Earthport PLC EPO Final Results

  Earthport PLC (EPO) - Final Results

RNS Number : 8382R
Earthport PLC
23 November 2012




23 November 2012



                                Earthport plc

                        ("Earthport" or the "Company")

                                      

                                Final Results



Earthport plc, the cross-border payments service provider, announces its final
results for the year ended 30 June 2012.



FY12 Financial Highlights



· Revenue increased by 21% to £3,017,000 (2011: £2,488,000)

· Gross profit increased by 22% to £2,347,000 (2011: £1,926,000)

· Gross margin improved to 78% from 77%

· Cash at 31 October 2012 of £10.3 million, following successful  placing 
of £8.0 million in October 2012



FY12 Operational Highlights



· Transaction volumes  increased 53%  year-on-year, accelerating  through 
the year:

o Increase in June 2012 of 103% compared to June 2011

o Growth has continued, with October 2012 being 143% higher compared to  June 
2011

· Country network expanded to a total of 54 countries, with several  more 
in progress

· 19  new  customers were  signed  in  the financial  year,  12  customer 
implementations went live while an additional 13 customers are contracted  but 
not yet live

· Significant partnerships signed, including:

o Fiserv in North America

o NEC Decillion in Singapore

· Further  investment made  in  infrastructure and  people to  align  the 
business with its growth opportunities

· New  regulations,  such  as  the Dodd  Frank  Act  (DFS  1073)  driving 
additional opportunities



Hank Uberoi, Executive Director of Earthport commented, "This has been a  year 
of strong progress for Earthport, which  has seen the Company deliver on  many 
of  its  strategic   objectives,  having  completed   the  restructuring   and 
reorganisation which began  in 2010. Earthport  is at a  pivotal stage of  its 
development, as transaction levels continue  to gain momentum and the  Company 
continues to  gain traction  with  global industry  leaders as  customers  and 
channel partners."





For further information, please contact:



Earthport plc                                    020 7220 9700

Hank Uberoi / Asif Ali


Panmure Gordon                                   020 7886 2500

Katherine Roe / Victoria Boxall


Charles Stanley Securities                       020 7149 6000

Mark Taylor / Paul Brotherhood


Newgate Threadneedle                             020 7653 9850

Caroline Evans-Jones/ Josh Royston/ Fiona Conroy







About Earthport



Earthport plc, a regulated global financial services organisation, specialises
in the provision of a white label cross-border payments service.



Through its  innovative payments  framework,  specifically designed  for  high 
volumes  of   low   value   cross-border  payments,   Earthport   provides   a 
cost-effective and  transparent  service for  secure  international  payments. 
Earthport's  customers  include  banks,  foreign  exchange  businesses,  money 
transfer  organisations,  payment  aggregators  and  e-commerce   businesses. 
Through Earthport's well  established payments  infrastructure, customers  can 
clear and  settle  payments  directly  to  banked  beneficiaries  in  over  50 
countries.



The company  is headquartered  in  London and  is  listed on  the  Alternative 
Investment Market (AIM)  on the  London Stock Exchange.  It operates  globally 
with additional  regional offices  in Dubai  and New  York. Earthport  plc  is 
authorised and regulated by the Financial Services Authority under the Payment
Service Regulations 2009 for the provision of payment services. To learn more,
please visit www.earthport.com and follow us on Twitter @Earthport.







        BOARD STATEMENT



Introduction



Earthport  plc  ("Earthport")  provides   a  transparent  and   cost-effective 
white-labelled cross-border payments service, specifically designed to process
high  volumes  of  low  value  payments  with  a   straight-through-processing 
efficiency rate of 99+%.



In the 2012 financial year, Earthport made strong progress. While  transaction 
volume growth was  slower than we  would have  predicted at the  start of  the 
year, we exceeded  our expectations in  terms of  the nature and  size of  new 
customers, signing contracts with some of the leading businesses in  financial 
services and  signing  channel partner  deals  with large  financial  services 
technology companies. Many of these relationships are only in the early stages
of implementation,  which bodes  well for  accelerated growth  going  forward. 
Therefore, while  we  are  relatively  pleased with  the  growth  achieved  in 
transaction volumes in the year, an increase of 53%, we believe this does  not 
entirely reflect the progress that has been made. We have entered the  current 
financial year in an excellent  position, which has been demonstrated  through 
the continued growth  in transaction  volumes in recent  months, with  October 
2012 being 143% ahead of June 2011.



In total 19  new customers were  signed in the  year, including  Yandex.Money, 
Italbank  and   Active   Management   Services  Ltd   ("AMS").   12   customer 
implementations went live,  including notable accounts  such as Western  Union 
and AMS. Also  notable are  two multi-national corporate  customers, who  went 
live via our client  IBM in the  year, with a further  three having gone  live 
since the end of  the financial year. We  significantly increased our  market 
reach through the signing of two key channel partners, Fiserv in North America
and NEC Decillion in Singapore and  expanded our network coverage to reach  54 
countries. Earthport finished the year with 13 contracted customers which  had 
not yet  launched, underpinning  the Company's  growth prospects  in FY13  and 
beyond.



Earthport continued to broaden its  reach and consolidate its market  position 
in the year, taking  part in steering  committees, industry presentations  and 
hosting webinars alongside some  of the world's  largest banks and  technology 
providers. Our presence  exceeds that  which is typical  of a  company of  our 
size, reflecting our position as thought leaders in the international payments
industry.



Financial Review



Transaction volumes for the year ended 30 June 2012 were up by 53% compared to
the prior year. Total revenue  for the year ended 30  June 2012 was up 21%  to 
£3,017,000 (2011: £2,488,000). Gross  profit was up  22% to £2,347,000  (2011: 
£1,926,000). Gross margin was slightly higher at 78% (2011: 77%).



Administrative expenses increased  by 60% to  £10,825,000 (2011:  £6,763,000). 
This increase  was  due  to  Earthport's  reorganisation  and  investment  for 
growth.



