale.

Meanwhile mobile is making an increasing impact on online usage and we have been navigating this change with our popular mobile offering. This is still a fledgling market but we are well positioned in it with our iPhone and android versions of ADVFN. It is positive news that Google is making progress with its sales of mobile advertising as we are fast developing significant advertising inventory on the mobile format, one which is at an early stage of monetisation.

These apps alongside the website also address the growing tablet market, so we are already well positioned for developments in this important trend.

Our mobile platforms are also important as part of our international strategy as many markets have heavy mobile penetration where internet access via handsets has pre-empted desktop penetration.

Operating Costs

While we are always careful with our resources, we have been very focused indeed on costs over the last two years. This process has significantly re-engineered our cost base. This can be seen in the much improved results even as sales have fallen a notch.

In this period we have not simply cut costs, we have continued to invest, pushing more resources into our US, Japan, Indian and Philippine offices. 

Research and Development

R&D at ADVFN never stops.

Nothing in our markets sits still. Market technology is constantly evolving, which is a risk, a cost and an opportunity. In addition internet viewing technology constantly changes too, so now as opposed to say 5 years ago when we were almost exclusively on the desktop, we have large mobile traffic and with it new revenue streams. Tomorrow it might be Google glass or the apple i-watch that opens new markets. As such we will continue to invest in on-going R&D.

We are well prepared for change and we are at the core, a technology company, even while many consider us a media company.

R&D will always be the heart of ADVFN.

Environmental policy

The company as a whole continues to look for ways to develop our environmental policy. It remains our objective to improve our performance in this area.

Summary of key performance indicators

	2013	2013	2012	2012
	Actual	Target	Actual	Target
Average head count	37	40	60	60
ADVFN registered users	2.8M	2.7M	2.6M	2.5M

Future outlook for the business

ADVFN is determined to be an overnight success one day.

ADVFN has grown significantly over the long term, from a blue sky start up to an established business and we see no reason why we cannot expand to the next level of scale.

Any improvement in the global economy can only help and we believe that having ridden out the last 13 years through two of the worst equity downturns in living memory, we are toughened against any unexpected global setbacks.

We believe we have all the pieces of the puzzle to grow significantly and like the global economic recovery, we feel we are on the brink of positive developments.

Principal risks and uncertainties:

Economic downturn

There are signs of global economic recovery and these have shown up as bursts of traffic on ADVFN, for example in Japan. However there can be no certainty in a return to economic normality in the near future.

However as previously stated the company has bridged both the dotcom crash and the credit crunch, so we feel that we have shown we are robust enough to withstand the financial conditions of economic emergencies.

High proportion of fixed overheads and variable revenues

A large proportion of the company's overheads are fixed. There is the risk that any significant changes in revenue may lead to the inability to cover such costs. Management closely monitor fixed overheads against budget on a monthly basis and cost saving exercises are implemented on a constant review basis. We have had a strong period of cost optimisations which are updated on a regular basis.

Product obsolescence

The technology that we use and develop is always in development and constant change. All our products are subject to technological change and advance and resultant obsolescence.

We have no choice but to keep innovating to keep up with growing technical challenges that are changing all the time.

The directors are committed to the Research and Development strategy in place, and are confident that the company is able to react effectively to the developments within the market.

Fluctuations in currency exchange rates

A growing proportion of our turnover relates to overseas operations. As a company, we are therefore exposed to foreign currency fluctuations. The company manages its foreign exchange exposure on a net basis, and if required uses forward foreign exchange contracts and other derivatives/financial instruments to reduce the exposure. Currently hedging is not employed. If currency volatility was extreme and hedging activity did not mitigate the exposure, then the results and the financial condition of the company might be adversely impacted by foreign currency fluctuations. 

People

We are a dedicated, highly skilled and loyal team. I would like to thank everyone for enabling ADVFN to provide a superb 24/7/365 service to millions of users around the globe; the private investors of the world.

Clem Chambers

CEO

22 October 2013

Consolidated income statement
		12 months to  30 June	12 months to  30 June
		2013	2012
	Notes	£'000	£'000
Revenue	1	8,077	8,485
Cost of sales		(339)	(319)
Gross profit		7,738	8,166
Share based payment		(93)	(96)
Amortisation of intangible assets		(917)	(1,001)
Other administrative expenses		(7,599)	(8,508)
Total administrative expenses		(8,609)	(9,605)
Operating loss		(871)	(1,439)
Finance income		95	-
Loss before tax		(776)	(1,439)
Taxation		242	163
Total loss after taxation for continuing operations		(534)	(1,276)
Total (loss)/profit after taxation from discontinued operations		(5)	(400)
Loss for the period attributable to shareholders of the parent		(539)	(1,676)
Loss per share - basic and diluted	2	(0.09)p	(0.27)p