The primary reason for the rise was an increase in staff and contractor  costs 
(excluding non-cash  share-based payments)  for the  year ended  30 June  2012 
which were  up 55%  to £6,520,000  (2011: £4,218,000).  The other  main  items 
contributing to  the increase  were IT  operational costs,  other  operational 
costs and general overheads.



The share-based payment charge of £1,110,000 (2011: £2,368,000) is a  non-cash 
item. This relates to  options granted to employees  and Directors during  the 
year and in the past.



Operating  loss  before  share-based  payment  charge  increased  by  75%   to 
£8,478,000 (2011:  £4,837,000). Including  the share-based  payment charge  of 
£1,110,000 (2011: £2,368,000), operating loss  increased by 33% to  £9,588,000 
(2011: £7,205,000).



Overall, the loss for the year before share-based payment charge increased  by 
65% to £8,519,000 (2011: £5,151,000). Including the share-based payment charge
of £1,110,000 (2011: £2,368,000), loss before taxation rose 28% to  £9,629,000 
(2011: £7,519,000).



Cash and cash equivalents at the year-end were £5,766,000 (2011:  £3,826,000). 
With the  recent  post balance  sheet  successful fundraising  of  £8  million 
(gross), the  cash and  cash equivalents  position  of the  Company as  at  31 
October 2012 was £10.3 million.



Successful Fundraises



We have been delighted by the level of investor support shown during the  year 
and post  year  end,  enabling  the Company  to  carry  out  two  fundraisings 
providing capital for  future growth, particularly  to accelerate the  Group's 
expansion of country coverage through regional representation and presence. In
November 2011, the Company  raised gross proceeds of  £10.6 million through  a 
placing and  the  issue  of  £1.6 million  of  Convertible  Loan  Notes  which 
automatically converted to  equity after  permission being  obtained to  issue 
sufficient equity in the Annual General Meeting. In October 2012, the  Company 
raised £8.0 million through a placing.



Market Developments



During FY12, Earthport has been focussed on key 'send markets', such as  North 
America and areas within the European Union and Middle East. These geographies
alone represent a  vast potential market.  The Board believes  there are  four 
main trends driving the need for and uptake of, Earthport's payments service:



Increases in global trade

Global trade has grown  dramatically over the last  few years. According to  a 
report from the World Trade Organisation export volumes grew by 14.5% in  2010 
and were expected to  expand by 6.5%  in 2011, with a  shift to lower  average 
value per transaction.



Increases in remittances

Remittance payments are increasingly becoming bank-to-bank payments as opposed
to cash delivery.  This trend  is due  to an  ever-increasing globally  mobile 
workforce. The World  Bank Migration  and Remittances  Factbook 2011  reported 
that International migration has  doubled in the last  25 years, to more  than 
200 million people who now generate over 2 billion individual transactions per
annum. These worldwide migrant remittances amount to over $440bn by value,  at 
an average value of $200 - $250. Earthport's service is particularly effective
for high volume, low value payments.



Increases in eCommerce

eCommerce has experienced significant growth through the proliferation of  the 
internet. The World Payments Report 2011 forecasts that by 2013, the number of
e-payment transactions  is  expected  to  total  30.3  billion.  According  to 
research from Glenbrook Partners,  15% of eCommerce  transactions are made  by 
overseas buyers and suppliers.



The introduction of new regulations

Regulation is playing  an increasingly  prominent role within  the market.  An 
example of this was  the implementation of the  Dodd Frank Act ('DFS1073')  in 
North America.  DFS1073 seeks  to protect  and inform  consumers by  providing 
greater transparency and predictability relating  to the cost and delivery  of 
international payments. Earthport's  highly transparent cross-border  payments 
service is being enhanced to address the specific requirements outlined in the
regulation and provide a solution to Banks in the US.



Sales and Marketing



Sales

We have  maintained our  focus on  selling to  regulated providers,  and as  a 
result banks  now  represent a  large  part of  our  sales pipeline.  This  is 
particularly so in our European and North American territories where many bank
opportunities are  those nearest  to  contract. Although  the sales  cycle  is 
longer than  we  had  anticipated,  we  are  engaged  in  several  contractual 
discussions and revenue earning relationships with leading regional and global
banks. Regulatory change in  North America with the  introduction of the  Dodd 
Frank Act, specifically Section 1073 in February 2013, is having a significant
impact on institutions that transmit consumer originated payments out of North
America  and  we  are  pleased  to  now  be  engaged  in  revenue   generating 
opportunities in this space.



During the  course of  the fiscal  year we  have also  adopted a  strategy  to 
complement our  direct to  market  sales activity  through a  channel  partner 
program, where a partner offers products and services that represent synergies
to the  core  Earthport  proposition.  We are  confident  this  strategy  will 
leverage channel  partners'  existing relationships  and  support a  drive  to 
reduce the sales cycle. This program has already resulted in partners  funding 
the integration  to  the Earthport  service  and  investing in  go  to  market 
activities. We are pleased to be able to show that we have signed a number  of 
regionally focussed partnerships, the most significant of which is with Fiserv
in North America.

We have also extended our  sales reach through business development  expertise 
in Asia and in Russia and the Commonwealth of Independent States (CIS) made up
of former Soviet Republics  on a retained basis,  to help manage direct  sales 
initiatives as well as channel partner activity.



Post the year end, professional services engagements have become a new  source 
of revenue, with Earthport developing a revenue stream through consultancy and
funded developments.

Marketing

During the financial year we completed a brand refresh, updating the Company's
brand proposition and introducing a new website. We have commissioned a series
of thought leadership pieces which are published on our website and have  been 
invited to speak at most of the major payment conferences, including post  the 
year end at Sibos with PNC Bank and Vocalink.



To support  a campaign  in North  America to  position solutions  to meet  the 
challenges of the implementation of the Dodd Frank Act we have also hosted  an 
industry webinar, supported by leading industry professionals and attended  by 
over 180  executives from  US banks,  money transfer  organisations and  their 
advisers.



Customers



In total 19 new customers  were signed and 12  customers went live during  the 
year, with  a  further 13  customers  contracted but  not  yet live.  Key  new 
customers integrated  during  the  course  of the  year  have  contributed  to 
transaction growth and are outlined below.



Since 2009 Earthport has provided a  global payments service for IBM's  Global 
Expense Reporting  Solution (GERS)  product which  enables it  to provide  the 
final settlement of employees' individual expense reports.



We were delighted to  secure two multi-national  corporate customers who  went 
live via IBM with a further three since the end of the financial year.



Legitas, a market leading provider of outsourced payroll services, facilitates
payments to over 15,000 employees per week  within the UK and was signed as  a 
client in March 2011.  The service went  live at the end  of FY11 and  started 
generating initial revenues in  early FY12. Over the  year Earthport has  been 
increasing the number  of transactions it  processes for Legitas  on a  weekly 
basis. This growth is expected to  continue as there is significant  potential 
within this relationship.



Further key customer launches:



· Western Union  went live  in October  2011, with  the marketing  launch 
towards the end of the financial year.  We have seen a noticeable increase  in 
transaction flows as a result of the launch.

· In June 2011, Earthport signed Active Management Services Ltd  ("AMS"), 
the global facilities  management company,  and in November  2011 the  service 
went live  to support  the delivery  of payroll  services for  AMS'  corporate 
customers.

· Italbank went  live in  May 2012. Based  in Puerto  Rico, Italbank  has 
automated and enhanced its payments services through Earthport's service.

· In  July  2012, Earthport  went  live with  Yandex.Money,  the  leading 
e-wallet service in Russia  and the CIS.  The service provides  Yandex.Money's 
e-wallet holders with a range of enhanced international payment options.

· Two top ten Money Transfer Operators  are in the process of going  live 
since the end of the financial year.



The Company is currently working on opportunities with several top global  and 
regional banks and other significant payment provider companies, which are not
yet formally contracted, but are being already developed to decrease the  time 
to market.  These opportunities  are expected  to contract  in this  financial 
year. The pipeline remains large by number and size of clients.



Channel Partnerships



During the  course  of  the financial  year  we  have been  pleased  with  the 
development of our channel partner programme.



In May 2012, Earthport announced a  partnership with Fiserv (NASDAQ: FISV),  a 
leading global provider of financial services technology solutions to  provide 
a solution for international payments. This partnership enables Fiserv clients
to seamlessly process low value,  cross-border payments through Fiserv's  PEP+ 
application. PEP+ is  Fiserv's leading domestic  ACH processing solution  and 
the partnership with  Earthport has  now expanded  the reach  of the  solution 
globally,  creating  one   solution  for  both   domestic  and   international 
cross-border payments processing. The joint offering is in its initial stages;
however Earthport anticipates  that the partnership  represents a  significant 
opportunity. Recognised as the industry standard in ACH processing for  nearly 
three decades,  more than  10 billion,  or roughly  50%, of  all domestic  ACH 
transactions in North America, were processed through Fiserv in 2011.



In June  2012,  Earthport announced  a  strategic partnership  with  Decillion 
Group, a subsidiary of  NEC and leading systems  integrator and SWIFT  Service 
Bureau operator, which is headquartered in Singapore, and has local offices in
Australia,  China,  Vietnam,  Indonesia,  Malaysia  and  Thailand.  Under  the 
agreement, Earthport's service is to  be introduced to Decillion's  160-strong 
banking customer base throughout the region. We are very pleased with pipeline
development activities through NEC Decillion's existing relationships in Asia.
NEC Decillion invited Earthport to participate  with them in the recent  SWIFT 
annual conference, Sibos  in Osaka  Japan. As  a member  of SWIFT,  Earthport 
attends Sibos  on  a regular  basis,  but this  was  a unique  opportunity  to 
participate as an official  partner and expose the  Earthport brand through  a 
booth presence.



Decillion Group can now offer its  customers a dedicated payments service  for 
low value  cross-border payments  which complement  its existing  systems  and 
services for Anti-Money Laundering and international payments.



In May 2012, Earthport  announced a partnership in  Japan with Global  Winning 
Technologies ("GWT"). Tokyo-based  GWT provides its  customers, which  include 
banks, hedge  funds  and securities  firms,  with an  extensive  portfolio  of 
advanced intelligence software. GWT will act  as an extension of the  existing 
Earthport sales team.



In October 2012, post the year  end, Earthport entered into an agreement  with 
ebpSource, the leading specialists in electronic bill presentment and payment.
ebpSource has  a global  network of  clients in  the international  electronic 
billing and payments industry and is therefore ideally positioned to introduce
Earthport to support the  launch of payments  servicers into new  territories. 
The collaboration provides  ebpSource customers  with the  ability to  quickly 
launch competitive  white label  services internationally  due to  Earthport's 
network of more than 54 countries and growing.



Banking Network



Earthport's  network  expansion  strategy  continued  to  demonstrate   steady 
progress throughout the financial year, completing several critical  territory 
initiatives and  paving the  way  for further  growth  phases to  follow.  The 
available  territory  coverage  now  encompasses  54  markets,  with   further 
expansion in process.



Banking Network activity is focussed on  adding new capability in a number  of 
developing markets, especially  in Latin  America, Africa  and Asia,  together 
with putting  in  place  additional  resilience  processing  relationships  in 
certain strategic  and/or high  volume routes  and enhancing  capabilities  on 
existing routes.



Service Enhancements



A number  of  significant service  enhancements  have been  completed  in  the 
period:



·  Client  Integrations  -  Improving  the  ease  of  client  onboarding, 
particularly focused  on  the  banking and  processor  segments,  through  the 
provision of additional services, tools and formats aligned to this segment.

·  Operational   Efficiency  -   An   increasing  focus   on   efficiency 
improvements, facilitating later payment  cut-off times during the  processing 
day and reducing settlement  periods for payments on  a number of key  routes, 
which has enabled  us to process  an increasing number  of transactions  while 
exceeding our SLA requirements.