Consolidated statement of comprehensive income
		12 months to  30 June	12 months to  30 June
		2013	2012
		£'000	£'000
Loss for the period		(539)	(1,676)
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		69	35
Deferred tax on translation of foreign held assets		(6)	(1)
Total comprehensive income for the year attributable to shareholders of the parent		(476)	(1,642)

Consolidated balance sheet
		30 June	30 June
		2013	2012
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		61	83
Goodwill		806	789
Intangible assets		1,777	2,179
Trade and other receivables		485	105
		3,129	3,156
Current assets
Trade and other receivables		925	1,070
Current tax recoverable		46	151
Cash and cash equivalents		1,461	1,440
		2,432	2,661
Total assets of the continuing operations		5,561	5,817
Assets in disposal group classified as held for sale		-	706
Total assets		5,561	6,523
Equity and liabilities
Equity
Issued capital		6,291	6,289
Share premium		8,062	8,057
Merger reserve		221	221
Share based payment reserve		563	474
Foreign exchange reserve		278	215
Retained earnings		(12,063)	(11,528)
		3,352	3,728
Non-current liabilities
Deferred tax		249	487
		249	487
Current liabilities
Trade and other payables		1,954	2,153
Current tax		6	38
		1,960	2,191
Total liabilities of the continuing operations		2,209	2,678
Liabilities in disposal group classified as held for sale		-	117
Total liabilities		2,209	2,795
Total equity and liabilities		5,561	6,523

Consolidated statement of changes in equity

	Share capital	Share premium	Merger reserve	Share based payment reserve	Foreign exchange reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2011	6,249	7,941	221	533	181	(10,007)	5,118
Issue of shares	40	116	-	-	-	-	156
Exercise of share options	-	-	-	(155)	-	155	-
Equity settled share options	-	-	-	96	-	-	96
Transactions with owners	40	116	-	(59)	-	155	252
Loss for the period after tax	-	-	-	-	-	(1,676)	(1,676)
Other comprehensive income
Exchange differences on translation of foreign operations	-	-	-	-	35	-	35
Deferred tax on translation of foreign held assets	-	-	-	-	(1)	-	(1)
Total comprehensive income for the year	-	-	-	-	34	(1,676)	(1,642)
At 30 June 2012	6,289	8,057	221	474	215	(11,528)	3,728
Issue of shares	2	5					7
Exercise of share options				(4)		4	-
Equity settled share options				93			93
Transactions with owners	2	5	-	89	-	4	100
Loss for the period after tax	-	-	-	-	-	(539)	(539)
Other comprehensive income
Exchange differences on translation of foreign operations	-	-	-	-	69	-	69
Deferred tax on translation of foreign held assets	-	-	-	-	(6)	-	(6)
Total comprehensive income for the year	-	-	-	-	63	(539)	(476)
At 30 June 2013	6,291	8,062	221	563	278	(12,063)	3,352

Consolidated cash flow statement
		12 months to  30 June	12 months to  30 June
		2013	2012
		£'000	£'000
Cash flows from operating activities
Loss for the period before tax		(776)	(1,439)
Net finance income in the income statement (unwinding receivable)		(95)	-
Depreciation of property, plant & equipment		62	76
Amortisation		917	1,001
Adjustment to fair value of embedded derivative		300	-
Share based payments		93	96
(Increase) in trade and other receivables		149	(53)
(Decrease)/increase in trade and other payables		(199)	(147)
Net cash (used in)/generated from continuing operations		451	(466)
Net cash used in discontinued operations		(5)	(43)
		446	(509)
Income tax receivable		77	61
Net cash (used in)/generated from operating activities		523	(448)
Cash flows from investing activities
Payments for property plant and equipment		(40)	(59)
Purchase of intangibles		(499)	(593)
Sale of UK Government gilts - available for sale financial assets		-	681
Sale of current asset investments by discontinued operations		-	15
Net cash used in investing activities		(539)	44
Cash flows from financing activities
Proceeds from issue of equity shares		7	156
Loans repaid (finance leases)-discontinued operations		-	(3)
Net cash generated by financing activities		7	153
Net (decrease)/increase in cash and cash equivalents		(9)	(251)
Exchange differences		30	4
Total (decrease)/increase in cash and cash equivalents		21	(247)
Cash and cash equivalents at the start of the period		1,440	1,716
Cash and cash equivalents at the end of the period		1,461	1,469
Cash and cash equivalents of the disposal group		-	(29)
Cash and cash equivalents for continuing operations		1,461	1,440

1.      Segmental analysis

The directors identify operating segments based upon the information which is regularly reviewed by the chief operating decision maker. The Group considers that the chief operating decision maker is the Board of Directors. The Group has identified two reportable operating segments, being that of the provision of financial information and that of research services. The provision of financial information is made via the Group's various website platforms. Research activities are provided by the Group's staff, primarily to corporate customers.