· Bank Partner Integrations -  Additional automation of processing  links 
with key banking  partners, improving service  levels, volume scalability  and 
resilience.

· IT  Development  &  Infrastructure -  Significant  upgrades  to  system 
availability, including the move to new active datacentres.

· Compliance  - Further  strengthened  the capacity  of the  function  by 
increasing the headcount and by committing to the professional development  of 
the compliance  team  by  supporting  employees  in  undertaking  the  leading 
financial  services  industry  compliance  qualification.  In  addition,   new 
automated screening tools were implemented  in the period, which have  enabled 
the growth  of  transaction  volumes,  by  providing  efficient  and  accurate 
screening and issue resolution.



Board Changes



In July 2012, Lady Olga Maitland stepped down from the Board having served  as 
a Non-Executive  Director at  the Company  for three  years. Mohit  Davar  was 
appointed to the  Board in July  2012 as a  Non-Executive Director. Mohit  has 
over 16  years of  experience  in the  payments  sector, through  setting  up, 
managing and leading  global teams and  operations and managing  relationships 
within banks/financial institutions and regulators, at the senior most  level. 
Since 1997 Mohit has held senior level positions such as CFO and CEO,  helping 
the formation of  and leading  several money  transfer companies  such as  the 
MoneyGram and Thomas Cook JV and  Travelex Money Transfer, both of which  were 
subsequently acquired. Mohit is now on the Board of several companies, and  is 
also the Chairman of the  Advisory Committee of the International  Association 
of Money Transfer Networks.



At the end  of October 2012,  Zafarullah (Zafar) Karim  stepped down from  his 
position  as  Chief  Financial  Officer  and  Executive  Director,  though  he 
continues to assist the Company in a  transition period through to the end  of 
December 2012. Zafar leaves to  pursue other business interests after  several 
years at Earthport, having contributed significantly to its restructuring  and 
turn around.



In October  2012,  Earthport was  pleased  to announce  that  Chief  Operating 
Officer, Christopher  (Chris)  Cowlard,  joined  the  Board  as  an  Executive 
Director. Chris joined  Earthport in  January 2011  and has  overseen much  of 
Earthport's  operational  expansion  and  increasing  sophistication  of   the 
offering.



Company Development & Strategy



Earthport has undergone a significant transformation in recent years,  passing 
through a year of stabilisation in  2010 following the appointment of the  new 
Board, in which the focus was on proving the concept behind the technology and
the recapitalisation  of the  business.  In 2011  a  new management  team  was 
appointed, bringing highly experienced executives  from the industry into  the 
Company, products  were further  developed  and the  education of  the  market 
began. The appointment of Paul Thomas as  Head of Sales in early 2011 saw  the 
growth of sales team and steady increase in the sales pipeline.



The strength of our sales pipeline means our main focus is now the closure and
implementation of  deals in  our core  geographies of  North America,  Europe, 
Russia and the CIS. This will continue into 2013 and once we are someway along
this path we will consider further geographical expansion.



Outlook



The  Board  believes  the  size  of  Earthport's  addressable  market  to   be 
significant  and   while  early   transaction  volume   increases  have   been 
encouraging, they do not fully represent the potential scope of the  business. 
Those customers that are signed and live are still only at the earliest  stage 
of their  evolution and  are  expected to  grow for  many  years to  come.  In 
addition to this, there are several significant customers signed and yet to go
live, and many more on-going discussions with potential customers.



The timing of growth in each customer is difficult to predict, given that  the 
sales process and implementation can be protracted. Indeed, growth in  volumes 
although satisfactory  has been  slower  than predicted,  largely due  to  the 
challenge Earthport  has faced  in  replacing an  incumbent process  within  a 
conservative  market  that  is  historically  reticent  to  implement  change. 
Nonetheless, expansion is now taking place  at an increasing pace and  leading 
financial services business are adopting the Earthport solution. The focus  in 
the year ahead will be on further expansion in the current markets of the  US, 
Europe and the CIS. Other opportunities relatively unexploited thus far by the
Company include Asia, Latin America and Africa, in which Earthport intends  to 
build a presence through  partners ahead of a  possible direct expansion  into 
these regions in future years.



The Board believes the Company is  well positioned to exploit its  significant 
market opportunity and looks to the future with confidence.







CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2012



                                 Notes    2012      2011
                                           £'000       £'000
Continuing operations:
Revenue                               4    3,017       2,488
Cost of sales                             (670)    (562)
Gross profit                             2,347     1,926
Administrative expenses               8  (10,825)     (6,763)
Operating loss before                     (8,478)     (4,837)
share-based payment charge
Share-based payment charge               (1,110)    (2,368)

Operating loss                           (9,588)    (7,205)
Finance costs                         6  (41)   (314)
Loss before taxation                  7  (9,629)    (7,519)
Income tax expense                    9  -  -
Loss for the year and total               (9,629)     (7,519)
comprehensive income
Loss per share - basic and fully     10  (3.87p)     (4.42p)
diluted

There were no items of other Comprehensive Income for the year.









CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2012
                             Notes         2012      2011
                                         £'000      £'000
Assets
Non-current assets
Intangible assets                11           535      -
Property, plant and equipment    12  213      133
                                         748    133
Current assets
Trade and other receivables      14       1,472      671
Cash and cash equivalents        15      5,766   3,826
                                           7,238      4,497

Total assets                           7,986    4,630
Liabilities
Current liabilities
Trade and other payables         16         (581)       (892)
Borrowings                       17      -       (500)
Total liabilities                           (581)     (1,392)
NET ASSETS                               7,405    3,238
Equity
Share capital                    18    51,571   43,317
Share premium                    19   51,318    46,886
Interest in own shares           20     (954)    (954)
Merger reserve                         9,200   9,200
Share-based payment reserve            7,331  6,221
Warrant reserve                       1,312     1,956
Retained earnings                      (112,373)  (103,388)
EQUITY ATTRIBUTABLE TO OWNERS              7,405      3,238
OF THE PARENT







COMPANY STATEMENT OF FINANCIAL POSITION

as at 30 June 2012                
                              Notes      2012      2011
                                      £'000      £'000
Assets
Non-current assets
Intangible assets                11          535      -
Property, plant and equipment    12    213        133
Investments                      13   2      1
                                          750      134
Current assets
Trade and other receivables      14      1,553    709
Cash and cash equivalents        15    5,727     3,822
                                         7,280      4,531

Total assets                            8,030     4,665
Liabilities
Current liabilities
Trade and other payables         16       (577)   (1,637)
Borrowings                       17       -      (500)
Total liabilities                      (577)    (2,137)
NET ASSETS                              7,453     2,528
Equity
Share capital                    18     51,571   43,317
Share premium                    19   51,318    46,886
Interest in own shares           20  (853)     (853)
Merger reserve                       9,200     9,200
Share-based payment reserve          7,331      6,221
Warrant reserve                         1,312    1,956
Retained earnings                     (112,426) (104,199)
EQUITY ATTRIBUTABLE TO OWNERS          7,453     2,528
OF THE PARENT






CONSOLIDATED STATEMENT OF CASHFLOWS

for the year ended 30 June 2012                        
                                                   Notes      2012    2011
                                                             £'000    £'000
NET CASH USED IN OPERATING ACTIVITIES                 25  (9,442) (4,088)
INVESTING ACTIVITIES
Purchase of property, plant and equipment                   (193)   (78)
Capitalised development costs                               (611)    -
NET CASH USED IN INVESTING ACTIVITIES                          (804)  (78)
FINANCING ACTIVITIES
Proceeds on issuance of ordinary shares (net of             8,669  7,419
costs paid)
Issue of shares on exercise of warrants                        1,815   -
Proceeds on issue of convertible loan notes                   1,702   -
Proceeds on issue of loan notes                              -    100
Repayment of term loans                                   -  (86)
Net cash from financing ACTIVITIES                            12,186     7,433
NET INCREASE IN CASH AND CASH EQUIVALENTS                    1,940   3,267
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE                           
YEAR
                                                             3,826     559
CASH AND CASH EQUIVALENTS AT THE END OF THE                 5,766   3,826
YEAR

COMPANY STATEMENT OF CASHFLOWS

for the year ended 30 June 2012

                                                                    
                                                 Notes     2012       2011
                                                        £'000     £'000
NET CASH USED IN OPERATING ACTIVITIES               25    (9,477)   (4,092)
INVESTING ACTIVITIES
Purchase of property, plant and equipment                 (193)    (78)
Capitalised development costs                             (611)     -
NET CASH USED IN INVESTING ACTIVITIES                   (804)    (78)
FINANCING ACTIVITIES
Proceeds on issuance of ordinary shares (net of            8,669    7,419
costs paid)
Issue of shares on exercise of warrants                1,815   -
Proceeds on issue of convertible loan notes              1,702     -
Proceeds on issue of loan notes                              -     100
Repayment of term loans                                    -  (86)
Net cash from financing ACTIVITIES                         12,186    7,433
NET INCREASE IN CASH AND CASH EQUIVALENTS                1,905    3,263
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF                               
THE YEAR
                                                           3,822      559
CASH AND CASH EQUIVALENTS AT THE END OF THE              5,727    3,822
YEAR







CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2012



                                                                                        
                                            Interest               Share-based
                  Share       Share           in own   Merger     payment  Warrant   Retained
                Capital     premium           shares  reserve     reserve  reserve   earnings      
                                                                                                       Total
                  £'000       £'000            £'000        £'000                    
                                                             £'000                £'000    £'000   £'000
Balance at 30  36,457    45,375   (101)                         
June 2010                                                    9,200     3,853   1,688  (95,869)      603
Loss for the
year, being
total
comprehensive                                      
income for    -        -           - -            -        -      (7,519) (7,519)
the year
Share-based
payments
                 -          268
- warrants    -        -                            -            -          268 -
Issue of       6,777   1,577   (853)       7,501
ordinary                                             -            -        -     -
shares
Conversion of     17  -      100
loan notes          83                              -            -        -     -
Cost of share        -       
issues        -               (83)                  -            -        -     -              (83)
Total           6,860    1,511   (853)                   
transactions                                         -            -          268  (7,519)       267
with owners
Share-based
payments
- employee       -             2,368
share options -         -                            -               2,368 -     -
Balance at 30   43,317     46,886   (954)  9,200                             3,238
June 2011                                                           6,221 1,956  (103,388)



Loss for the
year, being
total
comprehensive                               
income for       -         -      -       -         -        -     (9,629) (9,629)
the year
Share-based
payments
                1,650                               1,815
- warrants                    165 -      -         -      (644)        644
Issue of        5,270  3,689        8,959
ordinary                               -            -         -       -        -
shares
Conversion of   1,334            2,202
loan notes                    868      -            -         -        -        -
Cost of share                 
issues           -          (290)      -            -         -        -        -       (290)
Total           8,254   4,432                           3,057
transactions                           -            -      -  (644)   (8,985)
with owners
Share-based
payments
- employee                   1,110
share options    -         -           -            -         1,110    -         -
Balance at 30  51,571    51,318                                        7,405
June 2012                                 (954)       9,200  7,331     1,312  (112,373)



Merger reserve

The merger reserve  represents the  premium attributable to  shares issued  in 
consolidation of the costs of acquisition of subsidiaries in prior years.



Share-based payment reserve

The share-based payment reserve  represents the cumulative  charge to date  in 
respect of unexercised share options at the balance sheet date.



Warrant reserve

The warrant reserve  represents the cumulative  charge to date  in respect  of 
unexercised share warrants at the balance sheet date.



Retained earnings

The retained  earnings  represent  the  cumulative  profit  and  loss  net  of 
distribution to owners.