Two minor operating segments, for which IFRS 8's quantitative thresholds have not been met, are currently combined below under 'other'. The main sources of revenue for these operating segments is the provision of financial broking services and other internet services not related to financial information. Segment information can be analysed as follows for the reporting period under review:

2013	Provision of financial information	Other	Total continuing operations	Research services (Disposal group)	Total
	£'000	£'000	£'000	£'000	£'000
Revenue from external customers	7,835	252	8,087	16	8,103
Depreciation and amortisation	(804)	(3)	(807)	-	(807)
Other operating expenses	(7,754)	(182)	(7,936)	(21)	(7,957)
Segment operating (loss)/profit	(723)	67	(656)	(5)	(661)
Interest income	95	-	95	-	95
Interest expense	-	-	-	-	-
Segment assets	7,407	254	7,661	-	7,661
Segment liabilities	(2,080)	(57)	(2,137)	-	(2,137)
Purchases of non-current assets	(554)	-	(554)	-	(554)

2012	Provision of financial information	Other	Total continuing operations	Research services (Disposal group)	Total
	£'000	£'000	£'000	£'000	£'000
Revenue from external customers	8,347	143	8,490	579	9,069
Depreciation and amortisation	(888)	(3)	(891)	(4)	(895)
Other operating expenses	(9,301)	(77)	(9,378)	(594)	(9,972)
Segment operating profit/(loss)	(1,842)	63	(1,779)	(19)	(1,798)
Interest income	-	-	-	-	-
Interest expense	-	-	-	-	-
Segment assets	7,698	52	7,750	152	7,902
Segment liabilities	(2,391)	(6)	(2,397)	(117)	(2,514)
Purchases of non-current assets	(652)	-	(652)	-	(652)

The Group's revenues, which wholly relate to the sale of services, from external customers and its non-current assets, are divided into the following geographical areas:

	Revenue	Non-current assets	Revenue	Non-current assets
	2013	2013	2012	2012
	£'000	£'000	£'000	£'000
UK (domicile)	3,594	3,134	3,843	3,520
USA	3,639	1,409	3,568	1,567
Other	854	-	1,079	1
Discontinued operations	16	-	579	24
	8,103	4,543	9,069	5,112

Revenues are allocated to the country in which the customer resides. During both 2013 and 2012 no single customer accounted for more than 10% of the Group's total revenues.

The segmental information regularly reviewed by the Board is presented under UK GAAP and, as a result, a key reconciling item between the segmental and the Group financial information relates to IFRS conversion.

The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows:

	2013	2012
	£'000	£'000
Revenue
Total segment revenue	8,103	9,069
Consolidation adjustment	(10)	(5)
Group revenue	8,093	9,064
Disposal group revenue	(16)	(579)
Group revenue net of discontinued operations	8,077	8,485
Segment profit or loss
Total segment operating (loss)	(661)	(1,798)
Consolidation adjustments	(396)	(246)
IFRS conversion adjustments	186	605
Group operating loss	(871)	(1,439)
Finance income	95	-
Group loss before tax	(776)	(1,439)

	2013	2012
	£'000	£'000
Segment assets
Total segment assets	7,661	7,902
Consolidation adjustments	(2,669)	(2,122)
IFRS conversion adjustments	569	743
Total Group assets	5,561	6,523
Segment liabilities
Total segment liabilities	(2,137)	(2,514)
Consolidation adjustments	(848)	(979)
IFRS conversion adjustments	665	698
Total Group liabilities	(2,320)	(2,795)

Consolidation adjustments primarily relate to the elimination of investments and the calculation of goodwill. IFRS conversion adjustments primarily relate to the different accounting bases for the Group's intangible and tangible assets under IFRS and UK GAAP.

2.     Loss per share

	12 months to  30 June	12 months to  30 June
	2013	2012
	£'000	£'000
(Loss) for the year from continuing operations attributable to equity shareholders	(534)	(1,276)
(Loss)/profit for the year from discontinued operations	(5)	(400)
Total (loss) for the year	(539)	(1,676)
(Loss) per share from continuing operations - basic and diluted (pence)	(0.09)p	(0.20)p
(Loss) per share from discontinued operations - basic and diluted (pence)	-	(0.07)p
Total (loss) per share- basic and diluted	(0.09)p	(0.27)p
		Shares
Weighted average number of shares in issue for the year	629,078,388	625,522,552
Dilutive effect of options	-	-
Weighted average shares for diluted earnings per share	629,078,388	625,522,552

Where a loss has been recorded for the year the diluted loss per share does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

3.             Post balance sheet events

On 2 July 2013 the directors concluded an agreement to purchase the website of Finance Manila, a company based in the Philippines, for a combination of £38,000 cash and 1,391,060 shares valued at £54,000. Total consideration amounting to £92,000.

4.             Publication of Non Statutory Accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

The consolidated balance sheet at 30 June 2013 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Company's 2013 statutory financial statements upon which the auditors' opinion is unqualified and does not include any statement under Section 498(2) or (3) of the Companies Act 2006.

The annual report and accounts will shortly be sent to shareholders and will be available on the Company's website, http://www.advfn.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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