COMPANY STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2012



                                         Interest                Share-based
                 Share    Share     in own    Merger        payment        Warrant   Retained
                capital   premium     shares   reserve       reserve       reserve   earnings 
                                                                                                       Total
                 £'000          £'000  £'000          £'000   £'000      
                             £'000                                     £'000                             £'000
Balance at 30     36,457           9,200          1,688 (96,617)  
June 2010                    45,375      -                          3,853                              (44)
Loss for the                                                                                         
year, being
total
comprehensive  -    -          -   (7,582)        
income for                    -                    -          -                                 (7,582)
the year
Share-based
payments
               -    -       268    
- warrants                    -                    -          -                          -           268
Issue of        6,777        (853)               
ordinary                      1,577                 -           -       -                  -         7,501
shares
Conversion of                 
loan notes              83       17 -               -           -       -                  -           100
Cost of share               
issues        -                 (83) -               -           -       -                  -          (83)
Total           6,860        (853)    268          
transactions                  1,511                 -            -                           (7,582)      204
with owners
Share-based
payments
- employee           -           -         
share options     -         -                    -              2,368                    -         2,368
Balance at 30    43,317          (853)  9,200           1,956  (104,199)     
June 2011                    46,886                                6,221                              2,528



Loss for the
year, being
total
comprehensive                     
income for         -        -       -        -         -          -        (8,871) (8,871)
the year
Share-based
payments
                1,650               644      
- warrants                  165    -        -        -           (644)             1,815
Issue of        5,270                     
ordinary                  3,689    -        -        -          -          -       8,959
shares
Conversion of   1,334              2,202
loan notes                   868    -        -        -          -          -
Cost of share                  
issues             -      (290)    -        -        -          -          -       (290)
Total           8,254                          3,815
transactions               4,432    -        -        -           (644)   (8,227)
with owners
Share-based
payments
- employee                       
share options      -        -       -        -       1,110      -          -       1,110
Balance at 30   51,571 51,318       9,200          1,312 (112,426)  7,453
June 2012                              (853)             7,331







  NOTES TO THE FINANCIAL STATEMENTS

for the year ended 30 June 2012



1. GENERAL INFORMATION



Earthport plc  is  a public  limited  company incorporated  and  domiciled  in 
England and Wales under the Companies  Act 2006. The address of its  principal 
place of business and  registered office is 21  New Street, London EC2M  4TP. 
The nature of the Group's operations and its principal activities are set  out 
in the Directors' Report within the Annual Report.



2. GOING CONCERN



The Directors  believe that  the Group  has demonstrated  further progress  in 
achieving its objective of positioning itself as an infrastructure supplier to
the global payments industry. The Group raised £10.6m during the year  through 
issuance of equity  and convertible loan  notes and £1.8m  due to exercise  of 
warrants. In addition, the  Group has raised £8.0  million of funding  through 
the issue of equity  since the year  end. The Directors  have prepared a  cash 
flow forecast covering a  period extending beyond 12  months from the date  of 
these financial statements. After taking account of anticipated overhead costs
and revenue, the Directors are confident that sufficient funds are in place to
support the  going  concern  status  of the  Group.  Therefore  the  Directors 
consider that it is appropriate to prepare the Group's financial statements on
a going  concern  basis,  which assumes  that  the  Group is  to  continue  in 
operational  existence  for  the   foreseeable  future.  When  assessing   the 
foreseeable future, the Directors have looked  at a period of at least  twelve 
months from the date of approval of the financial statements.



3. ACCOUNTING POLICIES



Basis of accounting

The  financial  statements  are  prepared  in  accordance  with  International 
Financial Reporting Standards (IFRS') as adopted by the European Union and the
requirement of the Companies Act applicable to companies reporting under IFRS.



The  financial  statements  have  been  prepared  under  the  historical  cost 
convention and the principal accounting policies are set out below:



Company Statement of Comprehensive Income

As permitted by s.408  Companies Act 2006, the  company has not presented  its 
own Statement of Comprehensive  Income. The Company's  loss for the  financial 
year was £8,871,000 (2011: £7,582,000).



New and amended standards adopted by the Group

The following standards have  been adopted in  these financial statements  and 
the Directors do not consider that there was any material impact:



· IFRS 2 - Group cash settled share-based payment transactions

· IAS 36 - Impairment of Assets

· IFRIC 17 - Distribution of non-cash assets to owners

· The amendments  to IFRS  3 relating  to (a)  transition for  contingent 
consideration from business acquired under  IFRS 3 (2004), (b) measurement  of 
Non-Controlling  Interests,  and  (c)  un-replaced  and  voluntarily  replaced 
Share-based Payment awards.

· IAS 27 - Describing the transition for amendments resulting from IAS 27
(2008).

· IAS 32 - Financial  Instruments: Presentation - Amendments relating  to 
classification of rights issues.

· IFRIC 19 - Extinguishing liabilities with equity instruments.



At the  date of  authorisation of  these financial  statements, the  following 
Standards and Interpretations relevant to the group operations that have  been 
applied in these financial statements were  in issue but not yet effective  or 
endorsed (unless  otherwise stated).  All amendments,  except where  otherwise 
stated, are applicable for periods commencing on or after 1 January 2013:



· IFRS 7 - Financial Instruments  - Disclosure - Amendment. (Effective  1 
January 2015)

· IFRS 9 - Financial Instruments - Classification and Measurement.

· IFRS 10 - Consolidated Financial Statements.

· IFRS 12 - Disclosure of Interests in Other Entities.

· IFRS 13 - Fair Value Measurement.

· IAS 1 - Clarification of the Statement of Changes in Equity (SOCE)

· IAS 19 - Employee Benefits - Amendments

· IAS 24  - Related  Party Disclosures  - Revised  definition of  related 
parties.

· IAS 27 - Separate Financial Statements (as amended 2011).



The  Directors  anticipate   that  the   adoption  of   these  Standards   and 
Interpretations as appropriate in future periods will have no material  impact 
on the financial statements of the group.



 Basis of consolidation

The  Group  financial  statements  consolidate  the  financial  statements  of 
Earthport plc and all of its subsidiaries for the year ended 30 June 2012. The
results of subsidiaries acquired or sold  are included in the Group  financial 
statements from the date  control passes, until  control ceases. Profits  and 
balances arising  on trading  between Group  companies are  excluded from  the 
financial statements.  All companies  in the  Group make  up their  financial 
statements to the same date.



Revenue recognition

Revenue  from  client  transactions  is   recognised  on  completion  of   the 
transactions as they  occur. Revenue  from foreign exchange  is recognised  on 
completion of the associated transactions. Revenue from client  implementation 
and consultancy is  recognised as the  services are performed.  In the  normal 
course of business,  certain balances  arise which  are not  allocable to  any 
client. Efforts are made  to allocate such balances.  If such balances  remain 
unallocated for a  period of  at least six  months, then,  in accordance  with 
client contracts, they are recognised as revenue.



Foreign currency translation

The functional  and presentational  currency  of the  parent Company  and  its 
subsidiaries is the UK Pound Sterling. Transactions in foreign currencies  are 
recorded at the rate  ruling at the date  of the transaction. Monetary  assets 
and liabilities denominated in foreign currencies are retranslated at the rate
of exchange ruling at the balance sheet date and exchange differences taken to
the income statement.



      Share-based payments and warrants

The Group offers  executive and  employee share  schemes. For  all grants  of 
share options  and warrants,  the  fair value  as at  the  date of  grant  is 
calculated using  an option  pricing model  and the  corresponding expense  is 
recognised either in the  income statement or within  equity over the  vesting 
period. The expense of options granted is recognised as a staff cost and  the 
associated credit  is made  against  equity and  included in  the  share-based 
payment reserve.  The fair  value of  warrants granted  in respect  of  equity 
fundraising activities is offset against the share premium account.



      Current and deferred income tax

Current tax is the expected tax payable on taxable income for the year,  using 
tax rates enacted or substantively enacted  at the balance sheet date and  any 
adjustments to tax payable in respect of previous years.



Deferred tax  expected to  be payable  or recoverable  on differences  at  the 
balance sheet date between  the tax bases and  liabilities and their  carrying 
amounts for financial reporting purposes is accounted for using the  liability 
method. Deferred  tax liabilities  are generally  recognised for  all  taxable 
temporary differences and  deferred tax  assets are recognised  to the  extent 
that it  is probable  that taxable  profits will  be available  against  which 
deductible differences can be utilised.



Deferred tax is  calculated at  the rates of  taxation which  are expected  to 
apply when the deferred tax asset or liability is realised or settled based on
the rates of taxation  enacted or substantively enacted  at the balance  sheet 
date. Deferred tax is measured on an undiscounted basis.



Impairment of non-financial assets

The carrying amounts of the Group's property, plant and equipment are reviewed
at each balance  sheet date to  determine whether there  is any indication  of 
impairment. If such an  indication exists, the  asset's recoverable amount  is 
estimated and  compared  to its  carrying  value.  Where the  asset  does  not 
generate cashflows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
Where the carrying value exceeds the  recoverable amount, a provision for  the 
impairment loss  is  established  with  a charge  being  made  to  the  income 
statement.



Intangible assets

Development costs are only  recognised as an intangible  asset if each of  the 
following conditions have been met:



· It is technically  feasible to complete  the asset so  that it will  be 
available for use;

· It is  reasonably expected  that the asset  is likely  to generate  net 
future economic benefits;

· Development costs in relation to the asset can be reliably measured;

· Management intends to complete the asset and use or sell it.



Capitalised development costs are stated at cost less accumulated amortisation
and impairment losses. Amortisation  is charged to the  income statement on  a 
straight line basis over their useful lives (4 years).



Where no  intangible  asset  can be  recognised,  development  expenditure  is 
treated as expenditure in the period in which it is incurred.



Property, plant and equipment and depreciation

Property, plant  and  equipment  are  stated at  cost  less  depreciation  and 
provision for impairment.  Depreciation is  provided at  rates calculated  to 
write down  assets to  their  estimated residual  values over  their  expected 
useful life as follows:



Leasehold improvements: short lease - straight line per annum over lease term
Fixture, fittings and equipment     - 20% - 33% straight line per annum
Computer equipment                  - 33% straight line per annum



The carrying  values  of  property,  plant  and  equipment  are  reviewed  for 
impairment annually and when events or changes in circumstances indicate  that 
the carrying value  may be impaired.  Any impairment is  taken direct to  the 
income statement.



Leasing

Leases in which a  significant portion of the  risks and rewards of  ownership 
are retained by the lessor are classified as operating leases. Rentals payable
under operating leases  are charged  against income on  a straight-line  basis 
over the lease term.



Pensions

The Group  offers  a stakeholder  pension  scheme  to all  employees  and  the 
contributions are charged to the income statement as they are incurred.



Financial risk management and financial instruments

Financial assets and liabilities are  recognised in the Group's balance  sheet 
when the Group becomes party to the contractual provisions of the instrument.



The Group's  principal financial  instruments comprise  secured and  unsecured 
short-term creditors, cash, short-term deposits and loans. The main purpose of
these financial instruments  is to finance  the Group's operations,  including 
any acquisitions  where  relevant.  The  Group  has  various  other  financial 
instruments, such as trade receivables and trade payables that arise  directly 
from its operations.



It is  the  Group's  policy  that  no  trading  in  financial  instruments  is 
undertaken. The Group borrows at both  fixed and floating rates of  interest. 
The Group's policy  in relation to  the finance is  to ensure that  sufficient 
liquid funds are maintained for operations.



Trade receivables are  initially measured  at fair value  and subsequently  at 
amortised cost  using  the  effective  interest  rate  method,  if  material. 
Appropriate allowances for estimated  irrecoverable amounts are recognised  in 
profit or loss when there is evidence that the asset is impaired.



Cash and cash  equivalents comprise cash  in hand, demand  deposits and  other 
short-term highly liquid investments that  are readily converted into a  known 
amount of cash and are subject to insignificant changes in value.



Trade payables  are  initially measured  at  fair value  and  subsequently  at 
amortised cost using the effective interest rate method, if material.



      Compound financial instruments:  the fair value  of the  liability 
      portion of  a  convertible  loan  is  determined  using  a  market 
      interest rate for an equivalent non-convertible loan. This  amount 
      is recorded  as  a liability  on  an amortised  cost  basis  until 
      extinguished on  conversion.  The  remainder of  the  proceeds  is 
      allocated  to  the  conversion  option.  This  is  recognised  and 
      included in shareholders' equity.



Borrowings are recognised initially  at fair value,  net of transaction  costs 
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net  of transaction costs) and  the redemption value  is 
recognised in the income statement over the period of the borrowings using the
effective interest method.



Fees  paid  on  the  establishment  of  loan  facilities  are  recognised   as 
transaction costs of the loan to the  extent that it is probable that some  or 
all of the  facility will be  drawn down. In  this case, the  fee is  deferred 
until the draw-down  occurs. To the  extent there  is no evidence  that it  is 
probable that some  or all  of the  facility will be  drawn down,  the fee  is 
capitalised as  pre-payment  for liquidity  services  and amortised  over  the 
period of the facility to which it relates.



Equity instruments  issued  by the  Company  are recognised  at  the  proceeds 
received net of direct issue costs.



Employee benefit trust

Shares to be awarded, and those that  have been awarded, but have yet to  vest 
unconditionally are held at cost by an  employee benefit trust and shown as  a 
deduction from  equity, shareholders'  fund  in the  Group balance  sheet  and 
included in  a separate,  negative reserve  described as  an interest  in  own 
shares.



Exceptional items

Exceptional items  are  non-recurring  items which  are  disclosed  separately 
because of their size or nature.



Interest bearing loans and borrowings

All interest bearing loans and borrowings are initially recognised at the fair
value of  the consideration  received less  directly attributable  transaction 
costs.



After  initial  recognition,  interest   bearing  loans  and  borrowings   are 
subsequently measured at amortised cost  using the effective interest  method. 
Gains and losses are recognised in  the income statement when the  liabilities 
are derecognised as well as through the amortisation process.



Significant judgements and estimates



Capitalisation of development costs

In determining whether  development costs should  be capitalised, the  Company 
makes estimates and assumptions based on  the ability to reliably measure  the 
costs and on the expected future economic benefits generated by products  that 
are the result of these development costs. It is the Directors judgement  that 
currently costs and future  economic benefit can  be measured with  sufficient 
reliability to  capitalise  these cost  at  this time.  In  the past,  a  high 
proportion  of  systems   development  work  was   related  to  migration   of 
functionality, making  it  impractical  to  track time  and  effort  spent  on 
enhancements. Since the start  of 2012, the Company  has been able to  measure 
reliably the enhancement  expenditure attributable to  the development of  new 
systems and therefore has capitalised the costs from 1 January 2012.



Share-based payment

Recognition and measurement of share-based payments require estimation of  the 
fair value of awards at  the date of grant.  Judgement is also exercised  when 
estimating the  number of  awards that  will ultimately  vest. Both  of  these 
judgements have a significant impact on  the amounts recognised in the  profit 
or loss and in the balance sheet.  To assist in determining each award's  fair 
value, the  Directors engage  a qualified  and independent  valuation  expert. 
Estimation of  the number  of awards  that will  ultimately vest  is based  on 
historic vesting trends for similar awards, taking into consideration specific
features of the awards and the current intrinsic value of those awards.



Substance over form

Historically and recently the Company has funded itself primarily with the use
of equity. On certain occasions the Company has not had sufficient permissions
to issue the  required amount of  equity. In these  instances the Company  has 
issued convertible loan  notes which  mandatorily convert to  equity upon  the 
granting of permissions  to issue  sufficient equity  and disapply  sufficient 
pre-emptive  rights.  In  the  Directors'  judgement  the  substance  of   the 
transactions in which such convertible loan notes have been issued is that the
issuance was one of equity and not of debt. Consequently, such issuances  have 
been accounted for as the issuance of equity. Further details are included  in 
note 18.





4. REVENUE



Revenue, loss and net assets/liabilities are all attributable to one  business 
segment operating from  the Group's  headquarters in  London, United  Kingdom. 
This is  consistent  with the  information  reviewed by  the  chief  operating 
decision maker. The segmental analysis by location of customers is as follows:



                     2012  2011
                    £'000 £'000
 United Kingdom     2,132 1,828
 Europe               227   357
 North America        482   219
 Rest of the world   176    84
                    3,017 2,488

There are two customers who  individually contribute 15% and 10%  respectively 
towards the total revenue (2011: two; 15% and 16%).



5. EMPLOYEES                                                2012  2011
                                                                     No.   No.
           The average monthly number of persons (including
           Executive Directors)
           employed by the Group during the year was:
           Directors                                                3     3
           Other employees (excluding contractors)                    73    47
                                                                    76   50
                                                                    2012  2011
           Staff costs for the above persons:                      £'000 £'000
           Wages, salaries, commission and other                   5,382 3,101
           Social security costs                                     582   334
           Share-based payment                                     1,110 2,368
           Other pension costs                                       177   100
                                                                   7,251 5,903

Of the staff costs shown above, £60,000 (2011: £14,000) is included in cost of
sales.





           
5. EMPLOYEES
           (continued)
           
           Directors'
           emoluments
                                   Basic           2012                   2011
                                  salary
                                and fees Pension  Total                  Total
                                   £'000   £'000  £'000                  £'000
           Non-Executive
           Chairman:
           M Harrison (resigned        -     -      -                     33
           18 November 2010)
           P Hickman                  40     -     40                     25
           Non-Executive Vice
           Chairman:
           L Browne (resigned         -    -      -                     15
           18 November 2010)
           Executive Directors:
           Z Karim                   137       7    144                    105
           H Uberoi *                  -       -  -                 -
           P Thomas                  145       6    151                     81
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